Case: Pilibhit Electric Supply Co.(P) Ltd. &amp; Anr Vs. Special Officer (Electricity) &amp; Anr

The appellant, original licensee under the Act had sought appropriate compensation under the aforesaid provision from the Special Officer entrusted with the task of determining the purchase price of the appellants undertaking acquired under Section 6-A as inserted by the very same Act of the U.P. Legislature. This appeal by grant of special leave under Article 136 of the Constitution of India was pressed at the time of final hearing by their learned Senior Counsel Shri Salve and learned counsel Shri Gupta on the followingIn the impugned award the Special Officer had erroneously excluded supervision charges actually incurred by the appellant from the book value of the assets as defined by the Explanation to SectionThe Special Officer had erroneously deducted from the book value of the assets of the appellants an amount of Rs 2, 48, 718 being the purported depreciation on works paid for by theThe Special Officer had erroneously deducted an amount of Rs 2, 67, 622 pertaining to variations in the energy bill raised by the Board which were seriously disputed by the appellant. In the aforesaid item ultimately the claim was reduced to Rs 60, 603.The Special Officer had erroneously deducted from the amount payable to the appellant an amount of Rs 92, 727 on account of the purported balance in the Consumer Rebate Reserve Account and an amount of Rs 46, 826 on account of the purported balance in the Tariffs and Dividends Control Reserve Account. So far as this item of claim is concerned ultimately the learned counsel for the appellant confined the claim to the total amount of Rs 76, 423 being the purported inflated balance in the Tariffs and Dividends Control Reserve Account and Rs 38, 211 being such balance in the Consumer Rebate Reserve AccountIn the Special leave petition originally two additional claims were also put forward as Item 2 consisting of Rs 35, 483 and Item 5 consisting of Rs 1, 51, 111. But at the time of hearing of this appeal these two claims were not pressed. We are, therefore, concerned with the aforesaid four claims surviving for considerationBackdrop facts2. Before we deal with these claims, it will be necessary to note a few relevant background facts. The appellant-licensee was functioning under the provisions ofthe Indian Electricity Act, 1910 having licence to generate electrical energy for being supplied to consumers in Pilibhit town of Uttar Pradesh. It was a purchaser of the licensee rights from the earlier licensee named M/s Champion Electrical Engineering Works. The said licensee had got its licence from 1935. On 1-4-1954 M/s Champion Electrical Engineering Works transferred to the appellant its licence to generate electricity in Pilibhit town. Thus the appellant became a transferee-licensee and held Pilibhit Electric Licence, 1935 from 1-4-1954. The said licence was revoked as per the provisions of clause (3) of U.P. Ordinance 1937 of 1975 in exercise of the powers vested in the U.P. State under Section 6-A ofthe Indian Electricity Act, 1910 as inserted in the aforesaid Act by the said ordinance. Pursuant to the said revocation of the appellants licence and acquisition of its assets, the U.P. State Electricity Board took over the electrical undertaking of the appellant at 00.00 hrs on 1-12-1975. On such acquisition of the assets of the appellant and the taking over of the electrical undertaking of the appellant by the U.P. State Electricity Board and as the undertaking of the appellant-licensee stood statutorily acquired for the purpose of the State Electricity Board under Section 6-A of the Act, the question arose regarding determination of appropriate compensation to be paid to the erstwhile licensee for acquisition of its assets under the Act. The determination of the amount was to be made under Section 7-A as substituted by the U.P. Amending Act. That task was statutorily assigned to a Special Officer. The Special Officer after hearing the appellants representative on diverse claims put forward under the said provision for determination of appropriate amount of compensation passed the impugned award dated 31-3-19803. The aforesaid award is brought in challenge by the appellant ex-licensee by filing this appeal in quest of additional compensation. At this stage it may be stated that direct writ petitions under Article 32 of the Constitution of India challenging the constitutional validity of Section 7-A of the parent Act were pending in this Court since 1972. Consequently the appellant challenged the impugned award directly in this Court after obtaining special leave as stated above. A Constitution Bench of this Court in the case of Tinsukhia Electric Supply Co. Ltd. v. State of Assam upheld the vires of the said provision. Consequently this appeal survived for consideration of the payment of proper compensation to the appellant ex-licensee whose licence was also revoked and whose undertaking got acquired under the said Section 7-A as substituted in the State of U.P. by Amending Act 14 of 1976

Reasoning:
