KERALA SHIPPING CORPORATION LTD Vs. CIT

JUDGEMENT

(1.) This I.T.R. under S.256(1) of the Income Tax Act (hereinafter referred to as the Act) is at the instance of the assessee. The assessment year in question is 1980-81. The question of law referred to us is as follows:

(2.) The assessee is a public limited Company engaged in the business of operating ships. The assessee - Company owned a ship by name Kairali which was reported to be missing from 3.7.1979 when on highseas. Neither the ship nor the crew were traced till date. A committee of Lloyds London on its meeting held on 20.8.1979 passed a resolution posting the ship as missing. Presuming total loss as provided in S.58 of the Marine Insurance Act (Indian Act), the Company lodged a claim with Director, Kerala State Insurance Department on 13.9.1979 for an amount of Rs. 6.40 crores being the insurance value on the hull and the machinery policy. The Kerala State Insurance Department agreed for a conditional settlement of the claim of the Company giving an undertaking in favour of the Kerala State Insurance Department to the effect that the insurance money will be refunded back in the event the ship is recovered and the insured gets legal possession thereof. The Assessing Officer assessed the difference between the original cost and the written down value of the ship under S.41(2) of the Act. It was further held that the actual total loss presumed under S.58 of the Marine Insurance Act would amount to destruction as the term has been used in S.41(2) of the Act. This was upheld by the Tribunal. The Tribunal held that the disappeared ship which was not recovered till date could be considered as destructed and the provisions of S.41(2) of the Act are attracted. It is in the above circumstances, that the question of law has been referred to us.

(3.) S.41(2) of the Act is as follows: