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TMI Blog1967 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 premises of the mills of the assessee destroying the building and partially destroying and damaging the machinery and plant. The amount of compensation was settled between the insurers and the assessee at Rs. 62,41,177. Although the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the profits or gains of any business, profession or vocation carried on by him. (2) Such profits or gains shall be computed after making the following allowances, namely : --- ... (iv) in respect of insurance against risk of damage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 used in the business ; and (3) the machinery shall have been sold when the business was being carried on and not for the purpose of closing it down or winding it up." In the latter case, after considering the cases of Liquidators of Pursa Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so 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. It is not disputed that on the facts of this case none of these conditions are satisfied. It follows from the above reasoning that the answer returned by the High Court is correct. The appeal accordingly fails and is dismissed with costs. Appeal dism ..... X X X X Extracts X X X X X X X X Extracts X X X X
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