Assistant Commissioner of Income Vs. Tea Agency Trading Centre - Court Judgment

Excerpt:
this is an appeal filed by the revenue for the asst. yr. 1993-94 against the order of the cit(a) dt. 17th march, 1997. the three grounds of appeal taken by the revenue are as under : "1. for that the learned cit(a) was not justified in deleting rs. 2,82,792, rs. 2,805, rs. 25,911, rs. 2,27,590 out of disallowance of rs. 15,22,807 out of repairs and maintenance expenditure. 2. for that the learned cit(a) was not justified in directing the ao to delete the sum of rs. 25,23,511 being capital receipt from the total income of the assessee. 3. for that the cit(a) was not justified in directing the ao set off the losses for asst. yr. 1992-93 against the appellant's income for asst. yr. 1993-94." 2. in respect of the first ground of appeal, the relevant facts are as follows. the ao observed that the assessee has claimed rs. 17,72,807 on account of repairs and maintenance of plant and machinery. after verification of the bills and accounts, he found that the entire expenditure represents capital expenditure and therefore, the same cannot be allowed as business expenditure. however, considering that the expenditure under this head in the immediately proceeding year was rs. 1,35,983, be allowed rs, 2,50,000 out of rs. 17,72,807 as revenue expenditure and disallowed the balance rs. 15,22,807 as capital expenditure. the cit(a) has gone through the details of the expenditure and found that rs. 2,82,793 was incurred for repairs of existing machinery or replacement of existing machinery or spare parts.therefore, considering the nature of the expenditure incurred, he deleted the disallowance of rs. 2,82,793 being revenue in nature.similarly, rs. 2,805 was for other repairs and rs. 2,59,911 was for repairs and replacement of electrical lines and installations and hence, the same were deleted. the cit(a) further, found that out of the aforesaid rs. 17,72,807, rs. 12,22,061 was on account of repairs to factory buildings and sheds. out of the above rs. 12,22,601 he, found that rs. 9,94,471 was capital expenditure as detailed in his appellate order and remaining rs. 2,27,590 was revenue expenditure and hence, he allowed rs. 2,27,590. thus, he found that out of rs. 17,72,807, rs. 7,73,099 (rs. 2,82,793 + rs. 2,805 + rs. 2,59,911 + rs. 2,27,590) was revenue in nature and hence, allowable to the assessee as business expenditure. however, as the ao has already allowed rs. 2,50,000 he withdrew the allowance of rs. 2,50,000 and allowed relief of rs. 7,73,099. the revenue being aggrieved by the aforesaid allowance filed the appeal before us.3. we have heard the rival submissions and perused the material available on record. the learned departmental representative relied upon the order of the ao. we find that the ao could not bring any material on record to show that the entire expenditure of rs. 17,72,807 debited under the head "repairs & maintenance" were capital in nature.the ao himself allowed rs. 2,50,000 as revenue expenditure. no basis for rs. 2,50,000 which was allowed as revenue expenditure was stated in the assessment order. on the other hand, the cit(a) after examining the nature of the expenditure debited under this head found that rs. 7,73,099 was for current repairs of replacement of existing assets. we observe that no material was brought before us to controvert the above finding of the cit(a). hence, we decline to interfere with the order of the cit(a). thus, this ground of appeal is dismissed.4. in regard to the next ground of appeal, the relevant facts are that the assessee received a sum of rs. 29,48,511 from the insurance company on account of loss on fire which took place on 17th jan., 1992, i.e., previous year relevant to the asst. yr. 1992-93. the ao observed that the assessee has not shown any amount as receivable from insurance company as on 31st march, 1992, in its return filed for the asst. yr.1992-93. he also observe that the entire stock on the date of fire was debited by the assessee in its trading account and has claimed as loss in the asst. yr. 1992-93. no adjustment in the value of the fixed assets were made in the asst. yr. 1992-93 on account of loss on fire.according to the ao whatever loss arose to the assessee because of the fire was a trading loss which has already affected the trading result of the immediately preceding financial year. and the receipt of insurance claim of rs. 29,48,511 was an additional benefit derived in the course of the business under section 28 of the act. in this view of the matter, be added rs. 29,48,511 to the income of the assessee for the year under consideration. the cit(a) after verification with the insurance polices held that rs. 4,215,000 was on account of the destruction of the stock-in-trade and rs. 25,23,511 was against damage or loss to plant & machinery and building. he held that rs. 4,25,000 was to be assessed as the assessee's business income because it represented the price realised for loss of trading goods. he further opined that money received from the insurance company on account of loss caused to the capital assets cannot be considered as business income. hence, he directed the ao to restrict the addition of rs. 29,48,511 to rs. 4,25,000.5. we have considered the rival submissions and perused the orders of the lower authorities and also the decision cited at the bar. we find that the department could not bring any material on record to show that the assessee received from the insurer more than rs. 4,25,000 on account of loss of stock-in-trade due to fire. thus, the balance amount of rs. 25,23,511 received by the assessee from the insurance company was on account of compensation for part damage of plant, & machinery and building caused due to fire. the main contention of the revenue is that the compensation of rs. 25,23,511 is also business income of the assessee. we do not find any force in this argument. surely, it cannot be argued that to set fire to the assets and received compensation from the insurance company can be said to be part of business of the assessee. the hard fact of the case is that a part of the capital assets was damaged by the fire for which compensation from the insurance company was received by the assessee. in our considered opinion the compensation so received was on capital account and the same was capital receipt of the assessee. it is now well settled that if any injury is inflicted on the trading of the assessee, so as to say a hole on the assessees profits and damage is recovered cannot be reasonably or appropriately put to any other purpose than to that hole, then the damage is recovered would properly enter his p/l a/c for the year. on the other hand, if the capital or assets themselves are damaged and the assessee received damages, there can be no doubt that the damages so recovered would not be entered into the p&l a/c because the destruction would be an injury not on his trading but on the capital assets of his trade making a hole in them, and the damages would, therefore, be used to fill that hole. the result of the forgoing is that the amount of rs. 25,23,511 represents the capital and not the revenue receipt chargeable as business income. normally capital receipt is not chargeable to tax unless and until there is a specific provision in the act providing for the charge of tax on the same. we find that section 41(2) of the act was not applicable to the assessee as the same in the relevant year was applicable to the undertaking engaged in generation or generation and distribution of power only. further, section 45(1a) was inserted in the act w.e.f. 1st april, 2000, and the same was not applicable in the year under consideration. hence, following the decision of the hon'ble supreme court in the case of vania silk mills ltd. v. cit (1991) 191 itr 647 (sc), we are of the considered opinion that the aforesaid compensation of rs 25,23,511 cannot be charged to tax under the head "capital gains" also. in view of the above, we do not find any reason to interfere with the order of the cit(a). hence, this ground of appeal of the revenue is dismissed.6. the last ground of appeal pertains to direction of the cit(a) to set off loss for the asst. yr. 1992-93 against the assessee's income from the asst. yr. 1993-94. the cit(a) found that vide its order dt. 7th aug., 1995, passed in the case of the assessee in respect of the asst.yr. 1992-93, he directed the ao to carry forward the loss of that year and allow its set off in subsequent year. hence, he directed the ao to set off the loss of the asst. yr. 1992-93 against the income of the year under consideration. the learned departmental representative at the time of hearing concluded that the cit(a) was justified in giving the above direction. we find that the cit(a)'s order passed in appeal no. shill/123/94/95 in the case of the assessee for the asst. yr.1992-93 is filed by the assessee" along with its paper book at p. 51 to 53. from the same it was observed that the assessee filed its return for the asst. yr. 1992-93 on 2nd nov., 1992, whereas as per section 139(1) due date for the same was 31st oct., 1992. it was pointed out by the assessee that 31st oct., 1992, and 1st nov., 1992, were saturday and sunday and the department was closed and hence, on the immediately next working day i.e., on 2nd nov., 1992, the said return was filed.therefore, in terms of cbdt's circular no. 639 dt. 13th nov., 1992, the aforesaid return was within the due time under section 139(1) of the act. in the above circumstances, we find on merit in this ground of appeal of the revenue which is dismissed.i have gone through the proposed order of the learned am in this case.i am unable to concur with the conclusion arrived at by him in para. 5 of pp. 5-7; at p. 7 of the order which reads as under: ".........following the decision of the hon'ble supreme court in the case of vania silk mills ltd. v. cit (1991) 191 itr 647 (sc), we are of the considered opinion that the aforesaid compensation of rs. 25,23,511 cannot be charged to tax under the head "capital gains" also. in view of the above, we do not find any reason to interfere with the order of the cit(a). hence, this ground of appeal of the revenue is dismissed." 2. i, after having discussions with my learned brother, record my dissent; reasons for doing so are given in the following paragraphs : "2. for that the learned cit(a) was not justified in directing the ao to delete the sum of rs. 25,23,511 being capital receipt from the total income of the assessee.4. the facts of the case in respect of ground no. 2 has already been mentioned by my learned brother, therefore, the same are not being repeated here.5. the learned departmental representative relied on the order of the ao.6. on the other hand, the learned counsel for the assessee submitted that the amount received by the assessee in respect of damage of factory building and plant & machinery from the insurance company is a capital receipt. the loss occurred to these capital assets was not debited by the assessee in the p&l a/c. no addition can be made to the business income of the assessee in respect of insurance claim received for damages caused to capital assets: in support of the same reliance was placed on the decision of the hon'ble supreme court in the case of vania silk mills (p) ltd. v. cit (supra). it was, therefore, submitted that the order of the cit(a) should be upheld and the ground taken by the revenue should be rejected.7. i have considered the rival submissions of the parties and perused the materials available on record. the fire broke out in the factory of the assessee on 17th jan., 1992, corresponding to the asst. yr.1992-93. however, the assessee has received the claim from the insurance company in the asst. yr. 1993-94, the year under appeal, therefore, the assessee has credited the insurance claim amounting to rs. 29,48,511 in its p&l a/c for that year. in the original return of income also the assessee has included the amount from the insurance claim in the income of the assessee and filed the return showing no income at rs. 11,32,120. subsequently the assessee has submitted revised computation of total loss of rs. 1.2,23,825 after deducting the insurance claim of rs. 29,49,511.the ao has not allowed the deduction of insurance claim of rs. 29,43,511 and assessed the same as business income of the assessee. on first appeal, the cit(a) held that out of rs. 29,48,511, a sum of rs. 4,25,000 is attributable to loss of finished goods and stores and accordingly he treated a sum of rs. 4,25,000 as business income of the assessee and the remaining amount of rs. 25,23,511 was treated as a loss caused to the capital assets of the firm and, therefore, he held that it cannot be considered as a business income and accordingly following the decision of the hon'ble supreme court of india as mentioned above he deleted the addition by rs. 25,23,511 from the total income of the assessee.8. now the issue