ALOK SINGH,J. - (1.) PRESENT appeal is filed against the judgment and order dated14.8.2003 passed by ITAT (Delhi Bench CN DLI) in ITANo.1037/Del/1998 and ITA No.1038/Del/1998 for the assessment year.
(2.) PRESENT appeal was admitted on the following substantialquestions of law: - "1. Whether the Hon'ble Income Tax Appellate Tribunal was right in allowing the loss on account of destruction of assets by treating the same as revenue loss after the change in the Income Tax Act, 1961 providing for adjustment of the loss against other assets of the block with effect from assessment year 1988-89. 2. Whether the Hon'ble Income Tax AppellateTribunal was right in allowing insurance premium paid on the life of two partners of the firm before the introduction of change brought about by the Finance Act, 1961 allowing the amount of insurance money on maturity or on death of keyman becoming taxable in the hands of the recipient i.e, the firm in this case which was effective from 1.10.1996." Question No.1 Brief facts of the present case, inter alia, for the purpose of deciding question No.1, are that assessee is engaged in the manufacture and sale of automotive components; loss of ? 1,90,278.00 on account of fire was claimed; due to short circuit, fire broke out in the factory premises of the assessee on 16.12.1993; assessee suffered a total loss of Rs 7,49,544.00; assessee received a sum of Rs 5,59,226.00 from the insurance company and the balance amount was debited to profit and loss account; at the time of assessment, the A.O. disallowed the same, which was upheld by the CIT.
(3.) LEARNED Tribunal in the impugned order has held that any capital gain or capital loss arises only when there is a transfer of assets within the meaning of Section 2(47) of the Act; the definition of 'transfer' includes the sale exchange or relinquishment of the assets or the extinguishments of any rights therein; in the instant case there is no relinquishment of the assets as due to fire, the asset is lost which could be the extinguishments of the assets. Learned Tribunal, while relying on the judgments of Hon'ble the Supreme Court in the case of Mary Bong & Kyel Tea Industries Ltd., 91 Taxman 11 and in the case of VarnaSilk Mills (P) Ltd., 191 ITR 657, Relied. has held that where the asset is destroyed it will not amount to transfer of the assets. Therefore, claim received from the insurance company against the loss suffered by the assessee due to fire would be revenue loss incurred in the normal course of business and allowable deduction under Section 37(1) of the Act and cannot be treated as capital gain.;