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Marybong & Kyel Tea Industries Ltd. Vs. Commissioner of Income Tax Calcutta [1997] INSC 162 (13 February 1997)

S.C. AGRAWAL, K.S. PARIPOORNAN

ACT:

HEAD NOTE:

[WITH CIVIL APPEAL NO. 3910 OF 1983]

In these appeals, the appellants (assessees) had received compensation from the Insurers under policies for insurance against fire and the question that was referred for opinion of the High Court was whether there was a "transfer" as defined in Section 2 (47) of the Income Tax Act, 1961 and the excess sum of compensation after deducting the original cost of the assets destroyed by fire had been properly brought to tax as capital gains under Section 45 of the Income Tax Act, 1961. By the impugned judgment in Civil Appeal No. 3909 of 1983 the Calcutta High Court has answered the said question against the assessee and has placed reliance on the decision of the Gujarat High Court in Commissioner of Income Tax v. Vania Silk Mills 107 ITR 300.

The said decision in Civil Appeal No. 3909 of 1983 was followed by the said High Court in the Judgment which is under challenge in Civil Appeal No. 3910 of 1983. The decision of the Gujarat High Court in Commissioner of Income Tax v. Vania Silk Mills (supra) came up in appeal before this Court and has been reversed in Vania Silk Mills v.

Commissioner of Income Tax, (1991) 191 ITR 647, wherein it has been held that in cases where an Insurance Company pays for the total loss or damage of the property and takes over the property or whatever is left of it there is no transfer for the purpose of capital gain under Section 45 of the Income Tax Act. This matter if thus fully covered by the said decision of this Court reported in 191 ITR 647. For the reasons given in the said judgment, the appeals are allowed and the question referred in both the cases is answered in favour of the assessee and against the Revenue. No order as to costs.

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