JUDGMENT

SAWANT, J.:—The appellant-Company, hereinafter referred to as the assessee, carries on the business of manufacture and sale of art-silk cloth. In the year 1957, it purchased machinery worth Rs. 2,81,741 and gave it on hire to M/s. Jasmine Mills Pvt. Ltd., Bombay at an annual rent of Rs. 33,900/ -. On August 11, 1966, a fire broke out in the premises of M/s. Jasmine Mills causing extensive damage to the machinery installed in their premises including the machinery hired by them from the assessee. The machinery belonging to the assessee became useless for any further use on account of the damage. M/ s. Jasmine Mills had insured along with its own machinery, the assessees machinery as well, and on a settlement of the insurance claim, M/ s. Jasmine Mills received a certain amount out of which it paid a sum of Rs. 6,32,533/- to the assessee on accountof the destruction of its machinery. The difference between the actual cost of the machinery and its written-down value worked out to Rs. 2,62,781/-. The assessee in its income-tax return for the assessment- year 1967-68 (relevant accounting year being the year ending on 31st August, 1966). showed the said amount as profit chargeab