arises as to whether the amount received by the assessee from the insurance company against the loss of business assets i.e., factory building and plant machinery is assessable as business income or to be deducted from the w.d.v. of the factory building and plant & machinery or assessable as income from capital gains.9. since the capital assets were damaged by the fire against which compensation was received from the insurance company, the compensation so received was on capital account, therefore, the same is a capital receipt and cannot be held that it is a revenue receipt chargeable as business income.as regards capital gain i find that their lordships of the hon'ble supreme court in the case of vinia silk mills (p) ltd. v. cit (supra) has held as under at p. 547 (short note) : "held, reversing the decision of the high court, (i) that capital gains tax was attracted under section 45 by transfer and not merely by extinguishment of rights howsoever brought about. whatever the mode by which the transfer was brought about, the existence of the asset during the process of transfer was a precondition, unless the asset existed in fact there could not be a transfer of it. the extinguishment of a right or rights should in any case be on account of its or their transfer in order to attract the provisions of section 45. if it was not, and was on account of the destruction or loss of the asset, it was not a transfer and did not attract the provisions of section 45 which related to transfer and not to mere extinguishment of a right. hence, an extinguishment of right not brought about by transfer was outside the purview of section 45." respectfully following the decision of the hon'ble apex court as mentioned above the amount received from insurance company is not, assessable under the head capital gains.subsequently by finance act, 1999, w.e.f, 1st april, 2000, the money received under the insurance policy was brought to tax as capital gain under section 45(1a) of the act. since the case before us is for the asst. yr. 1993-94 the amendment made by the finance act, 1999, is not applicable and accordingly the assessee is not liable to pay capital gains tax.now, the issue remains as to whether the assessee's case falls under section 43 of the it act. the taxation laws (amendment and miscellaneous provisions) act, 1986, has introduced w.e.f. 1st april, 1988, a new scheme of depreciation allowance under which the depreciation is to be allowed in respect of a block of assets instead of for each individual item as envisaged earlier. pursuant to this, clause (c) of sub-section (5) of section 43 of the act has been inserted to define the written down value in the context of the block system of assets. it was elaborately explained in the commentary on the it act, 1961, by the learned author, a.c. sampath iyengar, the law of income-tax, 9th edition, vol. 2 at p. 2932 which is reproduced as under : (i) the aggregate of the written down value of all the assets falling within that block at the beginning of the previous year shall first be calculated. (ii) the aggregate of the written down value arrived at as above, shall be increased by the actual cost of any asset falling in that block which was acquired by the assessee during the previous year. (iii) the sum so arrived at shall be reduced by the moneys receivable by the assessee together with the amount of the scrap value in regard to the any asset falling within that, block which is sold, discarded, demolished or destoryed during the previous year. the written down value of any asset in relation to the asst. yr. 1989-90, and any subsequent assessment year shall be worked out as under in accordance with the newly inserted section 43(5)(c); (i) the written down value of the block of assets in the immediately preceding previous year, shall be reduced by the depreciation actually allowed in respect of the block of assets in relation to the said preceding previous year. (ii) the sum arrived at, as above, shall be increased by the actual cost of any asset falling within that block which is acquired by the assessee during the previous year. (iii) the sum so arrived at shall be reduced by the sale proceeds and other amounts receivable by the assessee in regard to any asset falling within that block which is sold, discarded, demolished or destroyed during that previous year. under the new system, the written down value of any block of assets may be reduced to nil for any of the following reasons : (a) the moneys receivable by the assessee in regard to the assets sold or otherwise transferred during the previous year together with the amount of scrap value may exceed the written down value at the beginning of the year is increased by the actual cost of any new asset acquired, or (b) all the assets in the relevant block may be transferred during the year." in the case of the assessee we find that the assessee has not reduced the wdv of its factory building and as well as the plant & machinery and claiming depreciation, in its books of account on the opening written down value of the said assets. even in the return of income filed by the assessee, the assessee has claimed the depreciation on opening wdv of factory building at 10 per cent and plant & machinery at 25 per cent which is against the clear provisions of the act as mentioned hereinabove and hence the money received from the insurance company in respect of the factory building and plant & machinery is liable to be adjusted in the said block of assets which may be reduced to nil. accordingly the order of the cit(a) is set aside on this account and the ao. is directed to revise the assessment in the light of the provisions of section 43(6)(c) r/w expln. 4 of the act. before doing so, the ao shall also provide a reasonable opportunity of being heard to the assessee. the ground taken by the revenue is allowed for statistical purpose.10. on the remaining grounds of appeal i fully agree with the view, taken by my learned brother, am and accordingly no interference is called for.11. in the result, the appeal filed by the revenue is partly allowed for statistical purposes.as there is a difference of opinion between the members in the present appeal, the same is required to be resolved by one or more members of he tribunal as may be nominated by the hon'ble president, tribunal, in terms of section 255(4) of the act. "1. whether, in view of ground no. 2 taken in this appeal by the revenue and in view of the fact that the issue of depreciation was not in dispute before this tribunal, can this tribunal consider the issue of determination of the written down value of assets suo moto keeping in mind the decision of the apex court in the case of cit v. indira balkrishna (i960) 35itr 546 (sc) 2. whether in view of the provisions of section 43(6)(c) wherein the words used are "sold or discarded or demolished or destroyed" r/w words employed in section 45(1a) wherein the words used are "on account of damage to, or destruction of" can it be held that money received from the insurance company on account of damages of assets will go on to reduce the written down value of the assets 3. whether on the facts and circumstances of the case when it is not in dispute that rs. 25,23,511 was received by the assessee on account of assets damaged in the asst. yr. 1992-93 and the receipt was not on the account of sale discard, demolish or destruction of any asset during the previous year relevant to the assessment year under consideration, still can it be held that the amount of rs. 25,23,511 received from the insurance company will go to reduce the written down value of the assets of the year under consideration in view of the provisions of section 43(6)(c) of the it act ?" 2. the registry is directed to place the matter before the hon'ble president, tribunal.as there is a difference of opinion between the members in the present appeal, the same is required to be resolved by one or more members of the tribunal as may be nominated by the hon'ble president, tribunal, in terms of section 255(4) of the act. "whether, on the facts and in the circumstances of the case, the money received from the insurance company on account of damages of assts i.e., factory building and plant & machinery which was added by the ao as business income under section 28 can be considered in the light of the provisions of section 43(6)(c) r/w expln. 4 in the same chapter of the act for arriving wdv of such assets which in this case is worked out to nil despite the fact that the amount received from the insurance company as reduced by the cit(a) to rs. 25,23,511 is a capital receipt not chargeable to tax ?" we direct the registry to place the matter before the hon'ble president, tribunal.as a result of difference of opinion amongst the members constituting the division bench, i have been nominated as third member in regard to the point of difference. the difference of opinion in this case amongst the learned members has arisen in regard to the treatment of a sum of rs. 29,48,511 received by the assessee from the insurance company in respect of two policies of insurance taken for factory building, plant & machinery and stocks, 2. rival contentions have been heard. dissenting orders and other record considered. i consider it useful to give the relevant facts for the sake of coherence and ready reference even at the cost of repetition.3. the assessee is engaged in the manufacturing of plywood. the assessee had taken two insurance policies from united india insurance co, ltd. as under: on 17th jan., 1992, i.e., in the previous year relevant to asst. yr.1992-93, a fire broke out in the factory premises of the assessee.since there was damage/destruction of building, plant, machinery and stocks, the assessee lodged claim with the insurance company. the assessee vide claim no. 03427 dt. 11th march, 1992, made a claim for r.34,10,000 as per policy no. 1 and on the same date for rs, 5,00,000 as per policy no. 2. the assessee had mentioned "total loss" against the column "extent of loss", in the previous year relevant to asst. yr.1993-94, i.e., the year under appeal, the assessee received a sum of rs. 29,48,511 from the insurance company against the claims made. as against claim of rs. 34,10,000, the insurance company allowed rs. 25,76,278 against policy no. 1 and rs. 3,72,333 against policy no. 2.the assessee filed the return ' of income and originally the sum of rs. 29,48,511 was reflected as income of the assessee. however, subsequently revised computation of income was filed before the ao claiming the said amount received from the insurance company as capital receipt and not liable to tax. the ao considered a sum of rs. 4,25,000 as compensation received for the loss of finished goods and stores and assessed the same as income from business. the remaining claim of rs. 25,23,511 received by the assessee from the insurance company was also held to be assessable under section 28 of the it act, 1961.accordingly, the ao did not allow the claim made by the assessee in the revised computation of income. in other words, the entire amount of rs. 29,48,511 was assessed to tax as a business receipt.4. the assessee appealed to the cit(a). whereas the action of the ao in assessing the sum of rs. 4,25,000 as business income was upheld, the sum of rs. 25,23,511 was held to be a capital receipt and relying upon the decision of the supreme court in the case of vania silk mills ltd v. cit; (1991) 191 itr 647 (sc), it was held that the said amount is not liable to tax.5. the assessee appealed to the tribunal. the learned am has upheld the view of the cit(a) that the sum of rs 25,23,511 received by the assessee from the insurance company was a capital receipt. the learned am has further opined that section 41(2) of the act was not applicable to the facts of this case. it has further been held that section 45(1a) has been inserted w.e.f. 1st april, 2000 for taxability of the amount received from the insurance companies and, therefore, was not applicable for the asst. yr. 1993-94 as the amendment was not retrospective in nature. the learned jm has agreed with the learned am that the amount of rs. 25,23,511 received by the assessee from insurance company was not a revenue receipt. he has also agreed that the said amount is a capital receipt but not assessable to tax under the head 'capital gains' in view of the decision of the apex court in vania silk mills ltd. (supra). he, however, has opined that the amount or part of it was to be adjusted against the written down value under section 43(6)(c) of the act which would in turn affect the depreciation claim. hence the dissent.6. the learned members have also differed in regard to the point of dispute in this appeal. the following points of dispute have been identified by the learned am: "1. whether, in view of the ground no. 2 taken in this appeal by the revenue and in view of the fact that the issue of depreciation was not in dispute before this tribunal, can this tribunal consider the issue of determination of the written down value of assets suo motu keeping in mind the decision of the apex court in the case of cit v. indira balsrishna (1960) 39 itr 546 (sc) 2. whether, in view of the provisions of section 43(6)(c) wherein the words used are "sold or discarded or demolished or destroyed" read with words employed in section 45(1a) wherein the words used are "on account of damage to, or destruction of" can it be held that money received from the insurance company on account of damages of assets will go on to reduce the written down value of the assessee 3. whether, on the facts and circumstances of the, case when it is not in dispute that rs. 25,23,511 was received by the assessee on account of assets damaged in the asst. yr. 1992-93 and the receipt was not on the account of sale, discard, demolish or destruction of any asset during, the previous year relevant to the assessment year under consideration, still can it be held that the amount of rs. 25,23,511 received from the insurance company will go to reduce the written down value of the assets of the year under consideration in view of the provisions of section 43(6)(c) of the it act ?" 