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Interpretation of hail damage insurance claim under Income-tax Rules, 1962. Analysis: The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the assessment year 1981-82. The primary issue was whether the hail damage insurance claim receivable by the assessee-company was a mixed receipt to which rule 8 of the Income-tax Rules, 1962, is applicable. The facts revealed that the insurance claim arose from severe hailstorm damage to the tea crop in the assessee's gardens. The Income-tax Officer initially treated the claim as agricultural income, but later assessed it under sub-rule (1) of rule 8 of the Income-tax Rules, 1962, considering it as covering both agricultural and manufacturing operations. The Commissioner of Income-tax (Appeals) relied on a previous decision of the Calcutta High Court and treated the entire amount as 100% agricultural income. However, the Tribunal disagreed, stating that the insurance claim covered not only damage to the growing crop but also the loss in respect of tea that could have been manufactured if the damage had not occurred. The Tribunal held that the receipt was a mixed one and applied rule 8 of the Income-tax Rules, 1962. It distinguished the previous decision relied upon by the assessee and set aside the Commissioner's order, restoring that of the Income-tax Officer. During the hearing, the counsel for the assessee reiterated the applicability of the previous decision of the Calcutta High Court, emphasizing the clause of the insurance policy related to the damage to the growing tea crop. The court revisited the previous decision and concurred with its interpretation, stating that the amount received from the insurance company represented agricultural income exempt under the Income-tax Act, 1922. The court held that the principles established in the prior decision applied to the current case, concluding that the entire receipt for damage caused by the hailstorm to the growing tea leaves should be assessed as agricultural income without any apportionment under rule 8 of the Income-tax Rules, 1962. Ultimately, the court answered the reference question in the negative and in favor of the assessee, emphasizing that the insurance claim amount should be treated as agricultural income. The judgment was agreed upon by both judges, and no costs were awarded.
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