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 d

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