7. as against the above points of disputes identified by the learned am, the learned jm has identified the point of dispute as under: "whether on the facts and in the circumstances of the case, the money received from the insurance company on account of damages of assets i.e., factory building and plant & machinery which was added by the ao as business income under section 28 can be considered in the light of the provisions of section 43(6)(c) r/w expln. 4 in the same chapter of the act for arriving w.d.v. of such assets which in this case is worked out to nil despite the fact that the amount received from the insurance company as reduced by the cit(a) to rs. 25,23,511 is a capital receipt not chargeable to tax ?" 8. in my considered view, the real point of dispute in this appeal is as to what treatment is to be given to the amount of rs. 25,23,511 received by the assessee from the insurance company on account of destruction/damage of plant, machinery and building. as a corollary to the aforementioned issue, it is also to be considered as to whether it is open to the tribunal to consider the applicability of provisions of section 43(6)(c) when such a provision was not invoked by the ao or by the cit(a).9. before proceeding further, it may be pertinent to mention that there is no dispute about the taxability of the receipt of rs. 4,25,000 which has been treated as receipt against destruction of stocks. in regard to the receipt of rs. 25,23,511, the learned members of the bench are in agreement that the receipt from the insurance company is not taxable as a revenue receipt. the learned members have also agreed that the insurance claim received by the assessee is a capital receipt, but in view of the decision of the supreme court in the case of vania silk mills ltd (supra), the said receipt is not taxable under the head "capital gains" amendment in section 45(1a) being applicable prospectively w.e.f. 1st april, 2000.10. the learned am had not taken into consideration the provisions of section 43(6)(c) incorporated w.e.f. 1st april, 1988, by the taxation laws (amendment & miscellaneous provisions) act, 1986. the learned jm has opined that such a provision is attracted and the written down value of the respective block of asset has got to be adjusted in accordance with the said provisions of the act as a result of receipt of insurance claim in the year under appeal. the learned am, as is evident from the identification of the points of dispute indicated above, has questioned the power of the tribunal to go into this aspect of the matter.11. the learned departmental representative contended that it is well settled principle of law that when all material facts are available on record, it is open to the tribunal to consider any point of law even if such a point of law has neither been raised nor dealt with by the lower authorities. in this connection reliance has been placed on the following decisions of the supreme court and other high courts :cit v. rayala corporation (p) ltd. (1995) 215 itr 883 at 894-5 (mad); (iii) cit v. cochin refineries ltd. (1996) 220 itr 398 at 407 (ker); and it was contended that admittedly section 45(1a) is applicable w.e.f.1st april, 2000, and therefore, is inapplicable for the taxability of the receipt of the assessee from insurance company in the asst. yr.1993-94. however, provisions of section 43(6)(c), are attracted and that the ao having treated the entire amount as revenue receipt, had not considered the provisions of section 43(6)(c). the cit(a) having held that the receipt from insurance company was a capital receipt not liable to tax has failed to consider the provisions of section 43(6)(c). the learned departmental representative contended that since a statutory provision was ignored and the issue relating to the taxability of the receipt from insurance company was the matter of dispute before the tribunal, the learned jm was absolutely justified to consider the statutory provisions of the act in regard to the facts on record.12. the learned counsel for the assessee fairly conceded that the tribunal has the power to consider any aspect of the taxability of an amount on the basis of existing facts on record notwithstanding the fact that such an aspect was not considered by the lower authorities.the learned counsel, however, contended that though the applicability of section 43(6)(c) as a matter of principle is not objected to, yet the facts and circumstances of this case shall have to be taken into account in determining as to the extent to which the written down value has got to be reduced. in this connection it was contended that section 43(6)(c)(i)(b) provides for adjustment of the written down value on account of money received in respect of any asset-falling within that block, which is sold or discarded or demolished to destroyed during that previous year. it was further contended that the adjustment is permissible in respect of the assets totally destroyed and not in regard to the assets which are partially damaged. in regard to the meaning of the word "destroyed", the learned counsel placed reliance on the following decisions : (ii) cit v. engineering works of india (p) ltd. (1977) 108 itr 11 (cal); (iii) cit v. bengal assam steamship co. ltd. (1986) 161 itr 576 (cal); and the learned counsel further pointed out that the money payable is defined in explanation to section 41(4) to include any insurance, salvage or compensation moneys payable in respect of the assets. it was pointed out that the assessee had taken two insurance polices for rs. 34,10,000 and rs. 5,00,000. the claim was settled for total sum of rs. 29,48,511 only (rs. 25,76,278 + rs. 3,72,233). since the insurance company has not granted the entire claim made by the assessee, necessary exercise shall have to be taken to find out the nature of the claim accepted by the insurance company and the adjustment be made only in respect of the assets which had been destroyed and not in relation to the assets which are partially damaged.13. the learned departmental representative invited my attention to the claim made by the assessee placed at pp. 43 to 45 of the paper book. it was pointed out that the assessee themselves have claimed 'total loss' of all the assets and as such the contention on behalf of the assessee for adjustment does not deserve consideration, 14. in this case, there is a particular situation in so far as the learned jm has dealt with a different aspect of the assessability of receipt from the insurance company which was not at all dealt with by the learned am in the proposed order. the learned am has taken the opportunity to differ with the view expressed by the learned jm by incorporating the doubt in the point of difference referred to the third member. in my view, this situation is avoidable. as per the settled conventions, when an order is proposed by one of the members, the other member may accept the view as proposed and sign the proposed order. after the signature of the second member, the order becomes the order of the tribunal. however, so long as the second member does not sign the order, the proposed order by one of the members remains a draft order. in the event of difference of opinion in regard to the proposed order, the dissenting member should ordinarily bring to the notice of the author of the order his point of view by way of a note and if the author of the order ha omitted any aspect of the matter, also to draw his attention to that omission. that is how the author of the order shall have an opportunity to consider the views expressed by the dissenting member before a final view is formulated. the author of the order may accept the suggestion and, accordingly, redraft the order incorporating the suggestions given by the other member. consequently, unnecessary dissent would be avoided. however, after the receipt of the dissenting note from the other member of the bench, the author of the order may not change his opinion. so, however, he will get an opportunity to incorporate certain aspects of the issue which might have been left to be dealt with in the proposed order. in this case, if the aforementioned procedure had been followed, perhaps the learned am could have got an opportunity to express his views with supporting reasons. however, it seems he did not get such an opportunity. be that as it may, the learned am has expressed his dissent by way of formulating the point of difference and, i, therefore, proceed to deal with the point of difference arising in this case in accordance with law.15. the issue that assumes importance is as to whether the tribunal has the power to deal with any aspect of the addition/disallowance which has neither been raised before the authorities nor dealt with by them.in my considered view, there is a distinction between the dealing with the new source of income as against dealing with a different aspect of the addition/disallowance. in this connection, the decision of calcutta high court in the case of steel containers ltd v. cit (1978) 112 itr 995 (cal) is relevant. in this case their lordships of the calcutta high court have held as under : "though the powers of the tribunal may be said to be limited to the subject-matter of the appeal before it, the tribunal is competent to pass such orders on appeal "as it things fit". there is nothing in the act which restricts the tribunal to the determination of the questions raised before the departmental authority. all questions, whether of law or of facts, which related to the assessment of the assessee might be raised before the tribunal. if, for reasons recorded by the departmental authority, in respect of a contention raised by the assessee, grant of relief to him on another ground is justified; the tribunal would be under a duty to grant that relief. similarly, if the disallowance of certain expenditure to an assessee is warranted by certain provision of law. tribunal is competent to deal with that question and decide the same in accordance with the law," in the case of cit v. mahalakshmi textile mills ltd. (1967) 66 itr 710 (sc), their lordships of the supreme court held that where the claim before the tribunal was regarding the development rebate on account of installation of new machinery, the tribunal had the power to grant relief on the ground of current repairs. the relevant portion of the decision is given hereunder: "(ii) that because the tribunal rejected the assessee's claim for development rebate it was not bound to disallow the claim of the assessee for allowance of the amount spent, if it was a permissible allowance on another ground. whether the allowance was admissible under one head or another of sub-section (2) of section 10, the subject-matter for the appeal remained the same, and the tribunal having held that the expenditure incurred fell within the terms of section 10(2)(v), though not under section 10(2)(vib), it had jurisdiction to admit that expenditure as a permissible allowance in the computation of the taxable income of the assessee. under section 33(4) the tribunal is competent to pass such orders on appeal "as it thinks fit". there is nothing in the it act which restricts the tribunal to the determination of questions raised before the departmental authorities. all questions, whether of law or of facts, which relate to the assessment of the assessee may be raised before the tribunal. if for reasons recorded by the departmental authorities in respect of a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the tribunal, and indeed they would be under a duty, to grant that relief. the right of the assessee to relief is not restricted to the plea raised by him." in the case of national thermal power co. ltd. (supra), the hon'ble supreme "the view that the tribunal is confined only to issues arising out of the appeal before the cit(a) takes too narrow a view of the powers of the tribunal." 