We find considerable force in this contention. The aspect of original cost which may include proper addition on account of supervision not exceeding 15% of the cost referred to in sub-para (a) of clause (b) of definition paragraph XVII of the Sixth Schedule had nothing to do with the computation of proper compensation payable to the licensee as per Section 7-A sub-section (2) Explanation (ii). It is also pertinent to note that the scheme of compensation reflected by the aforesaid provisions indicated that cost of supervision actually incurred up to the ceiling of the 15% of the amount referred to in paragraph (i) of the Explanation to Section 7-A(2) had to be straightaway added to the book value of fixed assets which was to be paid for by the acquiring authority. On the other hand the provision of computation of original cost as found in paragraph XVII clause (6) of the Sixth Schedule referred to "proper addition on account of supervision" which left a discretion regarding computation of the amount of supervision and the said provision did not contain phraseology like "cost of supervision actually incurred" as found in the aforesaid Explanation to Section 7-A(2). It was, therefore, rightly contended that concept of capitalisation of the cost of supervision for computing the original cost of the asset for the purpose of paragraph I of the Sixth Schedule had nothing to do with the cost of supervision actually incurred which had to be considered as an addition to the book value of the acquired fixed assets for computing compensation under Section 7-A sub-sectionis not possible to accept the aforesaid contention of the learned Senior Counsel Shri Sen. In our view the provisions of Sixth Schedule to the Supply Act are general provisions which were enacted to lay down guidelines for fixation of the licensees charges to consumers as provided in Section 57 of the Supply Act and also for supplying guidelines to the Rating Committee under Section 587-A and for that purpose various paragraphs of Schedule 6 have been enacted and are made a part and parcel of the terms and conditions of the licence. But so far as the question of compensation is concerned, Section 7-A of the Act represents a complete circle. When we turn to the Explanation to Section 7-A(2) for computing the book value of any fixed asset, its original cost has to comprise two ingredients - the purchase price paid by the licensee for the asset and secondly 15% addition to the said purchase price by way of cost of supervision actually incurred on such an asset. It is almost analogous to solatium to be paid for acquisition of land underthe Land Acquisition Act, 1894. No question of capitalisation of such supervision charges from year to year is contemplated by the said Explanation. All that is required to be shown by the licensee is whether it had actually incurred the supervision costs in connection with the staff engaged for supervising the concerned fixed assets which were sought to be acquired from the licensee. Consequently the first ground put forward by the Special Officer for rejecting this claim cannot beHowever, the learned Senior Counsel for the respondents was on a firmer ground when he submitted that even on the second ground also the Special Officer was justified in rejecting the claim. The Special Officer had taken the view that there was no clear evidence led by the appellant to sustain this claim on merits. A mere look at Explanation (ii) to Section 7-A(2) shows that before claiming permissible supervision costs not exceeding 15% of the purchase price of the asset it has to be shown by the appellant that it had actually incurred supervision costs by engaging staff for supervising these fixed assets. In this connection the learned Senior Counsel for the appellant submitted that all the relevant documents were in the custody of the Board which could have been easily called for by the Special Officer for his scrutiny. Even that apart the balance sheets which were available on the record of the Special Officer showed that the appellant had bifurcated various costs incurred on the staff and one of the specified items was the cost of supervisory staff incurred by the appellant during the year. A mere look at a specimen of one such balance sheet shown to during the year. A mere look at a specimen of one such balance sheet shown to us indicated that a lump sum figure was shown in the balance sheet as the amount spent on supervisory staff. It is difficult to appreciate how this lump sum amount could be treated as the cost of supervision actually incurred by the appellant by way of meeting the wages of the staff engaged for supervising the concerned fixed assets which were the subject-matter of acquisition. It is easy to visualise that supervisory staff may be engaged by the licensee not only for supervising the fixed assets but also the office staff. Even that apart there would be a watchman kept for supervising not only the factory premises consisting of the relevant fixed assets but also for supervising the cash room, compound and other properties of the licensee. Unless clear evidence was available on record pointing to the actual amount of cost incurred by the licensee from year to year for meeting the wage bill of supervisory staff which was entrusted with the sole duty of supervising over the concerned fixed assets which ultimately vested in the State and the Electricity Board, it could not be said that the appellant had made out a case for grant of costs of supervision actually incurred by it in maintaining these fixed assets and that it had satisfied the requirements of Explanation (ii) to Section 7-A(2). Therefore the second ground on which the Special Officer rejected the claim cannot be found fault with. Consequently the first claim for additional compensation is found to be devoid of any substance and is, therefore,t is, of course, true that as mentioned in paragraph XII of the Sixth Schedule while considering the question of total capital base which includes the assets consisting of service lines for