Dipak Kumarsen, J.
1. Bengal Assam Steamship Co. Ltd., the assessee, at the material time used to carry on the business of inland transport service between Calcutta and Assam, via, East Pakistan, which is now Bangla Desh. In its said business, the assessee owned a number of steamers, barges, tugs, launches and boats which were in operation in the said transport service.
2. During hostilities between India and Pakistan in September, 1965, 18 vessels of the assessee, then in Pakistan, were captured as prize by the Pakistan authorities. The Government of Pakistan thereafter moved the High Court at Dacca in its Admiralty jurisdiction. The Dacca High Court declared the vessels as enemy property and the same were directed to be confiscated by an order dated October 20, 1965.
3. Fourteen of the said eighteen vessels had been insured by the assessee for Rs. 31,10,342 with the Government of India under the Emergency Risks Insurance Scheme promulgated under the Emergency Risks (Factories) Insurance Act, 1962. Under the said insurance, 80% of the loss suffered by the insured was agreed to be indemnified by the insurer.
4. By its letter dated September 17, 1965, the assessee at the first instance claimed a sum of Rs. 24,47,150. Subsequently, the assessee by its letter dated June 21, 1966, enhanced its claim to Rs. 24,95,954. The Government of India, the insurer, accepted the initial claim of the assessee for Rs. 24,47,150 on the following terms and conditions :
(a) The Government of India would be entitled to retain the said vessels if the same were received back from the Government of Pakistan.
(b) In case the Government of India received the vessels back, the assessee would accept the same back along with the reduced insurance amount which the assessee might, in such circumstances, be entitled to.
5. The assessee accepted the said terms and conditions on July 20, 1966. The assessee received payment of half of its accepted claim on account on July 20, 1967. The balance of the claim was paid and received by the assessee on July 16, 1968.
6. In the assessment year 1969-70, the corresponding accounting year ending on October 31, 1968, the assessee was assessed to income-tax. In its return for the said assessment year, the assessee disclosed a profit of Rs. 17,24,591 under Section 41(2) of the Income-tax Act, 1961, on the basis that the insurance amount received by the assessee had exceeded the written down value of the fourteen vessels. A loss of Rs. 4,72,044 was also claimed in respect of the remaining vessels as the said amount fell short of the written down value. The Income-tax Officer in the assessment included Rs. 17,24,591 in computing the taxable income of the assessee.
7. Being aggrieved, the assessee preferred an appeal before the Appellate Assistant Commissioner challenging the correctness of the inclusion of the said Rs. 17,24,591 under Section 41(2) of the Act. The Appellate Assistant Commissioner held that Section 41(2) of the Act applied only when the assets involved were sold, discarded, demolished or destroyed. It was held that confiscation of the said vessels by the Pakistan authorities did not come under any of the above categories and, as such, the insurance amount received by the assessee was not in respect of any of the said eventualities and Section 41(2) of the Act was not applicable. The Appellate Assistant Commissioner directed the Income-tax Officer to exclude the said amount from the taxable income. The Appellate Assistant Commissioner, however, did not allow the loss of Rs. 4,72.044 as claimed by the assessee.
8. From the order of the Appellate Assistant Commissioner, both the Revenue and the assessee came up on further appeals before the Income-tax Appellate Tribunal. It was contended before the Tribunal on behalf of the Revenue that the provisions of Section 41 were attracted in the instantcase inasmuch as the vessels, on their being captured by the Pakistan authorities, should be treated as having been discarded. It was also contended that the expression 'destroyed' included both physical destruction and the destruction of the rights in the assets.
9. The assessee, however, contended that discarding involved a voluntary act and, in the facts, there could be no discarding as the vessels were captured by the authorities in Pakistan. It was further contended that the expression 'destroyed' would mean physical destruction of the assets. Confiscation of the vessels, it was submitted, did not amount to their destruction. The assessee relied on the dictionary meaning of the words 'discard' and 'destroy'.
