COMMISSIONER OF INCOME TAX Vs. GANGOTHRI TEXTILES LIMITED

JUDGEMENT

(1.) 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:-

(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, 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.