installation of which contributions are made by consumers towards the construction of such service lines, the net cost of such service lines after deducting such contributions has to be included in the costs of such fixed assets. It is also true that, however, for computing the depreciation as per paragraph VI on such assets, wherein consumers have contributed towards their acquisition, the total original cost of construction of the service lines had to be taken into account. The Special Officer has applied paragraph XII whole hog while deducting the depreciation from the book value of all completed works which are acquired from the licensee as per Section 7-A(2)(i). In our view the said approach of the Special Officer is ex facie unjustified. The reasons are obvious. Paragraph XII of the Sixth Schedule to the Supply Act deals with a special type of asset, namely, service lines which are installed by the licensee wherein the consumers have contributed towards the cost of construction of such service lines. For this type of assets, in computing the capital base of the licensee, the contribution by the consumers has to be excluded but for computing depreciation under paragraph VI for such assets, namely, the service lines, the total original cost of construction of service lines has to be taken into account which may include the cost of construction of service lines incurred by the licensee as well as the other part of the component of the cost of construction of service lines which was come from the pockets of the consumers. But the entire paragraph XII deals with only one type of asset, namely, service lines construction cost of which is wholly or partially borne by the consumers. Paragraph VI of Schedule VI, however, is general in nature and covers all types of fixed assets and the method of computation of depreciation on these fixed assets. It is axiomatic that fixed assets employed in the business of electricity supply may consist of those assets which are wholly acquired at the cost of the licensee and may also include assets like service lines which may partly be acquired and installed at the cost of the licensee and partly out of contribution of the consumers who would be interested in getting electrical supply at their own premises and for that purpose they may be willing and may be made to pay contribution towards extension of service lines to their premises. Therefore, reference to service lines in paragraph XII of Schedule VI is with a view to finding out as to how depreciation has to be computed for such a special type of asset, namely, service lines wherein consumers have also contributed towards their installation. Consequently on a conjoint reading of paragraph VI and paragraph XII of the Sixth Schedule the depreciation on such service lines installed by drawing upon the contributions from the consumers is required to include the total original cost of construction of such service lines and that would necessarily include the component of the amount of cost contributed by the consumers. However that has nothing to do with the computation of depreciation on the assets which are acquired by the acquiring authority under Section 6-A read with Section 7-A(2)(i). It is now well settled that service lines whose installation had been paid for by the consumers are not to be compensated for and they vest in the acquiring authority under Section 6-A read with Section 7-A free of cost or payment of compensation to the licensee. The logic underlying this settled legal position is that as the licensee had not spent from his pocket for installing such an asset, he was not required to be compensated for that part of the asset which was paid for by the consumers. A mere look at Section 7-A(2)(i) shows that the gross amount payable to such licensee for acquiring his assets amongst others has to consist of an amount of the book value of all completed works in the beneficial use pertaining to the undertaking. While computing such book value of acquired assets the works paid for the consumers have to be ignored and omitted from consideration. Therefore, the amount of book value computed as per Section 7-A(2)(i) will consist of only those works which are for beneficial use of the undertaking which was installed and acquired by the licensee at its own cost. Having computed this amount the next question survives about deducting the depreciation on such acquired assets. That would naturally imply deduction of depreciation on such assets from the amount so computed being the book value of the completed works installed and acquired at the cost of the licensee. If these are the assets whose book value has to be computed as per Section 7-A(2)(i) the question of deduction from that amount would necessarily imply deduction of depreciation on these very assets. In other words the field is clearly earmarked both for computation of the book value of the concerned assets as also for deduction of depreciation on such assets as enjoined by the second part of Section 7-A(2)(i) itself. It is axiomatic that before any depreciation is deducted from the computed book value of an asset it should be for the same asset whose book value has been ascertained and from that value depreciation is to be deducted. It cannot be that for computing the book value of the licensees assets only self-financed assets are to be taken into consideration and not the works paid for by the consumers but while deducting from this very amount of book value the depreciation is to be deducted qua not only the assets whose book value is computed but also qua the