COMMISSIONER OF INCOME TAX vs. CAMA MOTORS PVT LTD

ITR/297/1987HC GujaratGJHC24012027198709 August 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA4 pages
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What were the facts?

The assessee, Cama Motors Pvt Ltd, a company dealing in vehicles, claimed a loss of Rs. 2,87,516/- for the assessment year 1982-83 due to four jeeps being stolen on May 1, 1981. The Assessing Officer disallowed this claim, believing there was a reasonable chance of recovery. The CIT(Appeals) upheld this decision. The assessee appealed to the Income Tax Appellate Tribunal, which allowed the appeal, permitting the claim for loss. The revenue filed a reference application to the High Court of Gujarat at Ahmedabad, challenging the Tribunal's order.

What did the High Court hold?

The High Court held that the assessee was entitled to the claim of Rs. 2,87,516/-. It was not disputed that the vehicles were stolen on May 1, 1981, and the assessment year in question was 1982-83. Crucially, the possession of the vehicles given to the assessee was only as a trustee to prevent deterioration while in police custody, not as an owner. The assessee was not permitted to deal with or use the vehicles. Therefore, the loss had occurred on the date of the theft. The assessee had rightly made a provision for this loss. The court noted that if the vehicles were recovered or compensation received in a subsequent year, Section 41(1) of the Act would apply. The revenue's argument that chances of recovery negated the loss claim was rejected, as possession as owner had not been restored even by the date of the Tribunal's order. The Tribunal's decision allowing the loss was justified. The question was answered in the affirmative, in favour of the assessee.

What were the issues?

1. Whether, in law and on facts, the assessee was entitled to a claim of Rs. 2,87,516/- being the provision on account of the value of stolen jeeps (question of law and fact, concerning the allowability of a loss claim). Assessee's contentions: The vehicles were stolen on May 1, 1981. Even as of September 26, 1986, when the Tribunal passed its order, possession of the vehicles had not been returned to the assessee in its capacity as owner. The loss had occurred, and the claim was justified. Any subsequent recovery or compensation would be taxable under Section 41(1) of the Act. Revenue's contentions: The vehicles were stolen on May 1, 1981, but due to an interim High Court order, possession was given to the assessee. There were chances of recovery, and thus the loss claim was not justified. The vehicles had been traced, and there was a likelihood of their return to the assessee.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 41(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 297 of 1987

For Approval and Signature:

Hon'ble MR.JUSTICE A.R.DAVE and Hon'ble MR.JUSTICE D.A.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO -------------------

The order continues below.

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