16. it may be pertinent to mention that in this case the issue before the ao was as to whether the amount of rs. 29,48,511 received from the insurance company was assessable to tax under the it act, 1961. the ao considered the said receipt as revenue receipt. the ao had no occasion to consider the adjustment to be made under section 43(6)(c) in the light of his finding that the entire amount was taxable as a revenue receipt. the cit(a) disagreed with the ao. he, however, held that the receipt from the insurance company was a capital receipt but in the light of the decision of the supreme court in the case of wania silk mills ltd. (supra), the same was not liable to tax, it was the duty of the cit(a) to consider all aspects relating to the taxability of the receipts from the insurance company. their lordships of the supreme court in the case of cit v. kanpur coal syndicate (1964) 53 itr 225 (sc) held that the first appellate authority has plenary powers in disposing of an appeal. the scope of his powers is conterminous with that of the ito. he can do what the ito can do and can also direct him to do what he has failed to do. this principle has been reiterated by the hon'ble supreme court in the case of jute corporation of india ltd. v. cit and anr. (1991) 187 itr 688 (sc).17. in the present case, the cit(a) has failed to deal with the issue relating to taxability of the receipt in the light of provisions of section 43(6)(c). the learned am also did not consider the applicability of provisions of section 43(6)(c). the learned jm has dealt with the issue and in my considered, view, he was justified in doing so. while dealing with section 43(6)(c) with reference to the taxability of the receipt of insurance claim, the learned jm has dealt with another aspect of the same addition and has not dealt with any new source of income. subject-matter of dispute in the tribunal in this case is the treatment for the purpose of taxability of the receipt of rs. 29,48,511 received from the insurance company. the said amount has been held to be not a revenue receipt. its taxability as a capital asset has been dealt with by the cit(a) for the first time. both the members have agreed with the cit(a) that the capital receipt is not taxable in the light of the decision of the supreme court in the case of vania silk mills ltd. (supra). the duty of the tribunal does not stop with giving an opinion in accord with the opinion of the first appellate authority or by the revenue authorities or contrary to it, the tribunal is duty bound to dispose of the matter in accordance with law. this principle may be explained with an example. the ao may treat an expenditure incurred by the assessee as expenditure not incurred for purposes of business. on appeal, the first appellate authority may disagree with the ao and hold that the expenditure has been incurred by the assessee for purposes of the business. though the order of the ao may have to be reversed by the first appellate authority, yet the first appellate authority shall have to take into consideration the statutory limitation provided under section 37(2a) for allowance of deduction on account of entertainment expenses notwithstanding the fact that the ao had not made any disallowance under section 37(2a). another situation may arise where the view expressed by the ao about the non-allowability of the expenditure of entertainment nature is confirmed by the cit(a) on the ground that the expenditure is not incurred for purposes of business or that the expenditure is not supported by evidence. on appeal, the tribunal may come to the conclusion that the expenditure incurred by the assessee on entertainment was for purposes of business.at this stage, it would not only be right of the tribunal but also its duty to consider the allowability of the claim in the light of the provisions of section 37(2a). the assessee shall not object to the power of the tribunal on the ground that the disallowance had not been made by the ao or by the cit(a) under section 37(2a). subject-matter of the appeal in the tribunal in this case would be the disallowance of entertainment expenses. therefore, when the tribunal deals with the issue, vis-a-vis section 37(2a), it deals with different aspect of the same addition and does not travel beyond its jurisdiction.18. similarly, in the present case the learned jm has dealt with different aspect of the same addition in the light of the relevant provisions of the act. the facts are on record. law is unambiguous and, therefore, the action of the learned jm in dealing with the issue, vis-a-vis provisions of section 43(6)(c) notwithstanding the fact that the addition was not made with reference to the said section either by the ao or by the cit(a), in my view, is justified. i, therefore, do not agree with the doubts expressed by the am in this regard. in this case it is not disputed that section 43(6)(c) is attracted in regard to the receipt of the claim from the insurance company. thus, when the learned jm expressed the view that the receipt is adjustable in the block of asset, he has not exceeded his jurisdiction in giving his opinion.therefore, i am of the view that the order of the learned jm in dealing with the issue under section 43(6)(c) with reference to the receipt of the insurance claim is in order and does not suffer from any infirmity.the learned counsel of the assessee has also conceded the said state of law.19. the only question that remains to be considered is as to the extent of adjustment permissible under section 43(6)(c). the learned jm has given a direction to the ao to adjust the amount of insurance claim received by the assessee in respect of the assets destroyed in fire.the ao has also been directed to give an opportunity of being heard to the assessee. whether the entire assets had been destroyed or not or whether the claim received by the assessee was in regard to the total destruction of the assets or partially damaged assets has not been gone into by the learned jm. however, since the learned jm has directed the ao to give an opportunity to the assessee before passing the order, no prejudice is caused to the assessee. the assessee shall have an opportunity before the ao to furnish any evidence in establishing that any part of the claim received from the insurance company was in respect of partial damaged assets. as per the claim of the assessee before the united india insurance co. ltd. placed on record, it is observed that the assessee themselves have claimed that there was total destruction of the assets insured with the insurance company. i may hasten to add that this is, however, a mere claim. the claim is subject to settlement for the purpose of which a survey report is relevant. the final acceptance of the claim by insurance company is also relevant.therefore, the nature of the receipt vis-a-vis the total destruction or partial damage to the assets shall have to be determined with reference to the report of the surveyor and the final acceptance of the claim by the insurance authorities.20. it may be pertinent to point out that the word "destroyed" has been interpreted by the hon'ble supreme court in the case of sirpur paper mills ltd. (supra) with reference to provisions of section 41(2). it has been held that section 41(2) postulates for its applicability that the plant or machinery, whether in whole or in part, should be sold, discarded, damaged or destroyed and that it could have no application to a case where the plant or machinery is merely damaged and by repairing the damage, the plant and machinery is restored to working condition. similar principle has been reiterated by their lordships of the calcutta high court in the case of kanoria chemicals & inds. ltd. (supra). in view of the aforementioned enunciated law laid down by the hon'ble supreme court, the exercise for determination of the actual amount adjustable under section 43(6)(c) shall have to be gone into by the ao after giving an opportunity of being heard to the assessee.prima facie it appears that most of the assets have been destroyed. so however, the learned jm has left it open for the assessee to establish that part of the claim has been received in respect of the partially damaged assets. the ao shall have to do that exercise. i, therefore, agree with the learned jm that the claim received by the assessee has got to be adjusted under section 43(6)(c) to the extent the same has been received in respect of the destroyed assets.21. in final analysis, i agree with the reasoning as well as conclusion arrived at by the learned jm.22. let the matter be placed before the regular bench for announcing the majority view.in view of the difference of opinion between the learned am and the learned jm, the following points were referred to the third member: "1. whether, in view of ground no. 2 taken in this appeal by the revenue and in view of the fact that the issue of depreciation was not in dispute before this tribunal, can this tribunal consider the issue of determination of the written down value of assets suo moto keeping in mind the decision of the apex court in the case of cit v. indira balkrishna (1960) 39 itr 546 (sc) 2. whether, in view of the provisions of section 43(6)(c) wherein the words used are "sold or discarded or demolished or destroyed" read with words employed in section 45(1a) wherein the words used are "on account of damage to, or destruction of" can it be held that money received from the insurance company on account of damages of assets will go on to reduce the written down value of the assessee 3. whether, on the facts and circumstances of the case, when it is not in dispute that rs. 25,23,511 was received by the assessee on account of assets damaged in the asst. yr. 1992-93 and receipt was not on account of sale, discard, demolish or destruction of any asset during the previous year relevant to the assessment year under consideration, still can it be held that the amount of rs. 25,23,511 received from the insurance company will go to reduce the written down value of the assets of the year under consideration in view of the provisions of section 43(6)(c) of the it act ?" 3. as against the above points of disputes identified by the learned am, the learned jm has identified the point of dispute as under: "whether, on the facts and in the circumstances of the case, the money received from the insurance company on account of damages of assets i.e. factory building and plant and machinery which was added by the ao as business income under section 28 can be considered in the light of the provisions, of section 43(6)(c) r/w expln. 4 in the same chapter of the act for arriving wdv of such assets which in this case is worked out to nil despite the fact that the amount received from the insurance company as reduced by the cit(a) to rs. 25,23,511 is a capital receipt not chargeable to tax ?" 4. shri m.a. bakshi, the hon'ble vice president (kolkata) was nominated as the third member. in his order dated 23rd. july, 2003, the third member concurred with the view taken by the learned judicial member and held (para 18) that: "..........i am of the view that the order of the learned judicial member in dealing with the issue under section 43(6)(c) with reference to the receipt of the insurance claim is in order and does not suffer from any infirmity. the learned counsel of the assessee has also conceded the said state of law." ".......the exercise for determination of the actual amount, adjustable under section 43(6)(c) shall have to be done into by the ao after giving an opportunity of being heard to the assessee. prima facie it appears that most of the assets have been destroyed. so, however, the learned jm has left it open for the assessee to establish that part of the claim has been received in respect of the partially damaged assets. the ao shall have to do that exercise. i, therefore, agree with the learned jm that the claim received by the assessee has got to be adjusted under section 43(6)(c) to the extent the same has been received in respect of the destroyed assets." in accordance with the majority view, the issue stands decided in favour of the revenue and against the assessee vide paragraphs 19 and 20 of the order of the third member. however, in view of the majority view, the order of the cit(a) is set aside on this account and the matter is restored to the file of the ao who shall decide the same in accordance with the majority view as referred to hereinabove after providing a reasonable opportunity of being heard to the assessee and to this extent the ground no. 2 taken by the revenue is partly allowed for statistical purpose.5. on the remaining grounds nos. 1 and 3 of appeal the issue is decided in favour of the assessee as mentioned in our order dt. 29th nov., 2002.6. in the result, the appeal filed by the revenue is partly allowed for statistical purpose.

