SANKAR PRASAD MITRA, C. J.

( 1 ) THIS is a reference under Section 256 (1) of the I. T. Act, 1961. The assessment year is 1967-68. The relevant previous year ended on December 31, 1966. The assessee's business is manufacture and production of tea. In 1964, a fire broke out in the assessee's factory resulting in, according to the statement of the case, "the damage and/or destruction of some assets". These assets were covered by fire insurance policies. The assessee received under the policies a total sum of Rs. 6,15,507.

( 2 ) THE original cost of the assets "destroyed by fire " was Rs. 1,20,463. The written down value was Rs. 23,821.

( 3 ) THE ITO treated Rs. 96,642 (Rs. 1,20,463--Rs. 23,821) as profit under Section 41 (2) of the I. T. Act, 1961. This sub-section of Section 41, inter alia, provides that where any building, machinery, plant or furniture which is owned by the assessee and which was or has been used for the purposes of business is destroyed and the moneys payable in respect of such building machinery, plant or furniture, as the case may be, together with the amount of scrap value, if any, exceed the written down value, so much of the excess as does not exceed the difference between the actual cost and the written down value shall be chargeable to income-tax as income of the business or profession of the previous year in which the monies payable for the building, machinery, plant or furniture became due.

( 4 ) THE balance of the amount, namely, Rs. 4,95,044, which the assessee received from the insurance company, was assessed by the ITO as capital gains. To appreciate the points of law that arise in this reference it is necessary to set out at this stage some of the provisions of the Act.

( 5 ) SECTION 2 (14) of the Act defines " capital asset". It says" 'capital asset' means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include- -. . . . ,. "

( 6 ) THE significance of this definition in the context of the present reference is that excepting certain assets specified in Section 2 (14) of the Act, property of any kind held by the assessee whether or not connected with his business or profession is a capital asset.

( 7 ) SECTION 2 (47) of the Act defines " transfer " in relation to a capital asset. It is in these words :" ' Transfer, in relation to a capital asset, includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law. "

( 8 ) THE dictionary meaning of the word " transfer " requires our attention. " Transfer " is derived out of the Latin word " transferee ". The French equivalent is " transferer ". The Latin word " transferee " consists of two words--" trans " and " feree ". " Trans " means " to convey or to take from one place, person to another; to transmit, transport; to give or hand over from one to another ". "feree" means "to bear, to carry ". When title, right or property is conveyed or made over by one person to another, a transfer takes place. (Vide Shorter Oxford English Dictionary ", 3rd Edn. , p. 2230 ).

( 9 ) SECTION 2 (47) gives a very wide definition of the word " transfer " in relation to a capital asset and from the language used, it appears that in relation to a capital asset a " transfer " may take place either by volition of the parties or by operation of law.

( 10 ) WE now come to Section 45 and 48 of the Act. These are as follows :" 45. Capital gains.-- (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 53, 54, 54b, 54d and 54e be chargeable to income-tax under the head ' Capital gains ', and shall be deemed to be the income of the previous year in which the transfer took place. ""48. Mode of computation and deductions.--The income chargeable under the head 'capital gains' shall be computed by deducting from the full value of the

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