10. The Tribunal accepted the contentions of the assessee. On a consideration of the dictionary meanings of the words 'discard' and 'destroy', the Tribunal held that the expression 'destroyed' involved physical destruction of the assets and not merely the destruction of the rights in the assets. The Tribunal held further that the discarding must be a voluntary act and in the instant case, there was no voluntary discard by the assessee. The Tribunal concluded that Section 41(2) of the Act was not applicable in the facts and no profit within the meaning of the said section could be included in the taxable income of the assessee. On an application of the Revenue under Section 256(1) of the Income-tax Act, 1961, the following question has been referred as a question of law arising out of the order of the Tribunal for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the provisions of Section 41(2) are not applicable in the instant case and in that view deleting the addition of Rs. 17,24,591?'
11. At the hearing, learned advocate for the Revenue drew our attention to Section 41 of the Income-tax Act, 1961, the material part of which is set out as follows:
'41. (2) Where any building, machinery, plant or furniture which is owned by the assessee and which was or has been used for the purposes of business or profession is sold, discarded, demolished or destroyed and the moneys payable in respect of such building, machinery, plant or furniture, as the case may be, together with the amount of scrap value, if any, exceed the written down value, so much of the excess as does not exceed the difference between the actual cost and the written down value shall be chargeable to income-tax as income of the business or profession of the previous year in which the moneys payable for the building, machinery, plant or furniture became due.'
12. Construing the said section, learned advocate submitted that, in the instant case, the assets, viz., the vessels belonging to the assessee having been confiscated by the authorities in Pakistan, the assessee ceased to have any rights whatsoever over the same and, in fact, it must be deemed that such assets have been destroyed so far as the assessee is concerned. Learned advocate drew our attention to the dictionary meaning of the word 'destroy' which had been considered by the Tribunal and submitted that the word also meant 'to put an end to' and 'to make useless'. It was submitted that an extended meaning of the word 'destroy ' should be adopted in the instant case.
13. Learned advocate next drew our attention to Section 32 of the Income-tax Act, 1961, and submitted that Clause (2) of the Explanation to Sub-section (1) of Section 32 gave an extended definition of the word 'sold'. The relevant portion of Section 32 reads as follows :
'(2) 'sold' includes a transfer by way of exchange or a compulsory acquisition under any law for the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by the amalgamating company to the amalgamated company where the amalgamated company is an Indian company.'
14. Learned advocate submitted that, in the instant case, there was a compulsory acquisition of the assets of the assessee by the authorities in Pakistan and, therefore, it must be held that there was a sale within the meaning of Section 41(2).
15. In support of his contentions, learned advocate for the Revenue cited the following decisions :
(a) CIT v. Scindia Steam Navigation Co. Ltd. : [1961]42ITR589(SC) . This well-known decision was cited for the proposition that where a question of law involved more than one aspect, it was open to the parties in a reference to agitate all such aspects irrespective of the fact whether the same had been argued before the Tribunal or not.
(b) CIT v. Engineering Works of India (P.) Ltd. : [1977]108ITR11(Cal) . Here, a Division Bench of this court held that where the assessee had received an amount from the insurance company on account of partial destruction of his assets by fire, to the extent the said amount exceeded the written down value of the assets, it would not be considered to be profits under Section 41(2) of the Act. The learned judges considered the dictionary meaning of the expression 'destroy' and held that, in view of the ordinary meaning of the word, Section 41(2) of the Act would not apply to items which were not fully destroyed.
(c) CIT v. Sirpur Paper Mills Ltd. : [1978]112ITR776(SC) . In this case, the assets of the assessee, viz., building, plant and machinerywere covered by insurance against fire. The said assets were partly damaged by fire and the assessee received an amount as compensation in respect of the loss. Only a part of the amount received was spent for restoration of the assets to a working condition. The question arose whether the balance of the compensation received was assessable to tax either as a revenue receipt or under Section 41(2) of the Income-tax Act, 1961. It was held by the Supreme Court on a concession from the Revenue that the balance of the compensation represented capital receipt in the hands of the assessee.
16. On the facts, it was held by the Supreme Court that Section 41(2) had no application in a case where the assets were merely damaged and not destroyed and by repairing the same could be restored to their working condition. It was held further that in the absence of specific provisions in Section 41(2), the amount received by the assessee on account of damage to his assets could not be taxed under the said section.