Judgment:
This is an appeal filed by the Revenue for the asst. yr. 1993-94 against the order of the CIT(A) dt. 17th March, 1997. The three grounds of appeal taken by the Revenue are as under : "1. For that the learned CIT(A) was not justified in deleting Rs. 2,82,792, Rs. 2,805, Rs. 25,911, Rs. 2,27,590 out of disallowance of Rs. 15,22,807 out of repairs and maintenance expenditure.

2. For that the learned CIT(A) was not justified in directing the AO to delete the sum of Rs. 25,23,511 being capital receipt from the total income of the assessee.

3. For that the CIT(A) was not justified in directing the AO set off the losses for asst. yr. 1992-93 against the appellant's income for asst. yr. 1993-94." 2. In respect of the first ground of appeal, the relevant facts are as follows. The AO observed that the assessee has claimed Rs. 17,72,807 on account of repairs and maintenance of plant and machinery. After verification of the bills and accounts, he found that the entire expenditure represents capital expenditure and therefore, the same cannot be allowed as business expenditure. However, considering that the expenditure under this head in the immediately proceeding year was Rs. 1,35,983, be allowed Rs, 2,50,000 out of Rs. 17,72,807 as Revenue expenditure and disallowed the balance Rs. 15,22,807 as capital expenditure. The CIT(A) has gone through the details of the expenditure and found that Rs. 2,82,793 was incurred for repairs of existing machinery or replacement of existing machinery or spare parts.

Therefore, considering the nature of the expenditure incurred, he deleted the disallowance of Rs. 2,82,793 being revenue in nature.

Similarly, Rs. 2,805 was for other repairs and Rs. 2,59,911 was for repairs and replacement of electrical lines and installations and hence, the same were deleted. The CIT(A) further, found that out of the aforesaid Rs. 17,72,807, Rs. 12,22,061 was on account of repairs to factory buildings and sheds. Out of the above Rs. 12,22,601 he, found that Rs. 9,94,471 was capital expenditure as detailed in his appellate order and remaining Rs. 2,27,590 was revenue expenditure and hence, he allowed Rs. 2,27,590. Thus, he found that out of Rs. 17,72,807, Rs. 7,73,099 (Rs. 2,82,793 + Rs. 2,805 + Rs. 2,59,911 + Rs. 2,27,590) was revenue in nature and hence, allowable to the assessee as business expenditure. However, as the AO has already allowed Rs. 2,50,000 he withdrew the allowance of Rs. 2,50,000 and allowed relief of Rs. 7,73,099. The Revenue being aggrieved by the aforesaid allowance filed the appeal before us.

3. We have heard the rival submissions and perused the material available on record. The learned Departmental Representative relied upon the order of the AO. We find that the AO could not bring any material on record to show that the entire expenditure of Rs. 17,72,807 debited under the head "repairs & maintenance" were capital in nature.

The AO himself allowed Rs. 2,50,000 as revenue expenditure. No basis for Rs. 2,50,000 which was allowed as revenue expenditure was stated in the assessment order. On the other hand, the CIT(A) after examining the nature of the expenditure debited under this head found that Rs. 7,73,099 was for current repairs of replacement of existing assets. We observe that no material was brought before us to controvert the above finding of the CIT(A). Hence, we decline to interfere with the order of the CIT(A). Thus, this ground of appeal is dismissed.

4. In regard to the next ground of appeal, the relevant facts are that the assessee received a sum of Rs. 29,48,511 from the Insurance Company on account of loss on fire which took place on 17th Jan., 1992, i.e., previous year relevant to the asst. yr. 1992-93. The AO observed that the assessee has not shown any amount as receivable from insurance company as on 31st March, 1992, in its return filed for the asst. yr.

1992-93. He also observe that the entire stock on the date of fire was debited by the assessee in its trading account and has claimed as loss in the asst. yr. 1992-93. No adjustment in the value of the fixed assets were made in the asst. yr. 1992-93 on account of loss on fire.

According to the AO whatever loss arose to the assessee because of the fire was a trading loss which has already affected the trading result of the immediately preceding financial year. And the receipt of Insurance claim of Rs. 29,48,511 was an additional benefit derived in the course of the business under Section 28 of the Act. In this view of the matter, be added Rs. 29,48,511 to the income of the assessee for the year under consideration. The CIT(A) after verification with the insurance polices held that Rs. 4,215,000 was on account of the destruction of the stock-in-trade and Rs. 25,23,511 was against damage or loss to plant & machinery and building. He held that Rs. 4,25,000 was to be assessed as the assessee's business income because it represented the price realised for loss of trading goods. He further opined that money received from the insurance company on account of loss caused to the capital assets cannot be considered as business income. Hence, he directed the AO to restrict the addition of Rs. 29,48,511 to Rs. 4,25,000.

5. We have considered the rival submissions and perused the orders of the lower authorities and also the decision cited at the Bar. We find that the Department could not bring any material on record to show that the assessee received from the insurer more than Rs. 4,25,000 on account of loss of stock-in-trade due to fire. Thus, the balance amount of Rs. 25,23,511 received by the assessee from the insurance company was on account of compensation for part damage of plant, & machinery and building caused due to fire. The main contention of the Revenue is that the compensation of Rs. 25,23,511 is also business income of the assessee. We do not find any force in this argument. Surely, it cannot be argued that to set fire to the assets and received compensation from the insurance company can be said to be part of business of the assessee. The hard fact of the case is that a part of the capital assets was damaged by the fire for which compensation from the insurance company was received by the assessee. In our considered opinion the compensation so received was on capital account and the same was capital receipt of the assessee. It is now well settled that if any injury is inflicted on the trading of the assessee, so as to say a hole on the assessees profits and damage is recovered cannot be reasonably or appropriately put to any other purpose than to that hole, then the damage is recovered would properly enter his P/L a/c for the year. On the other hand, if the capital or assets themselves are damaged and the assessee received damages, there can be no doubt that the damages so recovered would not be entered into the P&L a/c because the destruction would be an injury not on his trading but on the capital assets of his trade making a hole in them, and the damages would, therefore, be used to fill that hole. The result of the forgoing is that the amount of Rs. 25,23,511 represents the capital and not the revenue receipt chargeable as business income. Normally capital receipt is not chargeable to tax unless and until there is a specific provision in the Act providing for the charge of tax on the same. We find that Section 41(2) of the Act was not applicable to the assessee as the same in the relevant year was applicable to the undertaking engaged in generation or generation and distribution of power only. Further, Section 45(1A) was inserted in the Act w.e.f. 1st April, 2000, and the same was not applicable in the year under consideration. Hence, following the decision of the Hon'ble Supreme Court in the case of Vania Silk Mills Ltd. v. CIT (1991) 191 ITR 647 (SC), we are of the considered opinion that the aforesaid compensation of Rs 25,23,511 cannot be charged to tax under the head "capital gains" also. In view of the above, we do not find any reason to interfere with the order of the CIT(A). Hence, this ground of appeal of the Revenue is dismissed.

6. The last ground of appeal pertains to direction of the CIT(A) to set off loss for the asst. yr. 1992-93 against the assessee's income from the asst. yr. 1993-94. The CIT(A) found that vide its order dt. 7th Aug., 1995, passed in the case of the assessee in respect of the asst.

yr. 1992-93, he directed the AO to carry forward the loss of that year and allow its set off in subsequent year. Hence, he directed the AO to set off the loss of the asst. yr. 1992-93 against the income of the year under consideration. The learned Departmental Representative at the time of hearing concluded that the CIT(A) was justified in giving the above direction. We find that the CIT(A)'s order passed in appeal No. Shill/123/94/95 in the case of the assessee for the asst. yr.

1992-93 is filed by the assessee" along with its paper book at p. 51 to 53. From the same it was observed that the assessee filed its return for the asst. yr. 1992-93 on 2nd Nov., 1992, whereas as per Section 139(1) due date for the same was 31st Oct., 1992. It was pointed out by the assessee that 31st Oct., 1992, and 1st Nov., 1992, were Saturday and Sunday and the Department was closed and hence, on the immediately next working day i.e., on 2nd Nov., 1992, the said return was filed.

Therefore, in terms of CBDT's circular No. 639 dt. 13th Nov., 1992, the aforesaid return was within the due time under Section 139(1) of the Act. In the above circumstances, we find on merit in this ground of appeal of the Revenue which is dismissed.

I have gone through the proposed order of the learned AM in this case.

I am unable to concur with the conclusion arrived at by him in para. 5 of pp. 5-7; at p. 7 of the order which reads as under: ".........following the decision of the Hon'ble Supreme Court in the case of Vania Silk Mills Ltd. v. CIT (1991) 191 ITR 647 (SC), we are of the considered opinion that the aforesaid compensation of Rs. 25,23,511 cannot be charged to tax under the head "capital gains" also. In view of the above, we do not find any reason to interfere with the order of the CIT(A). Hence, this ground of appeal of the Revenue is dismissed." 2. I, after having discussions with my learned brother, record my dissent; reasons for doing so are given in the following paragraphs : "2. For that the learned CIT(A) was not justified in directing the AO to delete the sum of Rs. 25,23,511 being capital receipt from the total income of the assessee.

4. The facts of the case in respect of ground No. 2 has already been mentioned by my learned brother, therefore, the same are not being repeated here.

5. The learned Departmental Representative relied on the order of the AO.6. On the other hand, the learned counsel for the assessee submitted that the amount received by the assessee in respect of damage of factory building and plant & machinery from the insurance company is a capital receipt. The loss occurred to these capital assets was not debited by the assessee in the P&L a/c. No addition can be made to the business income of the assessee in respect of insurance claim received for damages caused to capital assets: In support of the same reliance was placed on the decision of the Hon'ble Supreme Court in the case of Vania Silk Mills (P) Ltd. v. CIT (supra). It was, therefore, submitted that the order of the CIT(A) should be upheld and the ground taken by the Revenue should be rejected.

7. I have considered the rival submissions of the parties and perused the materials available on record. The fire broke out in the factory of the assessee on 17th Jan., 1992, corresponding to the asst. yr.

1992-93. However, the assessee has received the claim from the insurance company in the asst. yr. 1993-94, the year under appeal, therefore, the assessee has credited the insurance claim amounting to Rs. 29,48,511 in its P&L a/c for that year. In the original return of income also the assessee has included the amount from the insurance claim in the income of the assessee and filed the return showing no income at Rs. 11,32,120. Subsequently the assessee has submitted revised computation of total loss of Rs. 1.2,23,825 after deducting the insurance claim of Rs. 29,49,511.

The AO has not allowed the deduction of insurance claim of Rs. 29,43,511 and assessed the same as business income of the assessee. On first appeal, the CIT(A) held that out of Rs. 29,48,511, a sum of Rs. 4,25,000 is attributable to loss of finished goods and stores and accordingly he treated a sum of Rs. 4,25,000 as business income of the assessee and the remaining amount of Rs. 25,23,511 was treated as a loss caused to the capital assets of the firm and, therefore, he held that it cannot be considered as a business income and accordingly following the decision of the Hon'ble Supreme Court of India as mentioned above he deleted the addition by Rs. 25,23,511 from the total income of the assessee.

