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TMI Blog2005 (3) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... y destroyed and reduced to scrap. Thus, the amount of compensation referable to the plant and machinery installed on these floors would clearly attract the provisions of section 41(2) - Tribunal was not justified in upholding the order of the Commissioner of Income-tax (Appeals) that the provisions of section 41(2) would not be applicable - - - - - Dated:- 15-3-2005 - Judge(s) : R. K. AGRAWAL., PRAKASH KRISHNA. JUDGMENT The Income-tax Appellate Tribunal, Allahabad, has referred the following question of law under section 256(2) of the Income-tax Act, 1961, hereinafter referred to as "the Act" for opinion to this court: "Whether, on the facts and in the circumstances of the case, the Tribunal was, in law, justified in upholding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l receipts. Thus, a relief of Rs. 6,98,742 was allowed after deducting Rs. 11,17,757 on repairs and restoration of machinery and building. The Revenue feeling aggrieved preferred an appeal before the Tribunal. The Tribunal has upheld the decision of the Commissioner of Income-tax (Appeals) and had held that the ratio of the judgment of the hon'ble Supreme Court in CIT v. Sirpur Paper Mills Ltd. [1978] 112 ITR 776 was applicable. It did not accept the contention of the Revenue that the building along with the plant and machinery were completely destroyed in the fire and in respect of such damage the compensation received should have been brought to tax under section 41(2) of the Act. We have heard Shri A.N. Mahajan, learned standing counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mill building. The wooden doors and windows were gutted. The walls had developed serious cracks at certain places and required to be pulled down in portions. The fifth storey was the worst affected and required to be completely pulled down. The A.C. sheets of the roof had burnt and the steel framework had twisted and buckled. The RCC floors had sagged, steel connuns had gone out of plumb, walls at places had cracked, the plaster got dislodged. The 1st and 2nd storeys were practically saved. Due to the black partition wall between the wheat cleaning and milling sections, the fire could not spread to the wheat cleaning section and it was totally saved. (b) Plant and machinery Ground floor (1st storey) No machinery, except the lower po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y damaged. So far as the wheat cleaning section was concerned, it was totally saved. There is, therefore, considerable merit in the assessee's submission that so far as the building was concerned, it would be wrong to say that it was a case of total destruction of the building of the factory. So far as the extent of damage to plant and machinery is concerned, it was not too extensive, but so far as the second storey was concerned, the damage to the roller mills and grinder was minor. On the third storey, the entire machinery and accessories were burnt and reduced to scrap. Similar was the position with regard to the machines installed on the 4th storey and the 5th storey. These machines installed on 2nd and 3rd and 4th floors were reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id expenditure was the restoration altogether a new building or new machine. Prima facie, the assessee carried on extensive repairing of the burnt machines and building and brought it to working condition. It was thus clearly a case of partial damage, both with regard to machines and the buildings. This being so, the learned Commissioner of Income-tax (Appeals) was in our opinion, justified in holding that the ratio of the aforesaid judgment of the hon'ble Supreme Court applied to the facts of the present case. Accordingly, we confirm his order." Thus, from the perusal of the order of the Tribunal, we find that it had taken note of the surveyor's report that the entire plant and machinery installed on the second, third and fourth floor of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, the entire building and machinery installed in the second, third and fourth floor of the respondent's mill had been completely destroyed and reduced to scrap. Thus, the amount of compensation referable to the plant and machinery installed on these floors would clearly attract the provisions of section 41(2) of the Act. In view of the foregoing discussion, we are of the considered opinion that the Tribunal was not justified in upholding the order of the Commissioner of Income-tax (Appeals) that the provisions of section 41(2) would not be applicable. We accordingly answer the question referred to us in the negative, i.e., in favour of the Revenue and against the assessee. However, there shall be no order as to costs. - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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