9911796707
TMI Blog1962 (1) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... k-in-trade, machinery and buildings. The said assets were covered by several insurance policies of the General Assurance Society Limited : (1) in respect of general specification, (2) specific stock policies and (3) consequential loss policies for an aggregate sum of ₹ 1,48,92,390. Re-insurance had been effected by the said insurance company with other companies. The assessee preferred a claim on the insurance company, which appointed assessors to survey the same. On November 27, 1948, the assessee company wrote to the insurance company offering to accept ₹ 65,00,000 in full settlement of all its claims with stipulation that the offer should be accepted within fifteen days of the said date and the amount should be paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fiction of the law that the excess indicated in the proviso to section 10(2)(vii) became profit it could assume that character in the words of the section only when it was actually received. The question of law referred to this court is : Whether on the facts and in the circumstances of this case the sum of ₹ 27,06,593 was assessable as a profit of the assessee company of the previous year relevant to the assessment year 1949-50 in accordance with the fourth proviso to section 10(2)(vii) of the Indian Income Tax Act ? Section 13 of the Act lays down that income, profits and gains of an assessee are to be computed, for the purpose of sections 10 and 12, in accordance with the method of accounting regularly employed by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 10 must complied with. Under section 10(1) an assessee has to pay tax in respect of profits and gains of any business, profession or vocation carried on by him. Sub-section (2) enumerates allowanced admissible for the purposes of computation of profits and gains. Ordinarily moneys received by way of compensation from and insurance company for loss capital assets would not figure at all in the computation of income and profits but inasmuch as an assessee is entitled to allowances for depreciation year after year the Legislature thought that the entire amount of compensation should not be left untouched. Section 10(2)(vii) permits allowances as follows : In respect of any such building, machinery or plant which has been sold or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifference between the original cost and the written down value less the scrap value shall be deemed to be profits of the previous year in which such moneys were received : Provided further that for the purposes of this clause the original cost of a building, the written down value of which is determined in accordance with the first proviso to sub-section (5) shall be deemed to be the written down value so determined a sat the date of its being brought into use for the purposes of the business, profession or vocation. In this case we are only concerned with the fourth proviso under which any compensation received in respect of buildings, machinery or plant exceeding the difference between the written down value and the scrap value is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpretation of the word paid in section 10(5) was ex abundanti cautela and the result would have been the same even if the word paid was not interpreted as provided for. I find myself unable to accept this contention. There was no need to give such an interpretation at all in that event. As the taxation of what is not trading receipt is the result of a fiction the scope of the same ought to be strictly limited. It is legitimate to infer that the legislature thought that it would not be right to take ways a portion of the insurance moneys even before the same were actually received. On behalf of the assessee it was argued that the proper way to look at it was to treat a portion of the insurance moneys as profit only in case it reached ..... X X X X Extracts X X X X X X X X Extracts X X X X
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