Madras High Court
The Commissioner Of Income Tax vs M/S.Gangothri Textiles Limited on 30 October, 2012
Author: Chitra Venkataraman
Bench: Chitra Venkataraman, K.Ravichandrabaabu
In the High Court of Judicature at Madras Dated: 30.10.2012 Coram The Honourable Mrs.JUSTICE CHITRA VENKATARAMAN and The Honourable Mr.JUSTICE K.RAVICHANDRABAABU Tax Case (Appeal) No. 2596 of 2006 The Commissioner of Income Tax Coimbatore ... Appellant Vs. M/s.Gangothri Textiles Limited No. 14, East Periyasamy Road R.S.Puram Coimbatore 641 002 ... Respondent Tax Case (Appeal) against the order of the Income Tax Appellate Tribunal, Madras 'D' Bench, dated 17.5.2006 passed in I.T.A.No.208/ Mds/ 2002 for the assessment year 1998-99. For Appellant : Mr.N.V.Balaji For Respondent : Mr.R.Venkatanarayanan ------- JUDGMENT
(Judgment of the Court was delivered by CHITRA VENKATARAMAN,J. ) The Revenue is on appeal as against the order of the Income Tax Appellate Tribunal relating to assessment year 1998-99 by raising the following question of law:-
"Whether the insurance money received on loss of production is entitled for deduction under Section 80IA?"
2. It is seen from the facts herein that the assessee is stated to have suffered fire accident on 11.3.1996, which is relevant for the assesment year 1996-97. The assessee subsequently made claim before the insurance company and admittedly, the same was compensated. The assessee claimed loss on production due to the fire accident that took place on 11.3.1996. The Assessing Officer rejected the claim of the assessee by pointing out that the claim with the insurance company and the subsequent loss of the profit in the subsequent year was not at all connected. The Income Tax Officer held that mere commercial connection between the industrial undertaking would not be sufficient for grant of relief under Section 80IA of the Income Tax Act. Aggrieved by the same, the assessee went on appeal before the Commissioner of Income Tax (Appeals), who allowed the appeal by holding that on perusal of the Surveyor's report, it was clear that the insurance money was paid to the assessee for the loss on production. In the circumstances, the Officer was directed to include the compensation as profit derived from the undertaking and compute the same for deduction under Section 80IA of the Act. Aggrieved by the same, the Revenue went on appeal before the Income Tax Appellate Tribunal. Before the Tribunal, evidently, the assessee was not represented either in person or through counsel. The Tribunal allowed the assessee's claim based on the decision of the Delhi Bench of the Tribunal rendered in the case of ROLLATAINERS LIMITED v. DCIT (69 TTJ 8), wherein it was held that the insurance claim received for goods damaged in transit had direct nexus with the industrial undertaking and hence, it was an allowable deduction under Section 80-IA of the Act. Aggrieved by the same, the Revenue is on appeal before this Court.
3. We agree with the submission of the learned Standing counsel for the Revenue that in the absence of any nexus shown between the compensation received and the business activities of the industrial undertaking, the compensation could not be held as derived from the undertaking for the purpose of inclusion under Section 80-IA of the Act.
4. As already seen in the preceding paragraph, the accident took place on 11.3.1996, which is relevant for the assessment year 1996-97. The assessment year in question relating to 1998-99. It is evident from the reading of the order of the authorities below that there were no materials produced by the assessee to substantiate the nature of the fire accident that had taken place to link it to the commercial activity to earn profit. Given the fact that the accident had taken place as early as 11.3.1996 and there being no material to link this accident and the nature of damage caused in the industrial activity and to the productivity of the company, rightly, the Assessing Officer held that there being no nexus between the claim before the insurance company and the subsequent loss arising out of the industrial activity, there could be no question including the compensation for the purpose of granting relief under Section 80-IA of the Act.
5. As far as the order of the Commissioner of Income Tax (Appeals) is concerned, the same was passed based on the Surveyor's report. There is absolutely no deliberation as to the compensation received having any connection whatsoever to the industrial activity of the assessee on its income earning aspect.
6. As far as the Tribunal's order is concerned, reliance placed on the decision of the Delhi Bench of the Tribunal rendered in the case of ROLLATAINERS LIMITED v. DCIT (69 TTJ 8), is totally misplaced, since, as is evident from the order of the Tribunal, the case dealt with by the Delhi Bench related to the compensation received on the goods damaged while in transit. As far as the present case is concerned, even though we directed the assessee to produce the details regarding the fire accident and the policy, the assessee could not produce the same before this Court to substantiate its contention, and there being no material to substantiate the contention of the assessee linking the loss to the the fire accident, we do not find any justifiable ground to accept the order of the Tribunal which is not based on factual findings. In the circumstances, we have no hesitation in accepting the plea of the Revenue, thereby, set aside the order of the Tribunal.
7. In the result, the above Tax Case (Appeal) is allowed. No costs.
To
1. The Commissioner of Income Tax, Coimbatore
2. The Income Tax Appellate Tribunal, Madras 'D' Bench bg