8. Now the issue arises as to whether the amount received by the assessee from the insurance company against the loss of business assets i.e., factory building and plant machinery is assessable as business income or to be deducted from the W.D.V. of the factory building and plant & machinery or assessable as income from capital gains.

9. Since the capital assets were damaged by the fire against which compensation was received from the insurance company, the compensation so received was on capital account, therefore, the same is a capital receipt and cannot be held that it is a revenue receipt chargeable as business income.

As regards capital gain I find that their lordships of the Hon'ble Supreme Court in the case of Vinia Silk Mills (P) Ltd. v. CIT (supra) has held as under at p. 547 (short note) : "Held, reversing the decision of the High Court, (i) that capital gains tax was attracted under Section 45 by transfer and not merely by extinguishment of rights howsoever brought about. Whatever the mode by which the transfer was brought about, the existence of the asset during the process of transfer was a precondition, unless the asset existed in fact there could not be a transfer of it. The extinguishment of a right or rights should in any case be on account of its or their transfer in order to attract the provisions of Section 45. If it was not, and was on account of the destruction or loss of the asset, it was not a transfer and did not attract the provisions of Section 45 which related to transfer and not to mere extinguishment of a right. Hence, an extinguishment of right not brought about by transfer was outside the purview of Section 45." Respectfully following the decision of the Hon'ble apex Court as mentioned above the amount received from insurance company is not, assessable under the head capital gains.

Subsequently by Finance Act, 1999, w.e.f, 1st April, 2000, the money received under the insurance policy was brought to tax as capital gain under Section 45(1A) of the Act. Since the case before us is for the asst. yr. 1993-94 the amendment made by the Finance Act, 1999, is not applicable and accordingly the assessee is not liable to pay capital gains tax.

Now, the issue remains as to whether the assessee's case falls under Section 43 of the IT Act. The Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, has introduced w.e.f. 1st April, 1988, a new scheme of depreciation allowance under which the depreciation is to be allowed in respect of a block of assets instead of for each individual item as envisaged earlier. Pursuant to this, Clause (c) of Sub-section (5) of Section 43 of the Act has been inserted to define the written down value in the context of the block system of assets. It was elaborately explained in the commentary on the IT Act, 1961, by the learned author, A.C. Sampath Iyengar, The law of income-tax, 9th edition, vol. 2 at p. 2932 which is reproduced as under : (i) the aggregate of the written down value of all the assets falling within that block at the beginning of the previous year shall first be calculated.

(ii) The aggregate of the written down value arrived at as above, shall be increased by the actual cost of any asset falling in that block which was acquired by the assessee during the previous year.

(iii) The sum so arrived at shall be reduced by the moneys receivable by the assessee together with the amount of the scrap value in regard to the any asset falling within that, block which is sold, discarded, demolished or destoryed during the previous year.

The written down value of any asset in relation to the asst. yr.

1989-90, and any subsequent assessment year shall be worked out as under in accordance with the newly inserted Section 43(5)(c); (i) The written down value of the block of assets in the immediately preceding previous year, shall be reduced by the depreciation actually allowed in respect of the block of assets in relation to the said preceding previous year.

(ii) The sum arrived at, as above, shall be increased by the actual cost of any asset falling within that block which is acquired by the assessee during the previous year.

(iii) The sum so arrived at shall be reduced by the sale proceeds and other amounts receivable by the assessee in regard to any asset falling within that block which is sold, discarded, demolished or destroyed during that previous year.

Under the new system, the written down value of any block of assets may be reduced to nil for any of the following reasons : (A) The moneys receivable by the assessee in regard to the assets sold or otherwise transferred during the previous year together with the amount of scrap value may exceed the written down value at the beginning of the year is increased by the actual cost of any new asset acquired, or (B) All the assets in the relevant block may be transferred during the year." In the case of the assessee we find that the assessee has not reduced the WDV of its factory building and as well as the plant & machinery and claiming depreciation, in its books of account on the opening written down value of the said assets. Even in the return of income filed by the assessee, the assessee has claimed the depreciation on opening WDV of factory building at 10 per cent and plant & machinery at 25 per cent which is against the clear provisions of the Act as mentioned hereinabove and hence the money received from the insurance company in respect of the factory building and plant & machinery is liable to be adjusted in the said block of assets which may be reduced to nil. Accordingly the order of the CIT(A) is set aside on this account and the AO. is directed to revise the assessment in the light of the provisions of Section 43(6)(c) r/w Expln. 4 of the Act. Before doing so, the AO shall also provide a reasonable opportunity of being heard to the assessee. The ground taken by the Revenue is allowed for statistical purpose.

10. On the remaining grounds of appeal I fully agree with the view, taken by my learned brother, AM and accordingly no interference is called for.

11. In the result, the appeal filed by the Revenue is partly allowed for statistical purposes.

As there is a difference of opinion between the Members in the present appeal, the same is required to be resolved by one or more Members of he Tribunal as may be nominated by the Hon'ble President, Tribunal, in terms of Section 255(4) of the Act.

"1. Whether, in view of ground No. 2 taken in this appeal by the Revenue and in view of the fact that the issue of depreciation was not in dispute before this Tribunal, can this Tribunal consider the issue of determination of the written down value of assets suo moto keeping in mind the decision of the apex Court in the case of CIT v. Indira Balkrishna (I960) 35ITR 546 (SC) 2. Whether in view of the provisions of Section 43(6)(c) wherein the words used are "sold or discarded or demolished or destroyed" r/w words employed in Section 45(1A) wherein the words used are "on account of damage to, or destruction of" can it be held that money received from the insurance company on account of damages of assets will go on to reduce the written down value of the assets 3. Whether on the facts and circumstances of the case when it is not in dispute that Rs. 25,23,511 was received by the assessee on account of assets damaged in the asst. yr. 1992-93 and the receipt was not on the account of sale discard, demolish or destruction of any asset during the previous year relevant to the assessment year under consideration, still can it be held that the amount of Rs. 25,23,511 received from the insurance company will go to reduce the written down value of the assets of the year under consideration in view of the provisions of Section 43(6)(c) of the IT Act ?" 2. The Registry is directed to place the matter before the Hon'ble President, Tribunal.

As there is a difference of opinion between the Members in the present appeal, the same is required to be resolved by one or more Members of the Tribunal as may be nominated by the Hon'ble President, Tribunal, in terms of Section 255(4) of the Act.

"Whether, on the facts and in the circumstances of the case, the money received from the insurance company on account of damages of assts i.e., factory building and plant & machinery which was added by the AO as business income under Section 28 can be considered in the light of the provisions of Section 43(6)(c) r/w Expln. 4 in the same Chapter of the Act for arriving WDV of such assets which in this case is worked out to nil despite the fact that the amount received from the insurance company as reduced by the CIT(A) to Rs. 25,23,511 is a capital receipt not chargeable to tax ?" We direct the Registry to place the matter before the Hon'ble President, Tribunal.

As a result of difference of opinion amongst the Members constituting the Division Bench, I have been nominated as Third Member in regard to the point of difference. The difference of opinion in this case amongst the learned members has arisen in regard to the treatment of a sum of Rs. 29,48,511 received by the assessee from the insurance company in respect of two policies of insurance taken for factory building, plant & machinery and stocks, 2. Rival contentions have been heard. Dissenting orders and other record considered. I consider it useful to give the relevant facts for the sake of coherence and ready reference even at the cost of repetition.

3. The assessee is engaged in the manufacturing of plywood. The assessee had taken two insurance policies from United India Insurance Co, Ltd. as under: On 17th Jan., 1992, i.e., in the previous year relevant to asst. yr.

1992-93, a fire broke out in the factory premises of the assessee.

Since there was damage/destruction of building, plant, machinery and stocks, the assessee lodged claim with the insurance company. The assessee vide claim No. 03427 dt. 11th March, 1992, made a claim for R.34,10,000 as per Policy No. 1 and on the same date for Rs, 5,00,000 as per Policy No. 2. The assessee had mentioned "Total loss" against the column "Extent of Loss", In the previous year relevant to asst. yr.

1993-94, i.e., the year under appeal, the assessee received a sum of Rs. 29,48,511 from the insurance company against the claims made. As against claim of Rs. 34,10,000, the Insurance company allowed Rs. 25,76,278 against Policy No. 1 and Rs. 3,72,333 against policy No. 2.

The assessee filed the return ' of income and originally the sum of Rs. 29,48,511 was reflected as income of the assessee. However, subsequently revised computation of income was filed before the AO claiming the said amount received from the insurance company as capital receipt and not liable to tax. The AO considered a sum of Rs. 4,25,000 as compensation received for the loss of finished goods and stores and assessed the same as income from business. The remaining claim of Rs. 25,23,511 received by the assessee from the insurance company was also held to be assessable under Section 28 of the IT Act, 1961.

Accordingly, the AO did not allow the claim made by the assessee in the revised computation of income. In other words, the entire amount of Rs. 29,48,511 was assessed to tax as a business receipt.

4. The assessee appealed to the CIT(A). Whereas the action of the AO in assessing the sum of Rs. 4,25,000 as business income was upheld, the sum of Rs. 25,23,511 was held to be a capital receipt and relying upon the decision of the Supreme Court in the case of Vania Silk Mills Ltd v. CIT; (1991) 191 ITR 647 (SC), it was held that the said amount is not liable to tax.

5. The assessee appealed to the Tribunal. The learned AM has upheld the view of the CIT(A) that the sum of Rs 25,23,511 received by the assessee from the insurance company was a capital receipt. The learned AM has further opined that Section 41(2) of the Act was not applicable to the facts of this case. It has further been held that Section 45(1A) has been inserted w.e.f. 1st April, 2000 for taxability of the amount received from the insurance companies and, therefore, was not applicable for the asst. yr. 1993-94 as the amendment was not retrospective in nature. The learned JM has agreed with the learned AM that the amount of Rs. 25,23,511 received by the assessee from insurance company was not a revenue receipt. He has also agreed that the said amount is a capital receipt but not assessable to tax under the head 'capital gains' in view of the decision of the apex Court in Vania Silk Mills Ltd. (supra). He, however, has opined that the amount or part of it was to be adjusted against the written down value under Section 43(6)(c) of the Act which would in turn affect the depreciation claim. Hence the dissent.

