TaxTMI 
TaxTMI 
2005 (3) TMI 32
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....e provisions of section 41(2) of the Income-tax Act, 1961 in respect of compensation received for the units of the building and the items of machinery completely destroyed in the fire?" Briefly stated the facts giving rise to the present reference are as follows: The reference relates to the assessment year 1984-85. The respondent/assessee is a private limited company. The accounting period for the assessment year under consideration ended on December 31, 1983. A fire broke out in the month of August, 1983 in the respondent/assessee's mill. As a result of the damage to the flour mill, building, plant and machinery by fire the respondent-company received compensation of Rs. 18,16,499 from the insurance company as under: Building Rs.....
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....surveyor, which has been made part of the statement of case and also the order of the Tribunal. Sri A.N. Mahajan, learned standing counsel submitted that from the report of the surveyor it would be seen that the entire plant and machinery installed in the second floor (third storey), third floor (fourth storey) and fourth floor (fifth storey) were burnt and reduced to scrap. Thus the plant and machinery installed in these floors had been completely destroyed and any amount received by the respondent towards compensation is to be brought to tax in terms of section 41(2) of the Act. According to him the Tribunal has misdirected itself in holding that it was a case of partial damage both with regard to machines and the buildings. Having ....
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....ely burnt, whereas the sections of those elevators on the ground floor were only partially damaged. First floor (2nd storey) Thirteen roller mills, two grinders and accessories were installed in this floor. There was minor damage to the roller mills and grinders, but the wooden elevators, air and pressure pipes were burnt. Second floor (3rd storey) In this floor, 2 polish metal purifiers, 2 wooden indigenous purifiers, 2 centrifugal dressing machines and one bran finisher, with worm conveyers, air and pressure pipes and other accessories were installed. This floor was very badly affected and the entire machinery and accessories were burnt and reduced to scrap. Third floor (4th storey) Flour high efficiency polish planshift....
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.... damaged. The damage to machinery of the factory had also been thus, not total, but only partial though the part damage was more than the part which remained undamaged. Coupled with the above report is the fact of repairs and replacement, the details of which have been placed on record by the assessee. It is again on record to state that no new machines were purchased for the restoration of the mill, except the following: (i) Two new dust collectors, 1,38,016 (ii) A pneumatic worm conveyor system 2,27,562 &nbs....
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....essee by incurring the said expenditure was the restoration altogether a new building or new machine. Prima facie, the assessee carried on extensive repairing of the burnt machines and building and brought it to working condition. It was thus clearly a case of partial damage, both with regard to machines and the buildings. This being so, the learned Commissioner of Income-tax (Appeals) was in our opinion, justified in holding that the ratio of the aforesaid judgment of the hon'ble Supreme Court applied to the facts of the present case. Accordingly, we confirm his order." Thus, from the perusal of the order of the Tribunal, we find that it had taken note of the surveyor's report that the entire plant and machinery installed on the second,....