COMMISSIONER OF INCOME TAX versus KASTURI AND SONS LTD.

Citation: [1999] 1 S.C.R. 1207 · Decided: 17-03-1999 · Supreme Court of India · Bench: D.P. WADHWA · Disposal: Dismissed

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

.>-
COMMISSIONER OF INCOME TAX 
v. 
KASTURI AND SONS LTD. 
MARCH 17, 1999 
[D.P. WADHWA AND M. SRINIVASAN, JJ.) 
Income Tax Act 1961-Section 41(2}-Baluncing charge-Contract of 
insurance-Scop~Newspaper company buying an aircraft for quick delivery 
of newspaper--The aircraft insured for certain sum of mone7 The tem1s of 
insurance policy gave an option to the insurer to replace the aircraft or make-
up the loss or damage thereto-Aircraft destroyed in an accident-Insurer 
replaced the aircraft by purchasing a new one-Even though the cost incurred 
by the insurer in replacing the aircraft was much higher than the written down 
value of the insured aircraft-Held, the differential amount beyond .the scope 
of 'moneys payable'-Hence not assessable under Section 41(2). 
Words and phrases-Words 'money' and 'moneys payable'-Meaning 
of-In the context of Section 41(2) of the Income Tax Act, 1961. 
A 
B 
c 
D 
Insurance-Insurance contract-Option to replace reinstate the insured 
article-Exercise of-Effect-Held, ends the obligation to pay, money and E 
makes the contract into one of reinstating-Thus, on exercise of the option 
after the accident the contract of insurance became one for reinstatement right 
from the inception. 
Doctrines-Doctrines of relation back-Applicability of. 
Interpretation of Statutes-Taxing statutes-Liberal and strict constrnc-
tion-Applicability of. 
Respondent was carrying on the business of publishing newspaper. 
F 
It had purchased an aircraft for Rs. 3,31,455 and it was insured for a sum 
of Rs. 4,00,000 • The terms of the insurance policy enabled the insurer to G 
opt for replacement of the aircraft in the event of loss or damage in an 
accident. The aircraft got destroyed in an accident. The insurer exeri:ised 
its option in terms of the policy and purchased a similar aircraft for Rs. 
3,50,000 and after incurring an additional expenditure of Rs. 25,000 made 
it available to the respondent. The assessment of the respondent for the H 
1207 
1208' 
SUPREME COURT REPORTS 
[1999] 1 S.C.R. 
A year 1969-70 was reopened.by the Income Tax Officer under Section 147 (b) 
of the Income Tax Act. In the assessment proceedings, the ITO applied the 
provisions of Section 41 (2) of the Act and worked out the profits at the 
difference between the original cost and the written down value of Rs. 
1,58,122. 
B 
Respondent preferred an appeal before the Appellate Assistant 
Commissioner who took the view that Explanation to 41(2) read with 
Explanation to Section 32(1) of the Act made it clear that the Expression 
'money payable' used in the Section included any amount received from an 
insurance company in any form and hence dismissed the appeal. On 
C further appeal to the Tribunal, it was held that the subject matter of the 
contract remained one for payment of money which would attract the 
provision of Section 41(2) of the Act and upheld the appellate order passed 
by the Appellate Assistant Commissioner. The High Court, on reference 
at the instance of the respondent, held that the expression "money payable" 
D 
occurring fo Section 41(2) of the Act could not be made applicable and the 
exercise of the option by the insurer to give a new aircraft, the contract 
could not be considered to be one for payment of money. Hence this appeal 
by the Revenue. 
It was contended by the Revenue that a contract of insurance being 
E essentially a contract for money, the subsequent exercise of the option by 
the insurer to discharge his liability by payment in a different mode other 
than money would not alter the character of the contract and Section 
41 (2) would be attracted. 
Dismissing the appeal, this Court 
F 
HELD : 1.1. The legislature has deliberately used the word "moneys" 
in Section 41 (2) of the Income Tax Act. Wherever the legislature intended 
to refer to payment in kind other than cash or money, it has taken care to 
provide specifically therefor. For example in Section 41(1) of the Income 
Tax itself, the legislature has used the expression ''whether in cash or in 
G any other manner whatsoever". There are several sections in the· Act which 
refer to benefits other than cash though the value thereof can be ascer~ 
tained in terms of cash or benefits which are convertible in cash. Hence, 
the word "moneys" used in Section 41(2) of the Act has to be interpreted· 
only as actual money or cash and not as any other thing or benefit which 
H could be evaluated in terms of money. [1215-8-E] 
'' 
C.I.T. v. KASTURI

Excerpt shown. Read the full judgment & AI analysis in Lexace.