TMI Blog1987 (11) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... rol) Act of 1968 in lieu of confiscation is only compensatory in nature and was not imposed for infringement of Gold (Control) Act and, therefore, allowable deduction under section 37 of the Income-tax Act, 1961 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to claim deduction of the value of the goods which were not recovered in the assessment year 1976-77 ? " The facts in brief necessary for answering the aforesaid two questions are that the assessee during the relevant assessment year was carrying OD business in purchase and sale of precious metal. The relevant assessment year in this case was 1976-77, the previous year with regard to which was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s claimed. On an application being made by the Department thereafter, the Tribunal referred the aforesaid two questions to this court for its opinion. It was urged by learned counsel for the Department that the sum of Rs. 5,000 which the assessee had to pay as fine in lieu of confiscation of the gold seized for the contravening of the Gold Control Regulations could not, in law, have been allowed by the Tribunal. In support of this submission, reliance has been placed on the decision of the Supreme Court in Haji Aziz and Abdul Shakoor Bros. v. CIT [1961] 41 ITR 350. In that case, the assessee was carrying on the business of importing dates from abroad and selling them in India. It imported dates from Iraq partly by steamer and partly by co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 350. In this view of the matter, the law laid down by the Supreme Court in the aforesaid case is squarely applicable to the facts of the instant case. Learned counsel for the assessee in this connection invited our attention to a later decision of the Supreme Court in CIT v. Piara Singh [1980] 124 ITR 40. In our opinion, that case is clearly distinguishable. There the respondent was carrying on smuggling activity and was apprehended by the Indian police while crossing the border into Pakistan, and a sum of Rs. 65,000 in currency notes was recovered from his person which was confiscated by the Customs authorities, The Income-tax Officer found that the assessee was carrying on the business of smuggling and that he was liable to income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on August 13, 1974, and the assessee was following the mercantile system of accounting, the loss could be claimed by him not in the assessment year 1976-77 but in the assessment year 1975-76. The Tribunal, on the other hand, relied upon a decision of the Allahabad High Court in U. P. Vanaspati Agency v. CIT [1968] 68 ITR 120 and held that the loss was rightly claimed in the assessment year 1976-77. In that case, it was held that a dispossession would become a loss only after the recovery becomes impossible or the chances of recovery become very remote. In that case, a theft of Rs. 13,100 had taken place on January 4, 1960, and only Rs. 1,100 was recovered. The balance of Rs. 12,000 was claimed by the assessee as if the theft had taken pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not justified in law in holding that the imposition of fine of Rs. 5,000 under the Gold (Control) Act of 1968 in lieu of confiscation is only compensatory in nature and was not imposed for infringement of the Gold (Control) Act and, therefore, an allowable deduction under section 37 of the Incometax Act, 1961. Our answer to question No. (2), on the other hand, is that, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to claim deduction of the value of the goods which were not recovered in the assessment year 1976-77. In other words, our answer to question No. (1) is in the negative, in favour of the Department and against the assessee and our answer to question No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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