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TMI Blog1952 (11) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... year with which we are concerned is 1945-46. The assessee had insured its buildings, plant and machinery with various insurance companies and also took out, besides those policies, four policies of a type known as a "Consequential Loss Policy." This kind of policy insures against loss of profit, standing charges and agency commission. The total insured against under the latter heads was Rs. 37,75,000 on account of loss of profits and standing charges, and Rs. 2,25,000 on account of agency commission, making a total of Rs. 40,00,000. On the 18th of January, 1944, a fire broke out and the mills were completely destroyed. The various insurance companies therefore paid the assessee company an aggregate of Rs. 14,00,000 on account in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mong other heads. The question has been referred in these terms :-- "Whether in the circumstances of the case, the sum of Rs. 14,00,000 was the assessee company's income within the meaning of Section 2(6C) of the Indian Income-tax Act and liable to pay income-tax under the Indian Income-tax Act." We are concerned in this case with four policies of insurance with four different insurance companies. The clauses relevant to the present matter are the same in all four cases though the sum insured against by each insurance company differs. They are as follows :-- "POLICY NO. C.L. 10018..................... Rupees X Lacs only On Loss of Profits, Standing Charges and Agency Commission of the above Co.'s Mills, situate at Haines Road, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uditor's Fees, Travelling Expenses, Insurance Premiums, Advertising and Agency Commission. Period of indemnity.--The period beginning with the occurrence of the fire and ending not later than eighteen consecutive calendar months thereafter during which the results of the business shall be affected in consequence of the fire. Rate of Gross Profit.--The rate of gross profit per unit earned on the output during the financial year immediately before the date of the fire.......... to which such adjustments shall be made as may be necessary to provide for the trend of the business and for variations in or special circumstances affecting the business either before or after the fire or which would have affected the business had the fire not occ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit" but it is something which represents the profits and was intended to take the place of them and is therefore just as much income as profits or gains received in the ordinary way. Section 4 is so widely worded that everything which is received by a man and goes to swell the credit side of his total account is either an income or a profit or a gain. No attempt has been made in the Act to define "income" except to say in Section 2(6C) that it includes certain things which would possibly not have been regarded as income but for the special definition. That however does not limit the generality of its natural meaning except as qualified in the section itself. The words which follow, namely, "from whatever source derived", show how wide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip and conduct of the business and arises from it. Accordingly, it is not exempt. This question was considered by the Supreme Court of Canada which decided that a receipt of this nature is not a "profit" and so is not taxable (B. C. Fir and Cedar Lumber Co. v. The King). But the Court did not examine the wider position whether it is " income " and in any event the decision was reversed on an appeal to the Privy Council. Their Lordships held it is " income ". This was followed later by the Court of Appeal in England and endorsed by the House of Lords in Commissioners of Inland Revenue v. William's Executors. In so far as these decisions do not turn on the special wording of the Acts with which they are respectively concerned and deal with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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