HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
The Fazilka Electric Supply Co. Ltd. v. Commissioner of Income-tax, Delhi
Civil Appeal No. 183 of 1961
[1962] Supp. 3 SCR 496 ·
Indian Income-tax Act, 1922: section 10(2)(vii) · Indian Electricity Act, 1910: sections 3, 7, 10
Holding and result. The licence and section 7 of the Electricity Act created a consensual purchase option rather than compulsory acquisition; the transfer was a sale under section 10(2)(vii), so the excess over written-down value within the statutory limit was taxable and the company’s appeal was dismissed.
Sources & disclosures includedDownload original judgment / order
Two-judge bench; judgment delivered by S. K. Das, J. · S. K. Das, J. · J. C. Shah, J.
Assessment years: 1950-51
01 · Facts of the case
Punjab granted a fifteen-year electricity licence whose agreed terms gave Government a purchase option. Government exercised it in 1949 and paid more than the undertaking’s written-down value. For assessment year 1950-51 the Income-tax Officer taxed the statutory portion of that excess. The company argued that the transaction was compulsory acquisition, not a sale.
02 · Discussion by the Hon’ble Court
The Court read the Electricity Act, rules and licence together. The applicant proposed definite licence terms and Government accepted or modified them; grant of the licence supplied consideration. The option, timing and price mechanism therefore arose from agreement. Use of “compulsory purchase” in the statutory proviso did not convert the agreed option into compulsory acquisition.
Source: Primary judgment: reasoning
03 · Judicial decision
The Government purchase was a sale of the buildings, machinery and plant within section 10(2)(vii). The Court did not decide the broader proposition that the provision would also cover a genuinely compulsory sale.
Source: Primary judgment: holdings
04 · Outcome / in whose favour
Appeal dismissed with costs; the High Court’s answer sustaining taxability stood.
05 · AKHB REVIEW POINT
AKHB analysis: identify the legal source of the transfer before applying a balancing-charge rule. A statutory framework can implement an agreed purchase option; statutory compulsion and compulsory acquisition are not interchangeable. Keep the Court’s express reservation on true compulsory transfers visible.
Source & verification
Download original judgment / order · Open cited source rendition
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Statutory scope
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Later treatment
Source checked 2026-10-12. No comprehensive later-treatment or present-law clearance is represented. The note reports the historical statutory text and result in this primary report only.
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AI disclosure & professional disclaimer
This AKHB research note was prepared with AI assistance from the identified primary report and has not been represented as independently human-reviewed.
General legal and tax research only; not legal or tax advice. Verify the complete judgment, governing statutory version and subsequent judicial treatment before reliance. The AKHB REVIEW POINT is editorial analysis, not the Court's holding, and no current-law clearance is claimed.