COMMISSIONER OF INCOME TAX Vs. UNION ENGINEERING WORKS

JUDGEMENT

(1.) The Income Tax Appellate Tribunal, Cochin Bench, has, at the instance of the Department, referred to us the following question:--

(2.) The assessee firm carries on the business of manufacturing and selling tea chest fittings and batten covers. The reference case relates to the assessment year 1968-69. For the accounting year relevant to the said assessment year, the assessee had shown a sum of Rs. 13,455.75 in its Profit and Loss Account as "profit on devaluation". The question that arises in this case is, whether the claim of the assessee that this amount represented a casual and nonrecurring receipt coming within the scope of S.10(3) of the Income Tax Act, as it stood at the relevant time, can be accepted.

(3.) The assessee imported 57,694 tonnes of tin sheets from London. These tin sheets were imported for the purpose of manufacturing tea chests. Upon the arrival of the goods at Quilon, it was found that a quantity of 37,140 tonnes of tin sheets was rusty varying between 40% and 100% and these sheets had become unfit for the purpose of making tea chests. The goods were insured with an insurance company in London. It was agreed between the assessee and the insurer that the assessee would accept the partly rusty sheets at 40% discount and the completely rusty sheets at 50% discount. In accordance with this agreement, the assessee submitted a bill to the insurer on 9-12-1965 claiming a sum of Rs. 32,920/-. The insurer after deducting certain charges from the claim bill, issued a cheque for 1,762 Sh.10. This cheque was drawn in favour of the assessee on the West Minister Bank Ltd., London and it was forwarded to the assessee under cover of a letter dated 16-5-1966. The assessee received the cheque on 26-5-1966. On 6-6-1966 the Indian Rupee was devalued. Subsequently the cheque was deposited by the assessee for collection with the State Bank of India at Quilon and the Bank credited the cheque to the account of the assessee on 27-6-1966. The Bank duly collected the cheque and credited its proceeds of Rs. 36,857.21 to the account of the assessee on 21-1-1967. On account of the devaluation the assessee realised an excess amount of Rs. 13,455.75 which formed part of the total amount realised.