TaxTMI 
TaxTMI 
2018 (2) TMI 168
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....peal without proper reasons - both legal and f actual. 2. The Learned Commissioner of Income Tax (Appeals), having accepted that the value of machinery is directed to be allowed in the year in which the f inal settlement takes place between. the Assessee-Appellant and the Insurance company, is not justif ied in dismissing the appeal as if the claim towards loss of machinery is not an allowable deduction. 3. The Learned Commissioner of Income Tax (Appeals), having accepted that so f ar as the Insurance company is concerned the amount of loss on destruction of machinery is f inally determined, is not legally correct in holding that the liability is not crystalized for deduction in the year under appeal in computing Total inc....
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....during the year. After clearance by the customs authorities at Chennai, the truck carrying the machinery to the company's f actory at Hyderabad capsized in Chennai, resulting in severe damage to one of the machines rendering it unfit for use. The insurance company is yet to adjudicate the claim for loss. The loss on destruction of the machine of Rs. 3,79,42,277/-, being loss incidental to business, has been charged to the statement of profit and loss. On adjudication and settlement of insurance claim, the same will be accounted for as revenue in the relevant year" 2.1 The A.O observed that the loss incurred was towards destruction of machinery which is capital in nature. Therefore, the assessee was asked to explain as to why the said los....
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...., held that the loss or damage of machinery is capital in nature and hence cannot be allowed. Aggrieved, the assessee preferred an appeal before the CIT(A). 3. In the meantime, the assessee's claim was accepted by the insurance company at a sum of Rs. 1,26,35,109/- as a full and final settlement of claim. The assessee did not accept the offer and filed a suit in Hon'ble Madras High Court. The Hon'ble Madras High Court passed an interim order on 16-08-2016 directing the insurance company to pay a sum of Rs. 1,26,35,109/-, i.e the amount agreed to by the insurance company pending final result in the pending suit. The above amount was received by the assessee on 02-05-2017, and thereafter, the assessee reduced the said compensation received....
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.... the said finding has become final. He submitted that the loss is allowable in the year of incurring the loss and as and when the assessee receives the claim from the insurance company, it would reflect the same as income during the year of receipt u/s 41(1) of the IT Act. Therefore, according to him, no prejudice was caused to the revenue and in fact it has be allowed during the relevant assessment year. In support of his contentions, he placed reliance upon the following case law: a. Badridas Daga Vs. CIT 34 ITR 10 (SC). b. Ramchander Shivnarayan 111 ITR 263 (SC). c. Dr. T.A Quershi Vs CIT 287 ITR 547. d. CIT Vs Nainital Bank Ltd., 55 ITR 707 (SC). e. Chenab Forest Co. Vs CIT 96 ITR 568 (J &K).....