assets belonging to somebody else like the consumers who have paid for the works. This would on the face of it be very anomalous and unfair. It is also pertinent to not that from the book value of the assets which were financed by the licensee as computed as per Section 7-A(2)(i) when a question arised about deducting the depreciation, only the calculation of such depreciation on the concerned asset is to be done in accordance with the Sixth Schedule because the words advisedly used by the legislature in Section 7-A(2)(i) in this connection are less depreciation calculated in accordance with the Sixth Schedule read with the Seventh Schedule. Therefore, only the method of calculation of depreciation has to be applied by way of reference to the Sixth Schedule. But the type of asset for which depreciation has to be computed is not to be gathered from the Sixth Schedule. It has to be gathered from the very first part of Section 7-A(2)(i), namely, only self-financed fixed assets whose book value is to be computed by the Special Officer for payment to the licensee and from that amount depreciation is to be deducted which would necessarily mean depreciation on the very same asset which has undergone the book valuation as per Section 7-A(2)(i). If for calculating the book value of such assets the works paid for by the consumers are to be excluded they necessarily cannot be included for the purpose of ascertaining deductible depreciation on such assets. Consequently reference to paragraph XII Schedule VI would be totally out of picture and redundant so far as the scheme of Section 7-A sub-section (2)(i) is concerned. It may be that the licensee might have obtained benefit of such depreciation on consumer paid assets under the Income Tax Act or any other statutory provision but that is totally irrelevant for deciding the question whether the deduction of depreciation on the concerned assets whose book value is to be computed as per Section 7-A(2)(i), paragraph XII of Sixth Schedule could at all be pressed in service. It is, therefore, not possible to agree with the submission of the learned Senior Counsel for the respondents and also the learned counsel who appeared for the State of U.P. that for the purpose of deducting the depreciation the assets which are not included in computing the book value as per Section 7-A(2)(i), namely, the consumer financed assets also could be taken into consideration. In our view the Special Officer was patently in error when he computed the depreciation on the assets under Section 7-A(2)(i) by adding the amount of depreciation on the service lines which were paid for by the consumers. Reference to paragraph XII of Sixth Schedule in this connection was wrongly made and the said paragraph was wrongly pressed in service by the Special Officer. In this connection it has also to be kept in view that the amount of Rs 2, 48, 718 being the depreciation amount on the works constructed at the cost of consumers was not disputed by the Board and the only contention of the Board before the Special Officer was that as per paragraph XII of Sixth Schedule the said amount of depreciation was also to be deducted from the book value of the assets acquired by the Board under Section 6-A read with Section 7-A. As the reliance placed on paragraph XII of Sixth Schedule by the Special Officer is found by us to be unjustified and as the amount of depreciation deducted from the book value on this score is undisputedly Rs 2, 48, 718.81 this amount must be treated to have been wrongly deducted from the book value by way of depreciation on consumer financed assets, namely, serviceBefore parting with the discussion on this claim we may mention one impermissible exercise undertaken by the Special Officer. At page 40 of the impugned award it has been mentioned that the Special Officer having found that as the matter was of considerable judicial importance it was considered prudent to take legal advise from the Legal Remembrancer to U.P. Government and as the Legal Remembrancer opined that clauses XI and XII of the Sixth Schedule to the Electricity (Supply) Act would seem to provide an answer to the question raised they had to be kept in view and that Special Officer agreed with the said opinion of the Legal Remembrancer. It has to be kept in view that the Special Officer exercising quasi-judicial functions under Section 7-A of the Act who has the same powers as are vested in a civil court under theCode of Civil Procedure, 1908 when trying a suit, in respect of the matters enumerated in Section 7-A sub-section (7)(b) could not have called for such an opinion of the Legal Remembrancer and even though Section 7-A clause (7)(a) permits the Special Officer to have the assistance of such officers and staff of the State Government or the State Electricity Board or the licensee as he may deem fit in assessing the net amount payable, it had to be done in the presence of the licensee and an opportunity should have been given to the licensee to meet such an opinion. As that has not been done in the present case such an exercise on the part of the Special Officer and the reliance placed by him on the opinion of the Legal Remembrancer obtained behind the back of the licensee must be treated to be totally an incompetent and uncalled for exercise and such an opinion should have been completely ignored by the Special Officer. The second claim has, therefore, got to be accepted. We accordingly hold that the Special Officer has wrongly deducted from the book value of the assets as computed under Section 7-A(2)(i) an amount of