2011 (6) TMI 929

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....2. Briefly stated, the facts of the case are that the assessee-company, which was engaged in the business of hosiery goods suffered loss on account of fire at its factory premises on 16/17 Dec. 2005, i.e., in the year under appeal. The assessee furnished calculations of its loss before the AO, which reads as under: "The assessee has given calculation as to how the surveyor has estimated the loss of Rs. 19.68 lacs claimed by the assessee i.e. Total stock as on date of fire Rs. 1,34,15,820/- Unaffected stock Rs. 21,82,264/- Stock affected Rs. 1,12,33,556/- Claim filed with Insurance Co. Rs. 112.33 lacs Less claim of loss expected to be received Rs. 92.65 lacs Short claim to be received Rs. 19.68 la....

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....sentative for the assessee made three-fold submissions before us. His first submission was that the fact that the loss by fire was caused in the year under appeal, was not disputed by the Department and therefore such ought to have been considered for deduction in the year under appeal. His second submission was that mere difficulty in estimation of loss or settlement of claim by the Insurance company in subsequent years, would not convert accrued liability in the year under appeal as contingent liability or conditional liability. His third submission was that the case of the assessee was squarely covered by the principles laid down in Calcutta Company Ltd v. CIT, 37 ITR 1 (SC). 6. In reply the ld. DR supported the order passed by the AO....

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.... the year under appeal is a contingent or conditional one. Therefore the liability is required to be considered for allowance in the year under appeal and in no other year. The mere fact that the insurance company has settled the claim in subsequent year is irrelevant as the loss has been suffered and therefore arisen in the year under appeal. The aforesaid view is well supported by the judgment of the Hon'ble Punjab High Court in CIT v. Tulsi Ram Karam Chand, 51 ITR 180 (Pun.) in which it has been held that the claim of loss of goods has to be considered in the year in which loss occurs and not in the year in which claim is settled. In this view of the matter, the finding recorded by both the authorities below that the loss to stock caused....