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TMI Blog2002 (8) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year is 1976-77. The assessee is engaged in the business of growing and manufacturing tea. It had two factories, one situated in Sutton Estate and another in Katary Estate. On June 23, 1975, there was a fire accident in which the factory buildings and machinery installed in Sutton Tea Factory premises were destroyed. The assets had been insured with two insurance companies who settled the assessee's claim for compensation in terms of the fire policy. The company received a sum of Rs. 16,84,225 as compensation, of which, a sum of Rs. 8,00,000 represented compensation for damage suffered by the buildings and the rest represented compensation for damage to the plant and machinery. The Assessing Officer deemed the receipt of those a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or being owned, used or enjoyed by any one. "Capital asset" is defined in section 2(14) of the Act. It is defined as meaning property of any kind held by an assessee, whether or not connected with his business or profession. The definition of "transfer" in section 2(47) of the Act as it stood at the commencement of the year 1976-77 read thus: "'transfer', in relation to a capital asset, includes,-- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law;" The modes of transfer mentioned in this definition are; sale, exchange, compulsory acquisition, relinquishment of the asset, and extinguishment of any rights in the capital asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer", or in the charging section. The Supreme Court in the case of Vania Silk Mills Pvt. Ltd. v. CIT [1991] 191 ITR 647 dealt with a case where the assessee's machineries had been destroyed in a fire and for which it had received the amount payable by the insurer who had insured those machineries against the risk of fire. The court in that case held thus: "When an asset is destroyed there is no question of transferring it to others. The destruction or loss of the asset, no doubt, brings about the destruction of the right of the owner or possessor of the asset, in it. But it is not on account of transfer. It is on account of the disappearance of the asset. The extinguishment of right in the asset on account of extinguishment of the asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT v. Mrs. Grace Collis [2001] 248 ITR 323 (SC). In the case of Mrs. Grace Collis [2001] 248 ITR 323 (SC), the court was concerned with the question as to whether there is a transfer of the shares when the amalgamation of the company whose shares are held by the assessee is ordered by the court with another company. The court held that the rights of the assessee in the capital asset, viz., the shares in the amalgamating company stood extinguished upon the amalgamation of the amalgamating company with the amalgamated company and that,: "There was, therefore, a transfer of the shares in the amalgamating company within the meaning of section 2(47). It was, therefore, a transaction to which section 47(vii) applied and, consequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e added value to the shares of that company. The extinguishment of rights in the capital asset referred to in the definition of "transfer" in section 2(47) of the Act, therefore, would clearly apply to a case where the rights in the shares in the amalgamating company are extinguished on amalgamation to be replaced by shares in the amalgamated company, which after amalgamation is the owner of the assets transferred to it as a consequence of the amalgamation, and which will thereafter have the ownership, use and benefit of those assets. The case of amalgamation of companies and the extinguishment of rights of the shareholder in the amalgamating company is no way comparable to the destruction of the assets which as a consequence brings about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of transfers. The court held,: "As we read it, therefore, the expression does include the extinguishment of rights in a capital asset independent of and otherwise than on account of transfer." In the case of Mrs. Grace Collis [2001] 248 ITR 323 (SC), the court did not have occasion to go into the question as to whether the destruction of a capital asset which as a consequence brings about the extinguishment of the rights of the assessee-owner in such asset, would amount to transfer. The court did not hold that Vania Silk Mills Pvt. Ltd.'s case [1991] 191 ITR 647 (SC) was wrongly decided, or that the definition of "transfer" in section 2(47), particularly, the use of the words "extinguishment of any rights therein" would cover case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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