R.N. Mittal, J.
1. This order will dispose of Income-tax References Nos. 103, 135, 141, 142 of 1976 and No. 25 of 1977. The facts in the judgment are being given from Reference No. 25 of 1977. The following question of law has been referred under Section 256(2) of the I.T. Act, 1961, in pursuance of the directions of this court:
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Punjab State Elecricity Board is a licensee within the meaning of the Electricity (Supply) Act, 1948, and was thus entitled to the allowance of development rebate without creating thereserve contemplated by proviso (b), Explanation 2, to Section 10(2)(vib) of the Indian Income-tax Act, 1922 ?'
2. The previous year for the assessment year in the case is the financial year 1960-61. The Punjab State Electricity Board came into being under the Electricity (Supply) Act, 1948 (hereinafter referred to as 'the Act'), and started functioning with effect from February 1, 1959. The Board is a company for the purposes of the Indian I.T, Act, 1922, and is liable to income-tax and super-tax according to its income, profits and gains.
3. The Board started filing returns from the assessment year 1959-60. For the previous year relevant to the assessment year 1961-62 it filed a return of income declaring a loss of Rs. 5,61,71,366. It also claimed development rebate amounting to Rs. 1/10,04,658. The ITO completed the assessment on March 24, 1966, and observed that the Board was not entitled to any development rebate as full particulars of the new machinery had not been furnished.
4. The Board filed an appeal against the order of the ITO, regarding the non-allowance of development rebate, to the AAC. It was, inter alia, stated that the particulars of the new machinery had been furnished along with the return. The AAC remanded the case vide order dated April 6, 1967, and directed the ITO to submit a report after giving the assessee an opportunity to furnish further information required by him. He was further directed to give reasons for disallowing the portion of the claim regarding development rebate.
5. The ITO decided the matter and held that the allowance of development rebate could be allowed only to a licensee as defined under Section 2(6) of the Act and that as the Board was not a licensee within that definition and the development rebate reserve equal to 75% had not been created by it, the assessee was not entitled to the allowance of development rebate. The matter again went up before the AAC, who held that the assessee was a licensee within the meaning of the Act and it was, therefore, not necessary for it to create a development rebate reserve under Sub-clause (b) of the proviso to Section 10(2)(vib) of the Indian I.T. Act, 1922. He, consequently, allowed the appeal of the assessee and directed the ITO to give necessary relief to it.
6. The revenue having felt aggrieved against the order of the AAC went up in appeal before the Income-tax Appellate Tribunal which affirmed the order of the AAC and dismissed the same. The Commissioner filed an application before the Tribunal for referring the question of law for the opinion of the High Court under Section 256(1) which was declined. He thereafter moved an application in this court under Section 256(2) which was accepted and the question mentioned above was referred to this court for opinion.
7. The question that arises for determination is as to whether the assessee is a licensee within the meaning of the Act and was entitled to the allowance of development rebate without creating the reserve contemplated by prov.(b) to Expln. 2 of Section 10(2)(vib) of the Indian I.T. Act, 1922. Mr. Awasthy, learned counsel for the department, submits that the word 'licensee' has been defined in Clause (6) of Section 2 of the Act and that definition will be taken for the purposes of Sub-clause (b) of the proviso to Expln. 2 of Section 10(2)(vib) of the Indian I.T. Act, 1922. According to the counsel, the assessee does not fall within the aforesaid definition and, therefore, it cannot be treated to be an assessee under the aforesaid clause.
8. In order to determine the question it will be necessary to read Section 10(2)(vib) of the Indian I.T. Act, 1922, and Sections 2(6) and 26 of the Act [(Electricity Supply) Act, 1948] which are in the following terms:
'10. Business.--(2) Such profits or gains shall be computed after making the following allowances, namely :--...
(vib) in respect of a new ship acquired or new machinery or plant installed after the 31st day of March, 1954, which is wholly used for the purposes of the business carried on by the assessee, a sum by way of development rebate in respect of the year of acquisition of the ship or of the installation of the machinery or plant, equivalent to,--...
Provided that no allowance under this clause shall be made unless--..
(b) except where the assessee is a company being a licensee within the meaning of the Electricity (Supply) Act, 1948 (LIV of 1948), or where the ship has been acquired or the machinery or plant has been installed before the 1st day of January, 1958, an amount equal to seventy-five per cent. of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by him during a period of ten years next following for the purposes of the business of the undertaking, except,--...'
' 2. In this Act, unless there is anything repugnant in the subject or context--...
(6) 'licensee' means a person licensed under Part II of the Indian Electricity Act, 1910 (IX of 1910), to supply energy or a person who has obtained sanction under Section 28 of that Act to engage in the business of supplying energy but, the provisions of Section 26 of this Act notwithstanding, does not include the Board.
26. Subject to the provisions of this Act, the Board shall, in respect of the whole State, have all the powers and obligations of a licensee under the Indian Electricity Act, 1910 (IX of 1910), and this Act shall be deemed to be the licence of the Board for the purposes of this Act ;
9. Provided that nothing in Sections 3 to 11, Sub-sections (2) and (3) of Section 21 and Section 22, Sub-section (2) of Section 22A and Sections 23 and 27 of that Act or in Clauses I to V, Clause VII and Clauses IX to XII of the Schedule to that Act relating to the duties and obligations of a licensee shall apply to the Board:.....'
10. The words 'where the assessee is a company being a licensee within the meaning of the Electricity (Supply) Act, 1948 (LIV of 1948)' in prov. (b)to Expln, 2 of Section 10(2)(vib)are significant. It is clear from a reading of these words that the Act contemplated that the assessee-company should be a licensee within the meaning of the Act. In other words, if the language of any section warrants that the assessee is a licensee, though it does not fall within the definition of the word 'licensee', it will be deemed to be a licensee for the purpose of the proviso. The legislature has not intentionally said that the assessee-company should be a licensee as defined in the Act. If it had that intention it could say so. It, therefore, emerges that the word 'licensee' as defined in Section 2 of the Act need not be taken into consideration while interpreting the proviso, but it is to be seen whether the Board fulfils the requirement of a licensee according to any section of the Act. Section 26 confers on the Board all the powers and obligations of a licensee under the Indian Electricity Act, 1910. It further says that the Electricity (Supply) Act, 1948, shall be deemed to be a licence of the Board for the purposes of the Act. The only inference that can be drawn from the language of the section is that the Board is a licensee within its meaning.
11. In the aforesaid view, we also get support from the definition of the word 'licensee'. Section 2(6) of the Act says that, notwithstanding Section 26, the term 'licensee' does not include the Board. The definition thus suggests that if the Board had not been excluded from the definition of the word 'licensee', it would have been so within its meaning. The opening words of Section 2, namely, 'unless there is anything repugnant in the subject or context' are also significant. These words show that the legislature did not want to give a hide-bound meaning to the definition appearing in the section. Therefore, the definitions are to be read subject to the context in the sections of the Act. If the definition clause is not applicable in a particular context, it may be modified accordingly. It further shows that, if the context requires, the Board can be treated as licensee.
12. In view of the aforesaid reasons, we are of the opinion that the Board is a licensee within the meaning of the Act.
13. Consequently, the Tribunal was right in law in holding that the Punjab State Electricity Board was a licensee within the meaning of the Electricity (Supply) Act, 1948, and it was entitled to the allowance of thedevelopment rebate as contemplated by prov. (b) to Expltt. 2 to Section 10(2)(vib) of the Indian I.T. Act, 1922.
14. For the reasons recorded above, we answer the question in the affirmative, that is, in favour of the assessee.
B.S. Dhillon, J.
15. I agree.