6. The learned Members have also differed in regard to the point of dispute in this appeal. The following points of dispute have been identified by the learned AM: "1. Whether, in view of the ground No. 2 taken in this appeal by the Revenue and in view of the fact that the issue of depreciation was not in dispute before this Tribunal, can this Tribunal consider the issue of determination of the written down value of assets suo motu keeping in mind the decision of the apex Court in the case of CIT v. Indira Balsrishna (1960) 39 ITR 546 (SC) 2. Whether, in view of the provisions of Section 43(6)(c) wherein the words used are "sold or discarded or demolished or destroyed" read with words employed in Section 45(1A) wherein the words used are "on account of damage to, or destruction of" can it be held that money received from the insurance company on account of damages of assets will go on to reduce the written down value of the assessee 3. Whether, on the facts and circumstances of the, case when it is not in dispute that Rs. 25,23,511 was received by the assessee on account of assets damaged in the asst. yr. 1992-93 and the receipt was not on the account of sale, discard, demolish or destruction of any asset during, the previous year relevant to the assessment year under consideration, still can it be held that the amount of Rs. 25,23,511 received from the insurance company will go to reduce the written down value of the assets of the year under consideration in view of the provisions of Section 43(6)(c) of the IT Act ?" 7. As against the above points of disputes identified by the learned AM, the learned JM has identified the point of dispute as under: "Whether on the facts and in the circumstances of the case, the money received from the insurance company on account of damages of assets i.e., factory building and plant & machinery which was added by the AO as business income under Section 28 can be considered in the light of the provisions of Section 43(6)(c) r/w Expln. 4 in the same Chapter of the Act for arriving W.D.V. of such assets which in this case is worked out to nil despite the fact that the amount received from the insurance company as reduced by the CIT(A) to Rs. 25,23,511 is a capital receipt not chargeable to tax ?" 8. In my considered view, the real point of dispute in this appeal is as to what treatment is to be given to the amount of Rs. 25,23,511 received by the assessee from the insurance company on account of destruction/damage of plant, machinery and building. As a corollary to the aforementioned issue, it is also to be considered as to whether it is open to the Tribunal to consider the applicability of provisions of Section 43(6)(c) when such a provision was not invoked by the AO or by the CIT(A).

9. Before proceeding further, it may be pertinent to mention that there is no dispute about the taxability of the receipt of Rs. 4,25,000 which has been treated as receipt against destruction of stocks. In regard to the receipt of Rs. 25,23,511, the learned Members of the Bench are in agreement that the receipt from the insurance company is not taxable as a revenue receipt. The learned Members have also agreed that the insurance claim received by the assessee is a capital receipt, but in view of the decision of the Supreme Court in the case of Vania Silk Mills Ltd (supra), the said receipt is not taxable under the head "capital gains" amendment in Section 45(1A) being applicable prospectively w.e.f. 1st April, 2000.

10. The learned AM had not taken into consideration the provisions of Section 43(6)(c) incorporated w.e.f. 1st April, 1988, by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986. The learned JM has opined that such a provision is attracted and the written down value of the respective block of asset has got to be adjusted in accordance with the said provisions of the Act as a result of receipt of insurance claim in the year under appeal. The learned AM, as is evident from the identification of the points of dispute indicated above, has questioned the power of the Tribunal to go into this aspect of the matter.

11. The learned Departmental Representative contended that it is well settled principle of law that when all material facts are available on record, it is open to the Tribunal to consider any point of law even if such a point of law has neither been raised nor dealt with by the lower authorities. In this connection reliance has been placed on the following decisions of the Supreme Court and other High Courts :CIT v. Rayala Corporation (P) Ltd. (1995) 215 ITR 883 at 894-5 (Mad); (iii) CIT v. Cochin Refineries Ltd. (1996) 220 ITR 398 at 407 (Ker); and It was contended that admittedly Section 45(1A) is applicable w.e.f.

1st April, 2000, and therefore, is inapplicable for the taxability of the receipt of the assessee from insurance company in the asst. yr.

1993-94. However, provisions of Section 43(6)(c), are attracted and that the AO having treated the entire amount as revenue receipt, had not considered the provisions of Section 43(6)(c). The CIT(A) having held that the receipt from insurance company was a capital receipt not liable to tax has failed to consider the provisions of Section 43(6)(c). The learned Departmental Representative contended that since a statutory provision was ignored and the issue relating to the taxability of the receipt from insurance company was the matter of dispute before the Tribunal, the learned JM was absolutely justified to consider the statutory provisions of the Act in regard to the facts on record.

12. The learned counsel for the assessee fairly conceded that the Tribunal has the power to consider any aspect of the taxability of an amount on the basis of existing facts on record notwithstanding the fact that such an aspect was not considered by the lower authorities.

The learned counsel, however, contended that though the applicability of Section 43(6)(c) as a matter of principle is not objected to, yet the facts and circumstances of this case shall have to be taken into account in determining as to the extent to which the written down value has got to be reduced. In this connection it was contended that Section 43(6)(c)(i)(B) provides for adjustment of the written down value on account of money received in respect of any asset-falling within that block, which is sold or discarded or demolished to destroyed during that previous year. It was further contended that the adjustment is permissible in respect of the assets totally destroyed and not in regard to the assets which are partially damaged. In regard to the meaning of the word "destroyed", the learned counsel placed reliance on the following decisions : (ii) CIT v. Engineering Works of India (P) Ltd. (1977) 108 ITR 11 (Cal); (iii) CIT v. Bengal Assam Steamship Co. Ltd. (1986) 161 ITR 576 (Cal); and The learned counsel further pointed out that the money payable is defined in Explanation to Section 41(4) to include any insurance, salvage or compensation moneys payable in respect of the assets. It was pointed out that the assessee had taken two insurance polices for Rs. 34,10,000 and Rs. 5,00,000. The claim was settled for total sum of Rs. 29,48,511 only (Rs. 25,76,278 + Rs. 3,72,233). Since the insurance company has not granted the entire claim made by the assessee, necessary exercise shall have to be taken to find out the nature of the claim accepted by the insurance company and the adjustment be made only in respect of the assets which had been destroyed and not in relation to the assets which are partially damaged.

13. The learned Departmental Representative invited my attention to the claim made by the assessee placed at pp. 43 to 45 of the paper book. It was pointed out that the assessee themselves have claimed 'total loss' of all the assets and as such the contention on behalf of the assessee for adjustment does not deserve consideration, 14. In this case, there is a particular situation in so far as the learned JM has dealt with a different aspect of the assessability of receipt from the insurance company which was not at all dealt with by the learned AM in the proposed order. The learned AM has taken the opportunity to differ with the view expressed by the learned JM by incorporating the doubt in the point of difference referred to the Third Member. In my view, this situation is avoidable. As per the settled conventions, when an order is proposed by one of the Members, the other member may accept the view as proposed and sign the proposed order. After the signature of the second member, the order becomes the order of the Tribunal. However, so long as the second Member does not sign the order, the proposed order by one of the Members remains a draft order. In the event of difference of opinion in regard to the proposed order, the dissenting Member should ordinarily bring to the notice of the author of the order his point of view by way of a note and if the author of the order ha omitted any aspect of the matter, also to draw his attention to that omission. That is how the author of the order shall have an opportunity to consider the views expressed by the dissenting member before a final view is formulated. The author of the order may accept the suggestion and, accordingly, redraft the order incorporating the suggestions given by the other Member. Consequently, unnecessary dissent would be avoided. However, after the receipt of the dissenting note from the other Member of the Bench, the author of the order may not change his opinion. So, however, he will get an opportunity to incorporate certain aspects of the issue which might have been left to be dealt with in the proposed order. In this case, if the aforementioned procedure had been followed, perhaps the learned AM could have got an opportunity to express his views with supporting reasons. However, it seems he did not get such an opportunity. Be that as it may, the learned AM has expressed his dissent by way of formulating the point of difference and, I, therefore, proceed to deal with the point of difference arising in this case in accordance with law.

15. The issue that assumes importance is as to whether the Tribunal has the power to deal with any aspect of the addition/disallowance which has neither been raised before the authorities nor dealt with by them.

In my considered view, there is a distinction between the dealing with the new source of income as against dealing with a different aspect of the addition/disallowance. In this connection, the decision of Calcutta High Court in the case of Steel Containers Ltd v. CIT (1978) 112 ITR 995 (Cal) is relevant. In this case their Lordships of the Calcutta High Court have held as under : "Though the powers of the Tribunal may be said to be limited to the subject-matter of the appeal before it, the Tribunal is competent to pass such orders on appeal "as it things fit". There is nothing in the Act which restricts the Tribunal to the determination of the questions raised before the Departmental authority. All questions, whether of law or of facts, which related to the assessment of the assessee might be raised before the Tribunal. If, for reasons recorded by the Departmental authority, in respect of a contention raised by the assessee, grant of relief to him on another ground is justified; the Tribunal would be under a duty to grant that relief.

Similarly, if the disallowance of certain expenditure to an assessee is warranted by certain provision of law. Tribunal is competent to deal with that question and decide the same in accordance with the law," In the case of CIT v. Mahalakshmi Textile Mills Ltd. (1967) 66 ITR 710 (SC), their lordships of the Supreme Court held that where the claim before the Tribunal was regarding the development rebate on account of installation of new machinery, the Tribunal had the power to grant relief on the ground of current repairs. The relevant portion of the decision is given hereunder: "(ii) that because the Tribunal rejected the assessee's claim for development rebate it was not bound to disallow the claim of the assessee for allowance of the amount spent, if it was a permissible allowance on another ground. Whether the allowance was admissible under one head or another of Sub-section (2) of Section 10, the subject-matter for the appeal remained the same, and the Tribunal having held that the expenditure incurred fell within the terms of Section 10(2)(v), though not under Section 10(2)(vib), it had jurisdiction to admit that expenditure as a permissible allowance in the computation of the taxable income of the assessee.

