2002 (9) TMI 65

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... is receipt should be treated as taxable income in the hands of the assessee or excluded altogether from the computation on the ground that it is a capital receipt which did not have the character of a capital gain, is not anywhere discussed. Admittedly, the assessee had treated this amount as income in its profit and loss account and on its own showing it has used a part of this amount for payment of dividends. It was, therefore, necessary for the Assessing Officer to have examined in depth this claim of the assessee and his failure to do so is not only erroneous but also prejudicial to the Revenue. The Commissioner was therefore right in exercising his power of revision under section 263 and directing the Assessing Officer to examine this .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... in respect of the stock, work-in-progress and repairs to machinery were treated by the assessee as revenue receipts in its profit and loss account and as also for the purpose of income tax. However, the sum received by it for the damage caused to the machinery, which continued to be used even after the damage suffered, though treated as income in the profit and loss account and also used for the purpose of distributing dividend, was however, not treated as an item of revenue for the purpose of income-tax as in the view of the assessee that receipt was in the capital field. It was also the case of the assessee that it had treated that sum as falling within the capital field by relying upon the opinion furnished to it by a firm of chartered .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... tinguishment of rights in a capital asset distinct and independent of such extinguishment consequent upon the transfer thereof." The law stated in that decision is indeed, the law that had been followed by the Commissioner for holding that the assessee's claim with regard to the amount received from its insurer for the damage to its machinery was an amount which was prima facie liable to be taxed. Learned counsel also relied on the decision of the apex court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 wherein the court emphasised that for the exercise of jurisdiction under section 263 of the Act, it was necessary that the order of assessment be not merely erroneous but also be prejudicial to the interest of the R .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X