Marybong and Kyel Tea Industries Ltd. vs Commissioner of Income Tax, Calcutta

In these appeals, the appellants (assessees) had received compensation from the Insurers under policies for insurance against fire and the question that was referred for opinion of the High Court was whether there was a "transfer" as defined in Section 2(47) of the Income Tax Act, 1961 and the excess sum of compensation after deducting the original cost of the assets destroyed by fire had been properly brought to tax as capital gains u/s 45 of the Income Tax Act, 1961. By the impugned judgment in Civil Appeal No. 3909 of 1983 the Calcutta High Court has answered the said question against the assessee and has placed reliance on the decision of the Gujarat High Court in Commissioner of Income Tax Vs. Vania Silk Mills (P.) Ltd., . The said decision in Civil Appeal No. 3909 of 1983 was followed by the said High Court in the judgment which is under challenge in Civil Appeal No. 3910 of 1983. The decision of the Gujarat High Court in Commissioner of Income Tax v. Vania Silk Mills (supra) came up in appeal before this Court and has been reversed in Vania Silk Mills (P) Ltd. Vs. Commissioner of Income Tax, Ahmedabad [OVERRULED], , wherein it has been held that in cases where an Insurance Company pays for the total loss or damage of the property and takes over the property or whatever is left of it there is no transfer for the purpose of capital gain u/s 45 of the Income Tax Act. This matter (sic) if thus fully covered by the said decision of this Court reported in Vania Silk Mills (P) Ltd. Vs. Commissioner of Income Tax, Ahmedabad [OVERRULED], . For the reasons given in the said judgment, the appeals are allowed and the question referred in both the cases is answered in favour of the assessee and against the Revenue. No order as to costs.