Law: Income Tax Act, 1961

Section: 41

(a) Income-tax--- ----Business---Business income---Balancing charge---Scope of S.41(2)--­Meaning of "moneys payable" in S.41(2)---Money refers only to cash and not money's worth---Indian Income Tax Act, 1961, S.41(2). (b) Income-tax----Business---Business income---Balancing charge---Insurance---Option in contract of insurance for reinstatement---Effect of exercise of option--­Doctrine-of relating back applies and contract becomes one for reinstatement, right from its inception---Benefit derived from reinstatement is not covered by S.41(2)--Indian Income Tax Act, 1961, S.41(2). (c) Interpretation of taxing statutes--- ----Strict interpretation. The principle that a taxing statute should be strictly construed is well-settled. In section 41(2) of the Income Tax Act, 1961, the Legislature has deliberately used the word "moneys": Wherever the Legislature intended to refer to payment in kind other than cash or money, it has taken care to provide specifically therefor. For example in section 41(1) itself, the Legislature has used the expression "whether in cash or in any other manner whatsoever". There are several sections in the Act, which refer to benefits other than cash, though the value thereof can be ascertained in terms of cash or benefits which are convertible in cash. When the Legislature has instead of using any word such as "benefit" used only the term "money", it can refer only to money as understood in the ordinary common parlance. Hence, the word "money" used in section 41(2) of the Act has to be interpreted only as actual money or cash and not as any other thing or benefit which could be evaluated in terms of money. Where a policy of insurance gives the insurer an option to replace or make good accidental loss, the effect of exercise of such option has been recognised to bring an end to the obligation to pay money and make the contract one to reinstate the subject-matter of insurance. It has been held that such a conversion relates back to the inception of the contract. The proposition was first laid down by Lord Campbell, C. J. in Brown v. Royal Insurance Co. (1859) 1 E & E 853. Till this date, the proposition remains undisturbed and it has been…

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