Rs 2, 48, 718.81 and that amount is required to be added back to the book value of the assets which is to be made payable to the appellant-licensee by way of additional compensationClaim No.So far as this claim is concerned, as noted earlier, the appellant ultimately confined the claim on this head to Rs 60, 603.78. This claim refers to the electricity dues on the electricity supplied by the Board to the licensee during the period prior to the appointed day. The fuel escalation clause binding on the licensee entitled the Board to claim this amount. These amounts pertain to the period from October 1972 to November 1975. It is true that in connection with these amounts of claim various bills were issued by the Electricity Board to the appellant. At page 69 of the impugned award the entire table has been extracted by the Special Officer. The said table shows that at Serial Nos. 1 to 8 different bills were issued by the Board to the appellant between 25-7-1974 and 12-11-1975. But there are the last two bills dated 24-3-1976 and 2-9-1976 which were obviously issued after the appointed day. It was, therefore, contended by the learned Senior Counsel for the appellant that for at least the amounts covered by these two bills which consisted of Rs 51, 286.70 and 9317.08 respectively totalling to Rs 60, 603.78 the appellant could not have been made responsible as the bills were issued after the take-over. The learned Senior Counsel for the respondent-Board on the other hand submitted that these two bills referred to the period prior to take-over, namely, bill dated 24-3-1976 was for a period from October 1974 to November 1975 and bill dated 2-9-1976 was for October and November 1975. In this connection he invited our attention to Section 7-A(5)(b) which in terms provided that from the amount of compensation payable to the licensee the Special Officer was entitled to deduct the amount due to the State Electricity Board which was predecessor of the undertaking for energy supplied by the Board to the licensee before the vesting date. That as this energy was admittedly supplied to the licensee by the Board which was the predecessor of this undertaking before the vesting date, that is, 1-12-1975 the predecessor Board was entitled to deduct the said sum from the amount payable to the licensee for such acquisition and purchase as computed under Section 7-A(1) read with sub-section (2). In our view the aforesaid contention of the learned Senior Counsel for the respondent is well sustained on the statutory scheme of Section 7-A(5)(b). The Special Officer was certainly entitled to deduct from the amount payable to the licensee for the acquisition of his undertaking the amount due to the Board by way of supply of energy to the licensee. Even though the bill might have been issued after the acquisition and the appointed day as the bills referred to the period prior to the appointed day in connection with the electricity admittedly supplied by the Board to the licensee, the licensee was statutorily bound to reimburse the Board to the extent of these bills and that amount could be legitimately deducted from the computed amount of compensation by the Special Officer as enjoined by Section 7-A sub-section (5)(b). Consequently the learned Senior Counsel for the appellant was not justified in submitting that in such a case the Board should have been asked to file a separate suit and as such suit was not filed the Board could not have deducted this amount from the amount payable to the licensee under Section 7-A(2)(i). This claim, therefore, is found to have been rightly refused by the Special Officer and accordingly it stands rejected. That takes us to the consideration of the last claimClaim No.As noted earlier this claim now is confined to Rs 76, 423. It consists of deduction of Rs 38, 212 by way of Tariffs and Dividends Control Reserve. This deduction is effected by the Special Officer as per Section 7-A sub-section (5)(h). A mere look at the said provision shows that from the amount of compensation payable to the purchaser the Special Officer can deduct the amounts remaining in Tariffs and Dividends Control Reserve, Contingencies Reserve and the Development Reserve, insofar as such amounts have not been paid over by the licensee to the purchaser. It is obvious that these are trust amounts in the hands of the licensee which are ultimately to be paid over to the consumers and at the time of acquisition of its undertaking the said reserves have to be handed over to the purchaser, namely, the Board. But what is to be handed over to the Board by the licensee is the amount remaining in the Tariffs and Dividends Control Reserve. So far as the figures of the outstanding amounts in these reserves were concerned they were supplied by the licensee to the Special Officer. Accordingly an amount of Rs 8615 stood credited to the Tariffs and Dividends Control Reserve while an amount of Rs 54, 560 stood in the Consumer Control Reserve which was also part and parcel of Tariffs and Dividends Control Reserve. However by a very curious piece of reasoning the Special Officer artificially inflated the balances of theses reserves and held that Tariffs and Dividends Control Reserve should be treated to be showing the balance of Rs 46, 826 instead of Rs 8615 while the Consumer Rebate Reserve balance should be inflated to Rs 97, 727 instead of Rs 54, 560. The process by which this inflation was done for the purpose of deduction under Section 7-A(5)(h) also makes an interesting reading. The Special Officer agreed with the appellant that for the purpose