TMI Blog1967 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts and in the circumstances of the case, the sum of Rs. 19,81,899 received by the assessee in 1950, being the surplus of the compensation money over the written down value of the assets destroyed by fire in the year 1948, is taxable under the 4th proviso to section 10(2)(vii) as the income of the assessee for the year 1950 ? " The facts and circumstances out of which the question arose are as follows : The relevant assessment year is 1951-52 and the corresponding accounting year is the calendar year 1950. The Moon Mills Ltd., Bombay, respondent, hereinafter referred to as " the assessee ", carried on the manufacture and sale of cotton yarn and cotton piece-goods in Bombay. On June 6, 1948, a devastating fire broke out in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ", sustained the order of the Appellate Assistant Commissioner but on different considerations. The High Court answered the question in the negative and in favour of the assessee. The Commissioner of Income-tax having obtained special leave, the appeal is now before us. The learned counsel for the revenue contended that the High Court erred in answering the question in favour of the assessee, while Mr. Desai, relying on three recent decisions of this court, urged that the point was almost concluded in his favour. The relevant portions of section 10(1) and section 10(2) read as follows : " 10. Business.--- (1) The tax shall be payable by an assessee under the head 'profits and gains of business, profession or vocation' in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue no amount shall be allowable under this clause and so much of the excess as does not exceed the difference 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 .............." This court recently interpreted proviso 2 above in Commissioner of Income-tax v. Express Newspapers Ltd. and Commissioner of Income-tax v. Ajax Products Ltd. In the former case, Subba Rao J., as be then was, held : " Therefore, to bring the sale proceeds to charge, the following conditions shall be fulfilled : (1) during the entire previous year or a part of it the business shall have been carried on by the assessee ; (2) the machinery shall have been us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of insurance, salvage or compensation in respect of building, machinery or plant discarded, demolished or destroyed. Mr. Mitra relies on this distinction but we are unable to appreciate how this makes any difference. Further, the fourth proviso also brings to charge the " escaped profits under the guise of superfluous allowance." It seems to us that before the excess of insurance money received over the difference between the written down value and scrap value is brought to charge it is essential that : (1) during the previous year in which moneys are received the business shall have been carried on by the assessee for the part or whole of it ; and (2) the machinery shall have been used in the business in that previous year. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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