TaxTMI 
TaxTMI 
1999 (3) TMI 6
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....amage to the aircraft as described in the Schedule hereto (hereinafter referred to as "the aircraft"), including standard component parts thereof temporarily detached in connection with the overhaul or repair while in the custody or control of the insured (unless other similar component parts have been substituted) whilst the aircraft is In flight Taxying On the ground Moored" Conditions 7 and 8 of the "General conditions" read as follows : "7. In the event of the company exercising their option under section 1 to replace the aircraft the replacement shall unless otherwise mutually agreed be by an aircraft of the same make and type and in reasonably like condition. 8. The aircraft shall at all times remain the property of the insured who shall have no right of abandonment to the company. In the event of payment of a total loss or replacement of the aircraft by the company under the terms of the policy the company may at their option elect to take over the remains of the aircraft as salvage." The respondent's aircraft met with an accident on December 25, 1967, and became a total wreck. The insurer exercised its option in terms of the policy and purchased ....
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....etailed consideration of the matter concluded that the expression "moneys payable" occurring in section 41(2) of the Act could not be made applicable to the present case. Holding that on the exercise of the option by the insurer, the contract could not be considered to be one for payment of money, the High Court answered the reference in favour of the assessee and against the Revenue. It is the said judgment of the High Court which is in challenge in this appeal filed by special leave. The learned Attorney-General appearing for the appellant formulated his propositions in the following manner : "A contract of insurance is in essence a contract for money and money only. On the occurrence of the accident, money became payable under the said contract. If instead of money being paid, if the insured gets the money's worth by payment in specie it does not alter the character of the contract which continues to be one of insurance. Such payment in specie being money's worth would only amount to a substituted mode of discharge. Once the money becomes payable under the contract on the occurrence of the accident, the exercise of the option by the insurer to discharge his liabili....
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....sub-section has been defined to have the same meaning as in sub-section (1A) of section 32 (vide Explanation 2 to section 41(2A)). The Explanation to section 32(1A) defines moneys payable" in the following terms : "(i) 'moneys payable' in respect of any structure or work, includes (a) any insurance or compensation moneys payable in respect thereof ; (b) where the structure or work is sold, the price for which it is sold ;...." The principle that a taxing statute should be strictly construed is well settled. In Principles of Statutory Interpretation by justice G. P. Singh, Sixth edition 1966, the law is stated thus : "The well-established rule in the familiar words of Lord Wensleydale, reaffirmed by Lord Halsbury and Lord Simonds, means: 'the subject is not to be taxed without clear words for that purpose ; and also that every Act of Parliament must be read according to the natural construction of its words'. In a classic passage Lord Cairns stated the principle thus : 'If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Cro....
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....to money as understood in the ordinary common parlance. In Shorter Oxford English Dictionary, "money" has been defined as "a. current coin ; metal stamped in pieces as a medium of exchange and measure of value. b. Hence, anything serving the same purposes as coin, late ME. c. In mod. use applied indifferently to coin and to such promissory documents representing coin (esp. bank-notes) as are currently accepted as a medium of exchange". Hence, the word "money" used in section 41(2) of the Act has to be interpreted only as actual money or cash and not as any other thing or benefit which could be evaluated in terms of money. The learned Attorney-General has argued that a contract of insurance is only a contract for payment of money and money only. In support of this contention he has drawn our attention to Rayner v. Preston [1880-81] 18 Ch D I (CA), where Brett Lord Justice observed : "The subject-matter of insurance is a different thing from the subject-matter of the contract of insurance. The subject-matter of insurance may be a house or other premises in a fire policy, or may be a ship or goods in a marine policy. These are the subject-matter of insurance, but the subject-....
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....ed to extend the meaning of the expression " money" to "benefit". Thus, the decision can even be used against the appellant and it is not helpful to him. Reliance is placed upon the judgment of this court in CIT v. Artex Manufacturing Co. [1997] 227 ITR 260. The Bench referred to the provisions of section 41(2) of the Act and while analysing the rationale of the section quoted the following passage found in an earlier judgment reported in CIT v. Bipinchandra Maganlal and Co. Ltd. [1961] 41 ITR 290 (SC) : "In CIT v. Bipinchandra Maganlal and Co. Ltd. [1961] 41 ITR 290 (SC), this court has thus explained the reason for introducing the fiction in the second proviso to section 10(2)(vii) 'The reason for introducing this fiction appears to be this. Where in the previous years, by the depreciation allowance, the taxable income is reduced for those years and ultimately the asset fetches on sale an amount exceeding the written down value, i.e., the original cost less depreciation allowance, the Revenue is justified in taking back what it had allowed in recoupment against wear and tear, because in fact the depreciation did not result. But the reason of the rule does not alter t....
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....en cited without reference to any contrary decision. In Halsbury's Laws of England, fourth edition., volume 25, paras 634, 635 and 636, read as under : "634. Option as to reinstatement.---By the form of policy in general use, the insurers reserve to themselves the option of reinstating the property instead of making payment in money. This option is reserved for the insurers' benefit and it is for them to elect whether to reinstate ; the assured is not entitled to require them to reinstate. Nor may he prevent them from reinstating if they elect to do so. 635. Exercise of option to reinstate.---An election for or against reinstatement is final once it is made, and cannot afterwards be withdrawn. No formal election is necessary ; an election by conduct is sufficient, provided that the conduct is clear and unequivocal. The insurers will be taken to have elected against reinstatement and in favour of a payment in money if the negotiations for a settlement have been conducted by the insurers throughout on the footing that the loss is to be made good by a payment in money, or if they have proceeded to arbitration for the purpose of ascertaining the amount to be paid under th....