17. Learned advocate for the assessee contended, on the other hand, that in order to invoke the provisions of Section 41(2), the Revenue would have to establish that the facts in the instant case came strictly within the provisions of the said section and unless the same was established, tax under the said section could not be levied on the assessee.
18. Learned advocate next drew our attention to Section 2(47) of the Income-tax Act, 1961, which defined the expression 'transfer'. The said sub-section reads as follows:
'(47) 'transfer', in relation to a capital asset, includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law '
19. Learned advocate submitted that in the said definition, a distinction has been made between a sale of an asset on the one hand and the extinguishment of rights in an asset and the compulsory acquisition of an asset under any law on the other.
20. It was submitted that in the facts, it could not be said that there was a sale by the assessee of its assets to the authorities in Pakistan in law. It was submitted further that the assets were captured as prize of war and in any event, there was no compulsory acquisition under any law.
21. Learned advocate next drew our attention to the meaning of the word 'destroy' from the standard dictionaries, viz., The Webster's New 20th Century Dictionary, 2nd edition, and the Shorter Oxford Dictionary, 3rd edition, which read as follows :
Webster :
'Destroy; 1. to demolish, to tear down : as, to destroy a house, to destroy a city.
2. to ruin : to bring to naught ; to spoil completely ; as to destroy a scheme, to destroy a government, to destroy one's happiness.
3. to take away the utility of ; to make useless,
4. to put an end to : to do away with.
5. to kill.
6. to neutralise the effect of.
7. to confute : to disprove.'
Oxford :
'Destroy : 1. To pull down or undo, as a building ; to demolish.
2. To lay waste ; to ruin ;
3. To undo, break up, reduce into a useless form, consume, or dissolve.
4. To deprive of life : to kill,
5. To put end to ; to do away with.
6. To counteract.'
22. Learned advocate also submitted that there was no discard by the assessee of its assets in the instant case. Assets were taken over by the Pakistan authorities without any consent or co-operation from the asses-see and the assessee had no choice in the matter.
23. In the facts and circumstances of the instant case, it appears that Section 41(2) would be applicable only where as a result of sale, discard, demolition or destruction of an asset, moneys payable in respect of such assets exceed its written down value. In Sirpur Paper Mills Ltd. : [1978]112ITR776(SC) , the Supreme Court, upholding the decision of the Tribunal, held that in the absence of a specific provision in Section 41(2), the amount received by the assessee in respect of the damage to the plant and machinery could not be brought to tax. Similarly, in the instant case, the section cannot be held to be applicable in the case of loss of assets as suffered by the assessee in the instant case as the section does not specifically provide for such a contingency. It cannot be said that the assessee has sold or discarded his assets. The concept of a sale or discard involves exercise of volition on the part of the assessee which is totally absent in the instant case. The expression 'sold' in the section must be given its meaning under the general law. In any event, it is not a case where the property has been acquired by any authority compulsorily under the provisions of any particular law in force in India, or that compenstion was received by the assessee on account of such acquisition.
24. Next, we have to consider whether the assets of the assessee were demolished or destroyed within the meaning of Section 41(2). The expression 'demolished' or 'destroyed' occurring in the section itself, in ourview, refers to physical demolition or destruction. This is supported by the section itself which provides that in computing the profits, the amount of scrap value, if any, has to be taken into account. It is nobody's case that the assets of the assessee here have been physically demolished or destroyed. No doubt, the assessee has not the use of the assets entirely. But that is not the same thing as physical destruction of the assets.
25. Settled principles for interpretation of a taxing statute are, inter alia, that such a statute must be literally construed and unless a case comes clearly within the mischief of the statute, the subject should not be taxed. Where a taxing statute is ambiguous and capable of two different constructions, the construction in favour of the assessee should be adopted. In fact, the Revenue (seeks) to import into the section by construction the contingency of a loss of assets which is not there. The Legislature has advisedly confined the section to four contingencies, namely, sale, discard, demolition or destruction.
26. For the reasons aforesaid, we are unable to accept the contention of the Revenue. In our view, the Tribunal has decided the question correctly and the same calls for no interference. The question referred is accordingly answered in the affirmative and in favour of the assessee.
27. There will be no order as to costs.
Monjula Bose, J.
28. I agree.