TaxTMI 
TaxTMI 
2009 (8) TMI 29
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.... Assessing Officer (AO) subsequently issued notices on the ground of income escaping assessment for the reason that the Assessing Officer felt that the assessee company was not entitled to the benefit of Section 80-IA. 2. The facts are that on account of loss of goods which were destroyed by fire, the assessee company was given an insurance claim of Rs. 39,35,841/-. The Assessing Officer was of the view that the amount received from the Insurance Company is not "derived from" the manufacturing activity of the assessee company and consequently the assessee was not entitled to the benefit of Section 80-IA. The order of the Assessing Officer was, however, set aside by the CIT(A) and which order was confirmed by the ITAT resulting in the Rev....
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....vestment and employment with respect to particular industries in certain areas and in certain locations besides generation of revenue for the government and industries from whom plant etc. will be purchased by the new industrial undertaking. The object of the provision is further made clear from Sub-section (2) of Section 80-IA whereby such businesses are not considered for taking advantage of the deduction under Section 80-IA if either it is formed from splitting up of an existing business or by use of machinery or plant previously used and so on. The object is clearly to give fillip to the economy and to investment. This object will have to be kept in view while interpreting the provisions of Section 80-IA. 6. We find that for a simila....
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....ly by insuring against loss of profits. It is indubitable that the money paid in such circumstances is a receipt and insofar as it represents loss of profits, as opposed to loss of capital and so forth, it is an item of income in any normal sense of the term. It is equally clear that the receipt is inseparably connected with the ownership and conduct of the business and arises from it. Accordingly, it is not exempt." 8. Similarly, in the case of Commissioner of Income Tax vs. Needle Industries (India) Ltd., (200) 162 CTR (Mad) 337 a Division Bench of the Madras High Court held that the amount received from an insurer on account of loss of raw materials etc. in the fire, was held to be a trading receipt to the extent the amount received e....
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....ssee, although the expenditure incurred on the cost of goods damaged by fire is debited in the profit & loss account by the assessee and the insurance claim received on account of such goods lost in fire is credited in the profit & loss account as per the guideline for proper presentation and disclosure, the net effect is that both these transactions get nullified having no bearing ultimately on the profit shown in the profit & loss account. In our opinion, the exclusion of the amount of insurance claim received by the assessee and credited in the profit & loss account for computing deduction u/s 80IA thus is not justifiable from this angle also." Therefore, there is no reason why amount received from the insurance company by the assesse....