War-damage compensation taxed in full where special relief scheme left no residual book value for partial exclusion.

War-damage compensation received in replacement of assets was taxable in full because the assessee had already obtained relief under a special scheme on the footing that the war losses were fully absorbed. The Court held that no residual book value remained available for partial exclusion from tax, and the argument that only the excess over book value could be taxed could not succeed, particularly since it had not been raised before the revenue authorities. The full compensation was therefore brought to tax as income, and the assessment was upheld.

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Issues: Whether the compensation received for war-damaged assets was taxable in full as income, or whether only the amount exceeding the book value of the assets could be brought to tax.

Analysis: The assessee had obtained the benefit of a special relief scheme on the footing that its war losses were suffered and accounted for under that scheme, and the compensation later received from the war damage authority was in replacement of the damaged assets. The contention that only the excess over the book value was taxable had not been raised before the revenue authorities and, in any event, could not succeed because the assessee's treatment of the assets under the relief scheme left no surviving book value for tax computation purposes.

Conclusion: The compensation received was taxable in its entirety and the assessee's contention was rejected.

Final Conclusion: The appeals failed, and the assessment of the full war damage compensation as taxable income was upheld.

Ratio Decidendi: Where a taxpayer has obtained relief on the basis that war-damaged assets were fully absorbed under a special compensation scheme, subsequent compensation received in replacement of those assets is taxable in full and no residual book value can be set up for partial exclusion from tax.

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