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received by the Assessee from the Insurance Company for death of the Mares-Certainty and Gracian Flower was to be deemed as income of the Assessee under Section 41(1) of the Act. The said findings recorded by the Assessing Officer have been upheld in Appeal by Commissioner of Income Tax (Appeals) [CIT (A)] and Income Tax Appellate Tribunal.

Aggrieved by the decision of ITAT, the Appellant has filed the present Appeal under Section 260-A of the Act.

7) Mr. Pardiwalla, the learned Senior Advocate appearing for the Assessee has made following submissions :-

19) Section 45 of the Act deals with capital gains and sub- section (1) thereof provides that any profits or gains arising from 'transfer' of capital assets effected in the previous year shall be chargeable to income tax under the head 'capital gains'. The issue therefore is whether insurance receipt consequent to death of a horse would amount to 'transfer' within the meaning of Section 45 of the Act. The term 'transfer' has been defined under Section 2(47) of the Act. It is contended by the Assessee that insurance receipt on death of a horse would not be covered by definition of the term 'transfer' in relation to capital asset. Death of a horse cannot be treated as 'transfer' under Section 2(47) of the Act as a transfer presumes both existence of asset, as well as transferee to whom it is transferred. This position is well settled by the judgment in Vania Silk Mills (P.) Ltd. (supra) in which the issue before the Apex Court was whether money received towards insurance claim on account of damage/destruction of capital asset would be on account of 'transfer' of the asset within the meaning of Section 45. The Apex Court held in paras-2, 4, 5, 6 and 7 as under :-

29) However, the said provision came to be introduced by Finance Act, 1999 w.e.f. 1 April 2000 and the same has no application to 9 July 2025 Neeta Sawant ITXA-541-2003+3 others-FC the present case. Thus, insurance claim received towards destruction of capital asset has been brought to taxation for the first time from 1 April 2000. This is yet another reason for holding that the amount received by the Assessee towards insurance claim on death of the horses cannot be brought to tax before introduction of the said amount.

31) The questions of law in each of the Appeals are accordingly answered in the negative.

32) Accordingly, the Appeals succeed and we proceed to pass the following order:

(I) The orders passed by the Assessing Officer, CIT(A) and ITAT are set aside to the extent of bringing to taxation the amount of insurance claim received by the Assessee on account of death of its horses.

9 July 2025 Neeta Sawant ITXA-541-2003+3 others-FC (II) The Revenue is directed to treat the entire amounts of insurance claim received by the Assessee for death of horses as capital receipt governed only by provisions of Section 45(1) of the Act.