LexRAGHUVANSHI MILLS LTD. versus COMMISSIONER OF INCOME-TAX, BOMBAY CITY
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.. .. . ' • S.C.R. SUPREME COURT REPORTS 177 RAGHUVANSHI MILLS LTD. 'V· COMMISSIONER OF INCOME-TAX, BOMBAY CITY. • [MEHR CHAND MAHAJAN, DAs, VIVIAN BosE and GHULAM HASAN JJ.] Incmne-tax-Moneys received under "consequential loss policies" -Whether incmne-Assessability-Dejinition of "incmne"-Exemp- tion of receipt not arising out of business-Indian Income-tax Act, (XI of 1922), ss. 2 (6C), 4 (3) (vii). The appellant mills had insured its building, plant and machinery with various insurance companies against fire and had aiso taken out some policies of the type known as "consequenffial loss policies" which insured against loss of profits, standing charges, and agency commission. The mills were completely destroyed by fire and the appellant received certain sums of money under the consequential loss policies. Held, that sums of money received under these policies were "income" within the meaning of s. 2 (60) of the Indian Income-tax Act, and as they were inseparably connected with the ownership and conduct of the business of the company and arose from it, they were not exempt under s. 4 (3) (vii), and were therefore assessable to income-tax under the Indian Income-tax Act. [Their Lord- ships made it clear that they proceeded orr the assumption that the whole sum was assignable to loss of profits and that they decided nothing about other moneys which may be distributable amongst other heads, e.g., standing charges or agency commission.] The definition of "income" in Shaw Wallace rt Co.'s case [(1932) 59 I.A. 206] as a "periodical monetary return 'coming in' with some sort of regularity, or expected regularity, from definite sources" must be read with reference to the particular facts of that case and is not applicable to receipts of this nature. The Kin(], v. B. C. Fir and Cedar Lumber Co. (1932] A.O. 441 and Cmnmissioners of Inland Revenue v. Williams's Executors (1944) 26 Tax Oas. 23 applied. Cmnmissioner of Incmne-tax, Bengal v. Shaw Wallace rt Co. (1932) 59 I.A. 206, commented upon. Judgment of the Bombay High Court affirmed, CIVIL APPELLATE JURISDICTION: Civil Appeal No. 55 of 1950. Appeal by special leave from the Judgment and Order elated March 18, 1949, of the High Court of Judicature at Bombay (Chagla C. J. 1952 Nov.$. 1982 Raghuvanshi Mills.Ltd. v. Commissioner of Income~tax, Bombay City. Bote J, 178 SUPREME COURT REPORTS (19.53] and Tendolkar J.) in Income-tax Reference No. 5 of 1948, arising out of Order dated September 27, 1947, of the Income-tax Appellate Tribunal, Bombay Bench 'A', in LT.A. No. 2205 of 1946-47. C. K. Daphtary, Solicitor-General for India, (K. T. Desai and A.M. Mehta, with him) for the appellant. M. C. Setalvad, Attorney-General for India, (G. N. Joshi, with him) for the respondent. 1952. November 3. 'l'he Judgment of the Court was delivered by BosE J.~This is an appeal from the High Court at Bombay in an Income-tax Reference under sec- tion 66 (1) of the Indian Income-tax Act of 1922. 'l'he reference was made to the Bombay High Court by the Bombay Bench of the Income-tax Appellate Tribunal in the following circumstances. The appellant-assessee is a company kuown as the Raghuvanshi Mills T"td., of Bombay. Tbe assessment year with which we are concerned is 1945-46. Tbe assessee had insured its buildings, plant and machi- nery with various insurance companies and also took out, besides those policies, four policies of a type knowt~ as a "Consequential I"oss Policy."' This kind of policy insures against loss of profit, standing charges and agency commission. 'l'he total insured against under the latter beads was Rs. 37, 75,000 on account of. loss of profits and standing charges, and Rs. 2,25,000 on account of agency commission, mak- ing a total of Rs. 40,00,000. On the 18tb of January, 1944, a fire broke out and the mills were completely destroyed. 'l'he various insurance companies therefore pa\d the assessee com- pany an aggregate of Rs, 14,00,000 on account-in the year with which we are concerned under tbese poli- cies. This was paid in two sums· as follows:- Rs. 8,25,000 on 8th September, 1944, and Rs. 5,75,000 on 22nd December, 1944. These payments bave been treated as part of tbe assessee's income and the .. . ' ;t-- - . S.C.R. SUPREME COURT REPORTS 179 com"pany has been taxed accordingly. The question 195'13 is whether these sums are or are not liable to tax. Raghuvrmshi Befo
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