Under Section 33(4) the Tribunal is competent to pass such orders on appeal "as it thinks fit". There is nothing in the IT Act which restricts the Tribunal to the determination of questions raised before the Departmental authorities. All questions, whether of law or of facts, which relate to the assessment of the assessee may be raised before the Tribunal. If for reasons recorded by the Departmental authorities in respect of a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the Departmental authorities and the Tribunal, and indeed they would be under a duty, to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him." In the case of National Thermal Power Co. Ltd. (supra), the Hon'ble Supreme "The view that the Tribunal is confined only to issues arising out of the appeal before the CIT(A) takes too narrow a view of the powers of the Tribunal." 16. It may be pertinent to mention that in this case the issue before the AO was as to whether the amount of Rs. 29,48,511 received from the insurance company was assessable to tax under the IT Act, 1961. The AO considered the said receipt as revenue receipt. The AO had no occasion to consider the adjustment to be made under Section 43(6)(c) in the light of his finding that the entire amount was taxable as a revenue receipt. The CIT(A) disagreed with the AO. He, however, held that the receipt from the insurance company was a capital receipt but in the light of the decision of the Supreme Court in the case of Wania Silk Mills Ltd. (supra), the same was not liable to tax, It was the duty of the CIT(A) to consider all aspects relating to the taxability of the receipts from the insurance company. Their Lordships of the Supreme Court in the case of CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC) held that the first appellate authority has plenary powers in disposing of an appeal. The scope of his powers is conterminous with that of the ITO. He can do what the ITO can do and can also direct him to do what he has failed to do. This principle has been reiterated by the Hon'ble Supreme Court in the case of Jute Corporation of India Ltd. v. CIT and Anr. (1991) 187 ITR 688 (SC).

17. In the present case, the CIT(A) has failed to deal with the issue relating to taxability of the receipt in the light of provisions of Section 43(6)(c). The learned AM also did not consider the applicability of provisions of Section 43(6)(c). The learned JM has dealt with the issue and in my considered, view, he was justified in doing so. While dealing with Section 43(6)(c) with reference to the taxability of the receipt of insurance claim, the learned JM has dealt with another aspect of the same addition and has not dealt with any new source of income. Subject-matter of dispute in the Tribunal in this case is the treatment for the purpose of taxability of the receipt of Rs. 29,48,511 received from the insurance company. The said amount has been held to be not a revenue receipt. Its taxability as a capital asset has been dealt with by the CIT(A) for the first time. Both the Members have agreed with the CIT(A) that the capital receipt is not taxable in the light of the decision of the Supreme Court in the case of Vania Silk Mills Ltd. (supra). The duty of the Tribunal does not stop with giving an opinion in accord with the opinion of the first appellate authority or by the Revenue authorities or contrary to it, The Tribunal is duty bound to dispose of the matter in accordance with law. This principle may be explained with an example. The AO may treat an expenditure incurred by the assessee as expenditure not incurred for purposes of business. On appeal, the first appellate authority may disagree with the AO and hold that the expenditure has been incurred by the assessee for purposes of the business. Though the order of the AO may have to be reversed by the first appellate authority, yet the first appellate authority shall have to take into consideration the statutory limitation provided under Section 37(2A) for allowance of deduction on account of entertainment expenses notwithstanding the fact that the AO had not made any disallowance under Section 37(2A). Another situation may arise where the view expressed by the AO about the non-allowability of the expenditure of entertainment nature is confirmed by the CIT(A) on the ground that the expenditure is not incurred for purposes of business or that the expenditure is not supported by evidence. On appeal, the Tribunal may come to the conclusion that the expenditure incurred by the assessee on entertainment was for purposes of business.

At this stage, it would not only be right of the Tribunal but also its duty to consider the allowability of the claim in the light of the provisions of Section 37(2A). The assessee shall not object to the power of the Tribunal on the ground that the disallowance had not been made by the AO or by the CIT(A) under Section 37(2A). Subject-matter of the appeal in the Tribunal in this case would be the disallowance of entertainment expenses. Therefore, when the Tribunal deals with the issue, vis-a-vis Section 37(2A), it deals with different aspect of the same addition and does not travel beyond its jurisdiction.

18. Similarly, in the present case the learned JM has dealt with different aspect of the same addition in the light of the relevant provisions of the Act. The facts are on record. Law is unambiguous and, therefore, the action of the learned JM in dealing with the issue, vis-a-vis provisions of Section 43(6)(c) notwithstanding the fact that the addition was not made with reference to the said section either by the AO or by the CIT(A), in my view, is justified. I, therefore, do not agree with the doubts expressed by the AM in this regard. In this case it is not disputed that Section 43(6)(c) is attracted in regard to the receipt of the claim from the insurance company. Thus, when the learned JM expressed the view that the receipt is adjustable in the block of asset, he has not exceeded his jurisdiction in giving his opinion.

Therefore, I am of the view that the order of the learned JM in dealing with the issue under Section 43(6)(c) with reference to the receipt of the insurance claim is in order and does not suffer from any infirmity.

The learned counsel of the assessee has also conceded the said state of law.

19. The only question that remains to be considered is as to the extent of adjustment permissible under Section 43(6)(c). The learned JM has given a direction to the AO to adjust the amount of insurance claim received by the assessee in respect of the assets destroyed in fire.

The AO has also been directed to give an opportunity of being heard to the assessee. Whether the entire assets had been destroyed or not or whether the claim received by the assessee was in regard to the total destruction of the assets or partially damaged assets has not been gone into by the learned JM. However, since the learned JM has directed the AO to give an opportunity to the assessee before passing the order, no prejudice is caused to the assessee. The assessee shall have an opportunity before the AO to furnish any evidence in establishing that any part of the claim received from the insurance company was in respect of partial damaged assets. As per the claim of the assessee before the United India Insurance Co. Ltd. placed on record, it is observed that the assessee themselves have claimed that there was total destruction of the assets insured with the insurance company. I may hasten to add that this is, however, a mere claim. The claim is subject to settlement for the purpose of which a survey report is relevant. The final acceptance of the claim by insurance company is also relevant.

Therefore, the nature of the receipt vis-a-vis the total destruction or partial damage to the assets shall have to be determined with reference to the report of the surveyor and the final acceptance of the claim by the insurance authorities.

20. It may be pertinent to point out that the word "destroyed" has been interpreted by the Hon'ble Supreme Court in the case of Sirpur Paper Mills Ltd. (supra) with reference to provisions of Section 41(2). It has been held that Section 41(2) postulates for its applicability that the plant or machinery, whether in whole or in part, should be sold, discarded, damaged or destroyed and that it could have no application to a case where the plant or machinery is merely damaged and by repairing the damage, the plant and machinery is restored to working condition. Similar principle has been reiterated by their Lordships of the Calcutta High Court in the case of Kanoria Chemicals & Inds. Ltd. (supra). In view of the aforementioned enunciated law laid down by the Hon'ble Supreme Court, the exercise for determination of the actual amount adjustable under Section 43(6)(c) shall have to be gone into by the AO after giving an opportunity of being heard to the assessee.

Prima facie it appears that most of the assets have been destroyed. So however, the learned JM has left it open for the assessee to establish that part of the claim has been received in respect of the partially damaged assets. The AO shall have to do that exercise. I, therefore, agree with the learned JM that the claim received by the assessee has got to be adjusted under Section 43(6)(c) to the extent the same has been received in respect of the destroyed assets.

21. In final analysis, I agree with the reasoning as well as conclusion arrived at by the learned JM.22. Let the matter be placed before the regular Bench for announcing the majority view.

In view of the difference of opinion between the learned AM and the learned JM, the following points were referred to the Third Member: "1. Whether, in view of ground No. 2 taken in this appeal by the Revenue and in view of the fact that the issue of depreciation was not in dispute before this Tribunal, can this Tribunal consider the issue of determination of the written down value of assets suo moto keeping in mind the decision of the apex Court in the case of CIT v. Indira Balkrishna (1960) 39 ITR 546 (SC) 2. Whether, in view of the provisions of Section 43(6)(c) wherein the words used are "sold or discarded or demolished or destroyed" read with words employed in Section 45(1A) wherein the words used are "on account of damage to, or destruction of" can it be held that money received from the insurance company on account of damages of assets will go on to reduce the written down value of the assessee 3. Whether, on the facts and circumstances of the case, when it is not in dispute that Rs. 25,23,511 was received by the assessee on account of assets damaged in the asst. yr. 1992-93 and receipt was not on account of sale, discard, demolish or destruction of any asset during the previous year relevant to the assessment year under consideration, still can it be held that the amount of Rs. 25,23,511 received from the insurance company will go to reduce the written down value of the assets of the year under consideration in view of the provisions of Section 43(6)(c) of the IT Act ?" 3. As against the above points of disputes identified by the learned AM, the learned JM has identified the point of dispute as under: "Whether, on the facts and in the circumstances of the case, the money received from the insurance company on account of damages of assets i.e. factory building and plant and machinery which was added by the AO as business income under Section 28 can be considered in the light of the provisions, of Section 43(6)(c) r/w Expln. 4 in the same Chapter of the Act for arriving WDV of such assets which in this case is worked out to nil despite the fact that the amount received from the insurance company as reduced by the CIT(A) to Rs. 25,23,511 is a capital receipt not chargeable to tax ?" 4. Shri M.A. Bakshi, the Hon'ble Vice President (Kolkata) was nominated as the Third Member. In his order dated 23rd. July, 2003, the Third Member concurred with the view taken by the learned Judicial Member and held (Para 18) that: "..........I am of the view that the order of the learned judicial Member in dealing with the issue under Section 43(6)(c) with reference to the receipt of the insurance claim is in order and does not suffer from any infirmity. The learned counsel of the assessee has also conceded the said state of law." ".......the exercise for determination of the actual amount, adjustable under Section 43(6)(c) shall have to be done into by the AO after giving an opportunity of being heard to the assessee. Prima facie it appears that most of the assets have been destroyed. So, however, the learned JM has left it open for the assessee to establish that part of the claim has been received in respect of the partially damaged assets. The AO shall have to do that exercise. I, therefore, agree with the learned JM that the claim received by the assessee has got to be adjusted under Section 43(6)(c) to the extent the same has been received in respect of the destroyed assets." In accordance with the majority view, the issue stands decided in favour of the Revenue and against the assessee vide paragraphs 19 and 20 of the order of the Third Member. However, in view of the majority view, the order of the CIT(A) is set aside on this account and the matter is restored to the file of the AO who shall decide the same in accordance with the majority view as referred to hereinabove after providing a reasonable opportunity of being heard to the assessee and to this extent the ground No. 2 taken by the Revenue is partly allowed for statistical purpose.

5. On the remaining grounds Nos. 1 and 3 of appeal the issue is decided in favour of the assessee as mentioned in our order dt. 29th Nov., 2002.

6. In the result, the appeal filed by the Revenue is partly allowed for statistical purpose.