2024 (1) TMI 66 - HC - Income Tax

Additions against loss claimed due to goods being damaged/destroyed by fire - whether the loss incurred by assessee due to fire was an ascertained liability? - whether the respondent/assessee was entitled to claim the entire amount although the claim was not settled by the concerned insurance company and therefore, the amount received would be taxable u/s 41(1)? HELD THAT - None of the proposed questions were directed towards the fire incident or to that issue had not been decided. A perusal of the impugned order passed by the Tribunal discloses that the departmental representative did not make any submission in that regard. Given this position, we are of the view that since the findings of fact have been returned by the Tribunal that what was destroyed in the fire were goods in which the respondent/assessee was trading, the loss suffered was a revenue loss and hence deductible. Tribunal, therefore, came to a correct conclusion that the addition made by the AO was not sustainable. No substantial question of law arises for our consideration.

Summary

Issues:
The only issue in this appeal concerns the addition made by the Assessing Officer (AO) with regard to loss claimed by the respondent/assessee due to goods being damaged/destroyed by fire.

Details of Judgment:

1. The respondent/assessee claimed a deduction of Rs. 5,24,06,053/- due to loss of trading goods in a fire incident on 05.12.2014.
2. The AO added this amount to the income of the respondent/assessee as a contingent loss pending processing by the insurance company.
3. The Commissioner of Income Tax (Appeals) confirmed this addition, citing lack of evidence and finalization by the insurance company.
4. The Tribunal reversed the decision, considering the fire incident date, FIR filing, and the revenue loss nature of the destruction of stock-in-trade.
5. The Tribunal also referred to a judgment stating that destruction of stock-in-trade results in a revenue loss.
6. The respondent/assessee provided correspondence with the insurance company and stated readiness to offer any sum received for tax under Section 41(1) of the Act.
7. The AO did not question the occurrence of the fire but doubted if the loss was an ascertained liability or a contingent loss.
8. The Tribunal found that the loss was a revenue loss and deductible, thus ruling the AO's addition as unsustainable.
9. No substantial question of law was found, leading to the dismissal of the appeal.