- (1.) WE have heard the assessee, who opposed the Department's application for leave to appeal under s. 260A.
(2.) IN our opinion, there are two main points involving the sums on which the Department sought to appeal. The first sum is Rs. 2,72,110. This sum represents the part of the insurance cover received by the assessee (the aggregate received being Rs. 74,28,849) which was in excess of the cost of fully damaged machinery. This sum was offered to tax under S. 45 by the assessee but the assessee retracted its offer before the Tribunal. The Tribunal accepted the assessee's contention in that regard. On the authority of the Vania Silk Mills (P) Ltd. vs. CIT (1991) 98 CTR (SC) 153 : (1991) 191 ITR 647 (SC) : TC 20R.290, it is a settled position that this amount cannot be treated as a capital receipt in the hands of the assessee as there was no transfer of capital but the rights and property of the assessee merely got extinguished, somewhat ironically, by fire.
(3.) THE second sum in relation to which the appeal is intended is Rs. 16,63,668. This represents a part of the receipt from the insurance company, in respect of partly damaged machinery, for the repair of which the assessee spent a sum of Rs. 4,58,170, but even after such expenditure it had the balance of the sum of Rs. 16,63,000 and odd in its hands. The point was whether it could be taxed as a revenue receipt under S. 41(2), as it stood at the material time. The said sub-section without the provision is quoted below : "(2) Where any building machinery, plant or furniture which is owned by the assessee and which was or has been used for the purposes of business or profession is sold, discarded, demolished or destroyed and the money payable in respect of such building, machinery, plant or furniture, as the case may be, together with the amount of scrap value, if any, exceed the written down value, so much of the excess as does not exceed the difference between the actual cost and the written down value shall be chargeable to income-tax as income of the business or profession of the previous year in which the moneys payable for the building, machinery, plant or furniture became due." ;