TMI Blog1955 (4) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... r being 1st which ended on 31st March, 1948. On 14th March, 1946, the Government of Madras Promulgated the Madras Cotton Cloth and Apparel Export Control Order, 1946, under rule 81(2) of the Defence of India Rules. Clause (4) of this Order provided : No person shall on or after 19th February, 1946, transport or cause to be transported cloth or apparel from any place within the limits of the Province of Madras to any place in India outside the said limits except under and in accordance with the terms and conditions of a permit issued by the Commissioner under this order. 2. Rule 7 provided that the holder of the permit issued under the order above-mentioned should be bound by the provisions of the order and the conditions specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m had not taken any prominent part in the commission of the offence and therefore sentenced them to varying amounts of fine. In addition he passed an order in regard to the 9762 yards seized by the textile authorities in these terms : The cloth 9762 yards will be confiscated and placed at the disposal of the Provincial Textile Commissioner who will dispose of it in the manner he considers most appropriate and after deducting ten per cent of the sale price which will go to the Government the balance of the sale proceeds will be returned to the accused company. 4. In pursuance of this order of the Magistrate the Textile Commissioner utilised the services of the assessee to dispose of 99 pieces and himself effected a sale of the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was imposed upon the assessee. They considered that the present case was concluded against the assessee by the decision of this Court in Mask and Co. v. Commissioner of Income Tax, Madras. The question for our consideration is whether this disallowance is correct. 6. Learned counsel for the assessee did not contest the correctness of the ruling of this Court in Masks case nor the reasoning upon which that decision was tested. The deduction, that was claimed in Masks case and which was disallowed by this Court consisted of damage paid by the assessee for breach of contract by reason of their selling goods at lower rates than they were bound to sell. The damages payable were assessed by the Court at ₹ 5,000 and this with costs inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e imposed but arising incidentally by the manner in which the confiscation was directed to be enforced. 7. The loss of ₹ 9,720 claimed, it would be seen, is computed on the basis of the difference between ₹ 16,807, the sale price credited in the account in the previous year, and ₹ 7,087, the amount paid to the assessee by the Government. Even accepting the contention of the assessee, he would not be entitled to claim the entirety of this sum since it includes the diminution in value caused by the confiscation ordered. The sum representing the value of 1/10 confiscated and the costs incurred in effecting the sales came to ₹ 875-12-9 and the assessee would not be entitled to claim this as a loss. Learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re affected by government in their own right in pursuance of the orders of the Magistrate, it does not necessarily follow that the sales might not result in a commercial loss. The more important aspect is to examine whether the money paid over to the assessee by the Government was or was not a business receipt or a receipt in the course of business. The assessee has so treated it and has computed his loss on that basis. If the argument advanced on behalf of the Commissioner were accepted, this receipt from the Provincial Textile Commissioner ought to be eliminated from the credit side in the assessees books, and learned counsel for the Commissioner frankly stated that this would be the logical result of the acceptance of his argument. We ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the assessee in the present case arose incidentally out of the enforcement of the penalty imposed by the Magistrate and should therefore be deemed part of the penalty. In other words, the suggestion was that the Magistrate must be deemed to have inflicted a further punishment by his direction as regards the manner in which the confiscation should be enforced in addition to the confiscation ordered. We are unable to consider this as any reasonable deduction from, or construction of, the order of the Magistrate. 14. In our opinion the loss sustained by the assessee to the extent of ₹ 8,844 is a trading loss which is deductible in computing the income of the assessee for the assessment year. The reference is therefore answ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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