AJIT K.SENGUPTA, J. - (1.) AT the instance of the assessee, the following question of law has been referred to this court under Section 256(1) ofthe Income -tax Act, 1961, for the assessment year 1970 -71 : 'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the loss on account of the ropeway machinery blown off in the storm was not a loss allowable under Section 45 read with Section 2(47) of the Income -tax Act, 1961 ?' The facts leading to this reference are in a narrow compass.
(2.) BEFORE the Income -tax Officer, the assessee claimed that the ropeway machinery belonging to the company was blown off in a storm and could not be recovered from the hills as recovering it was considered to be uneconomical. The assessee -company claimed Rs. 2,07,900 as revenue loss under Section 32(1A)(ii) of the Income -tax Act. The Income -tax Officer found that the provision of Section 32(1A)(ii) came into force from April 1, 1971, and was not applicable to the year which ended on December 31, 1969. The Income -tax Officer further observed that the auditor was silent about this loss and there was no evidence to support this claim. He held that the loss was a capital loss and he disallowed the amount. Before the Appellate Assistant Commissioner, it was claimed that the loss was allowable under Section 32(1)(iii) and when it was pointed out that this loss could not be allowed as the machinery had not been used in this year, it was submitted that the loss should be allowed as a short -term capital loss under Section 45 of the Income -tax Act. It was contended that transfer included extinguishment of the rights in the capital asset and it should be held that the company's right to the machinery was extinguished by virtue of the loss of the machinery in the storm. The Appellate Assistant Commissioner, however, did not accept the claim of the assessee. He held that the loss could not be allowed under Section 32(1)(iii).
(3.) WHEN the matter came up before the Tribunal, the assessee confirmed its claim of loss only as a short -term capital loss under Section 45 of the Income -tax Act. It was contended that, after the loss of the machinery in the storm, the assessee's right in those capital assets was extinguished.;