1996 (4) TMI 4

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....ing year ending March 31, 1961 ?" The relevant assessment year is 1961-62. The appellant-assessee was an exporter of hides and skins. During the accounting year relevant to the assessment year 1957-58, he had pledged a certain quantity of goat skins with the National and Grindlays Bank. The value of the goat skins was Rs. 2,14,808. He had taken an overdraft against the said pledge in a sum of more than rupees two lakhs. The bank officers gave inspection of the said goods to a third party but thereafter did not store them properly. On account of a heavy monsoon, the goat skins got damaged for which the appellant claimed damages. The bank authorities were not prepared to pay him the damages. On the contrary, they called upon the assessee t....

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....January 5, 1961. Pursuant to the said compromise, the bank waived the sum of Rs. 1,93,159 which was the balance due to the bank on the date of the High Court's order. The assessee transferred the credit balance due to the bank to the trading account deeming it to be towards the loss sustained by him earlier as a result of the stocks which were in Bombay in the custody of the bank and offered this amount for taxation spread over the three assessment years 1957-58 [Rs. 39,940], 1958-59 [Rs. 73,152] and 1959-60 [Rs. 80,067]. The Income-tax Officer accepted the said additions and made assessment for the said three assessment years. While completing the assessment for the assessment year 1961-62, however, the Income-tax Officer took the view tha....

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....e, we are of the opinion that in view of the provisions of section 41(1) of the Act, this amount could be brought to tax during the accounting year". Accordingly, the Revenue's appeal, was allowed. Thereupon, the assessee applied for and obtained reference of the aforesaid question for the opinion of the High Court under section 256(1) of the Act. When the matter came up before the High Court, the High Court agreed with the assessee, in the first instance, that section 41(1) was not attracted to the facts of the case. Then it proceeded to observe : " ....it is clear that the payment received by the assessee (by way of adjustment) was by way of compensation for loss or damage to the assessee's stock-in-trade, viz., hides and skins. The....