ASSOCIATED POWER CO. LTD. vs COMMISSIONER OF INCOME-TAX

The Supreme Court addressed references under Section 257 of the Income Tax Act, 1961, concerning the deductibility of amounts transferred to a Contingency Reserve account by a company engaged in electricity generation. The Court held that the Income Tax Appellate Tribunal was incorrect in denying the deduction of Rs. 46,460, as the provisions of the Electricity (Supply) Act, 1948, and its Sixth Schedule allow for such deductions in the computation of taxable income. The ruling clarified the interpretation of financial principles applicable to electricity companies under the relevant statutes.