1986 (2) TMI 126 - AT - Income Tax

Summary

Issues:
1. Dispute regarding the estimate of income from lorries AAV 6291, AAG 157, and AAV 5265.
2. Computation of profit under section 41(2) concerning the sale of lorry AAV 5265.

Analysis:

1. The first issue in dispute pertains to the estimation of income from three lorries. The assessee had shown varying incomes for each lorry, which were then estimated differently by the Income Tax Officer (ITO) and the Commissioner of Income Tax (Appeals) [AAC]. The Tribunal considered the previous year's order and reduced the estimated income for lorry AAV 5265 to Rs. 18,000, while maintaining the AAC's estimates of Rs. 30,000 and Rs. 8,000 for lorries AAV 6291 and AAG 157, respectively. The Tribunal found no grounds to interfere with the AAC's estimations for the latter two lorries.

2. The second issue revolves around the computation of profit under section 41(2) concerning the sale of lorry AAV 5265. The assessee sold the lorry for Rs. 31,200, with a written down value of Rs. 12,965. After spending Rs. 13,500 on repairs due to an accident, the assessee received Rs. 14,949 from the insurance company. The ITO calculated a profit of Rs. 19,684 under section 41(2), whereas the assessee had admitted Rs. 4,235 as profit. The Tribunal ruled that the insurance amount of Rs. 14,949 should not be considered while computing the profit under section 41(2). Referring to the relevant provision, the Tribunal clarified that the insurance amount for damage incurred by the asset cannot be factored into the profit calculation. The matter was remanded to the ITO for recalculating the profit under section 41(2) without including the insurance amount.

In conclusion, the Tribunal partially allowed the appeal for statistical purposes, maintaining the income estimates for two lorries while reducing the estimate for one. Additionally, it clarified the correct method of computing profit under section 41(2) by excluding the insurance amount received from the calculations.