Actual cost for depreciation includes consumer contributions under the 1961 Act, even for pre-1961 assets.

Section 43(1) of the Income-tax Act, 1961 defines "actual cost" more broadly than the corresponding definition under the 1922 Act because it requires deduction of amounts met directly or indirectly by another person or authority. That definition applies to assets acquired before the previous year when computing written down value under section 43(6)(b), which expressly refers to depreciation actually allowed under the repealed Act. The earlier definition is not preserved for pre-1961 assets, and consumers' contributions toward house service connections must therefore be deducted in determining actual cost. The Tribunal's contrary view was rejected, and the computation issue was decided for the Revenue.

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Issues: Whether, for the assessment years 1962-63 to 1967-68, the actual cost of house service connections had to be computed by deducting consumers' contributions under section 43(1) of the Income-tax Act, 1961, or by applying the earlier definition in the Explanation to section 10(5) of the Indian Income-tax Act, 1922.

Analysis: The expression "actual cost" in section 43(1) of the Income-tax Act, 1961, is wider than the corresponding Explanation to section 10(5) of the Indian Income-tax Act, 1922, because it requires deduction of any amount met directly or indirectly by any other person or authority. Section 43(6)(b) expressly governs assets acquired before the previous year and refers to depreciation actually allowed under the repealed Act, showing that the 1961 definition applies to computation of written down value even in relation to earlier assets. The opening words of section 43 do not preserve the old definition, and Explanation 4 does not support limiting section 43(1) to assets acquired after 1 April 1961. The Tribunal's view that the old definition continued to govern pre-1961 assets was rejected as inconsistent with the statutory language and the object of removing the anomaly in favour of electricity undertakings.

Conclusion: The actual cost had to be determined under section 43(1) of the Income-tax Act, 1961, and consumers' contributions were deductible; the answer was in the negative and against the assessee.

Final Conclusion: The reference was decided in favour of the Revenue on the governing computation of actual cost and written down value for depreciation under the 1961 Act.

Ratio Decidendi: For assets falling for depreciation under the Income-tax Act, 1961, the definition of "actual cost" in section 43(1) applies to the computation of written down value under section 43(6)(b), notwithstanding that the asset came into existence before the Act and the earlier 1922 Act contained a narrower definition.

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