of computing depreciation of assets financed by the appellant which had to be deducted from the book value of these assets as per Section 7-A(2)(i) extra depreciation charged by the licensee on these assets and which was effectively got considered by the Income Tax Authorities could not be taken into consideration for the purpose of Section 7-A(2)(i) as such excess depreciation was not contemplated or covered by the Sixth or the Seventh Schedule. Having accepted this contention, the Special Officer reduced the figure of deductible depreciation on these self-financed assets under Section 7-A(2)(i) and to that extent the book value of the self-financed assets got inflated and that benefit became available to the appellant. But the Special Officer thereafter proceeded to hold that because the appellant had obtained this excess depreciation from the Income Tax Authorities that would have got added to its revenue in the relevant years and this additional benefit would have got added to its reserves and, therefore, the amount of excess depreciation which was not deducted from the book value of the acquired assets as per Section 7-A(2)(i) had to be added back to the concerned Tariffs and Dividends Control Reserve and Consumer Rebate Reserve and that is how he ploughed back these extra depreciation amounts which could not be deducted under Section 7-A(2)(i) by way of depreciation on these assets by treating them as deductible under Section 7-A(5)(h). In our view on the clear language of Section 7-A(5)(h) such an exercise is not contemplated. While deducting the depreciation from the book value of the concerned assets as per Section 7-A(2)(i) the amount of extra depreciation which is dehors the permissible scheme of the Sixth Schedule read with Seventh Schedule of the Supply Act has to be ignored. Once that is done Section 7-A(2)(i) gets completely exhausted and complied with. Up to that stage the Special Officer was with the appellant, but then he thought that this extra benefit of additional depreciation which was already earned by the appellant from the Income Tax Department must be deducted from the purchase price as per Section 7-A(5)(h) by artificially inflating the balance of the concerned reserves. So far as this exercise, undertaken by the Special Officer, is concerned it is not permissible on the express language of Section 7-A(5)(h). The said provision clearly indicates that whatever amounts have remained in the concerned reserve accounts with the licensee on the date of acquisition have to be paid over to the purchaser. Thus actual balances of these reserves as reflected from the books of accounts of the licensee, had to be handed over to the Board. The said provision nowhere permits an exercise of artificially inflating the balances of these reserves which are not reflected by the books of accounts of the licensee, on the supposition that these extra depreciations which the licensee must have earned from year to year on these assets and which is not covered by the Sixth or Seventh Schedule of the Supply Act must have swelled the revenues of the licensee under the Income Tax Act and, therefore, must necessarily have gone to the concerned reserve accounts. Before that stage is reached it is just possible that the licensee might have utilised the extra depreciation earned according to the Income Tax Act provisions for swelling its own profits which might not have been diverted to reserves but might have been utilised for other purposes including giving dividends to its shareholders or in purchasing other assets which would naturally get accounted for under Section 7-A(2)(i) itself. There are a number of contingencies contemplated in the accounting practices followed by the licensee in connection with its business activities which might have utilised in diverse ways these extra depreciation amounts earned by the licensee from Income Tax Authorities. Therefore, it was not permissible for the Special Officer to conclude that necessarily these extra depreciations earned by the licensee must have been utilised for swelling the balances of the concerned reserves and, therefore, the actual balances did not reflect the real balances. It is also to be kept in view that balances in these concerned reserves would rise over a number of years during which the licensee carries on its business and they are not necessarily confined to only one year or the last year when the acquisition takes place. They are a product of working of the concern over years and also get reflected by the accounting practices and the business practices resorted to and adopted by the licensee over years. Consequently there was no material with the Special Officer to come to a definite conclusion that the extra depreciations earned by the licensee over years from the Income Tax Department must have got channelised into these reserves and, therefore, the apparent balances in these reserves were not the real balances and had to be inflated accordingly with a view to seeing that what goes out from the deductible depreciation under Section 7-A(2)(i) must necessarily get deducted under Section 7-A(5)(h). In our view, therefore, the Special Officer was clearly in error in deducting the total amount of Rs 76, 423 consisting of the artificially inflated balances in the aforesaid two reserves from the amount of compensation payable to the licensee as per Section 7-A(5)(h). The fourth claim, therefore, is found to be well sustained and must be accepted by holding that the appellant was entitled to an additional compensation of Rs 76, 423 on this count