1980 PLP 168 (PTD)

10. We refer the following questions of law as directed by their Lord ships: (1) Whether, on tae facts and under the circumstances of the case, the petitioner firm was entitled to deduct from their taxable in come, the loss suffered by them due to their stock in‑trade and book debts amounting to Rs. 1,94,495 (rupees one lakh ninety‑four thousand for hundred and ninety‑five) being lost by the Japanese authorities in July one thousand nine hundred and forty‑one by way of trading loss or loss of revenue nature? (2)Whether the petitioner‑firm was entitled in law to claim the amount of the said loss suffered by them converted into Indian currency at the rate of exchange prevailing at the time of such loss."

11. The assessee wanted the Tribunal to reproduce paragraphs 2, 3 and 4 of the Appellate Assistant Commissioner's order in the statement of the case. As we have made a copy of the Appellate Assistant Commissioner's order a part of the case, we think it is not necessary to do so. At the special request of the assessee, the following three documents are made a part of the case: "(1) Joint affidavit of Kishinchand Lekhraj and Lokumal Sahijram dated‑February 11, 1953. (2) Affidavit of Hemandas Gulmal dated February 11, 1953. (3) Summary of the inventories filed before the British Consulate a1 Robe and Yokohama (without the details of individual items). They are Annexures `D', 'E' and `F' respectively. The assessee wanted that extract from an award given by Tricumdas Dwarkadas dated August 5, '1947, and the decree of the Court thereon be also made a part of the case. The departmental representative objects to the inclusion of these documents, as they were at no stage produced before the Income‑tax authorities or before the Tribunal. We think that it would not be right to include a document in the statement of the case which was not produced at the time of the hearing, In all other respects the statement of the case is accepted by both the parties." In this matter a supplementary statement of the case was submitted by ire Tribunal to the honourable High Court under section 66(4) on Novem ber 13, 1959. The honourable High Court, however, by its order dated April 19, 1960, was pleased to direct as under: " . . . The Court doth order that the said supplementary statement of case submitted by the said Tribunal herein dated the thirteenth day of November, one thousand nine hundred and fifty‑nine be and the same is hereby referred back to the said Income‑tax Appellate Tribunal, Bench `A', with the direction that the said Tribunal do resubmit the said supplementary statement of case after including therein the affidavit of the Income‑tax Officer affirmed on the first day of July, one thousand nine hundred and fifty‑nine, and the counter‑affidavit of Kishinchand Lekhraj affirmed on the twenty- eighth day of September, one thousand nine hundred and fifty‑nine, being Exhs. `H' and `I' respectively to the said supplementary statement of case and for making necessary changes in the said supplementary statement of case on the footing that the said two affidavits form part of the said supplementary statement of case."

2. The Members of the Tribunal who drafted the original supple mentary statement of the case are not here at present. We, therefore, submit to the honourable High Court the supplementary statement of the case which has been referred back to us after making the necessary changes therein as directed by the said order dated April 9, 1960.

3. As directed by their Lordships of the Bombay High Court by their order dated September 25, 1957, we hereby draw up a supplementary state ment of the case and refer it to the High Court of Judicature at Bombay under section 66(4) of the Income‑tax Act.

4. The direction given to the Tribunal is "to submit a supplementary statement of the case including therein the facts on which the Tribunal came to the conclusion that the loss occurred to the assessee as result of enemy action, and also the facts as a result of which the assessee claimed that the goods which were frozen were ultimately lost to them and the point of time at which the book debts and stock in trade were lost to the assessees."

5. As their Lordships had allowed the assessee to lead fresh evidence, the case was remanded to the Appellate Assistant Commissioner for .a report. A copy of the remand report along with its enclosures is Annexure "G" and forms part of the case.

6. The assessment year is 1942‑43, and the relevant accounting period is April 6, 1941, to March 26, 1942. The evidence on record, in our opinion, establishes beyond doubt that in July 1941, there was a freezing order made by the Japanese authorities. Under this order the stocks of various merchants were frozen and could not be sold by the merchants. The original order passed by the Japanese Government has not been produced. The fact, however, is not disputed. The goods which were frozen never came back to the assessee.

7. According to the departmental representative, these stocks were taken over by the Japanese authorities on the declaration of the war on December 8, 1941. The market value of the goods so taken over is said to have been credited to the assessee's account with the banks in Japan bet ween December 1941, and September 1945. On the facts produced be fore the Income‑tax authorities it has not established that market value of the goods was paid to the assessee. As a matter of fact, this is a new case made out by the departmental representative at the final day of the hearing. In the remand report the Appellate Assistant Commissioner says that the goods were lost between July 1941 and 1943. He, however, has admitted that the stocks which were frozen in July 1941, never came back to the assessee. Whether the assessee received any compensation from the autho rities in Japan or in India is a different matter altogether. The goods which were originally frozen, in our opinion, were lost to the assessee before the end of 1941 on the declaration of the war. These goods never came to be owned by the assessee thereafter. It is not, therefore, correct for the Appellate Assistant Commissioner to say that he was not sure as to the point of time when the goods were lost. These goods, in our opinion, were lost in the year of account.

8. The next question which arises is whether the assessee received any compensation in respect of these goods. So far the case has proceeded on the footing that the assessee received compensation in yens in respect of the loss of goods in 1945. The value of the yen at that time had considerably gone down. Measured in Indian money, it was only about Rs. 2,000 in 1945.

9. A few days before the remand report was to be finally considered by the Bench, the Department filed an affidavit of the Income‑tax Officer in which it is alleged that the assessee received about Rs. 3 lakhs as compensa tion from the Government of India and that this compensation includes the compensation for the loss of stock‑in‑trade in Japan. The relevant assess ment year is 194243. It is now 1959. It is surprising that the Department should not have known anything about the manner in which such matters were dealt with by the Government of India or the Custodian of Enemy Property. It would not be right for us to go into these facts and get the parties examined. We would only be allowing the Department to make out entirely a new case for itself at this late stage. As directed by the High Court by its order dated June 14, 1960, we have made the affidavit of the Income‑tax Officer and the counter‑affidavit made by the assessee; as Annexures "H" and "I" respectively and form part of the case.

10. The loss of stock‑in‑trade and the book debts which have accrued to the assessee did not accrue or arise in the ordinary course of the business carried on by the assessee. This loss took place as a result of Japan declar ing war, India being on the other side. The Department's stand that the loss did not take place in the year of account, as the assessee had a claim against the Japanese Government is, in our opinion, neither here nor there, What would have happened if we had lost the war? We cannot look at the picture as it emerged in 1945. We have to ascertain the position as it existed at the close of the year of account, i.e., March 26, 1942. We are surprised at the finding given by the Appellate Assistant Commissioner that it was not conclusively proved that the loss took place in the year of account. On the facts as brought out in the remand report, we think that such a finding is erroneous. The assessee did, suffer the loss in respect of stock and book debts in the year of account. This supplementary statement of the case is drawn up in pursuance of the orders of the Bombay High Court dated September 25, 1957, April 19, 1960 and 6th October 1962.

2. The applicant was at the relevant time a firm doing business in silk and having branches all over the world. The assessment year in question is 194243 and the corresponding previous year is the period from April 6, 1941, to March 26, 1942. The aspect of assessment which is relevant for the purpose of the supplementary statement relates to the claim of the assessee for deduction of loss on account of trading stocks and business debts in its branches at Yokohama and Kobe after the declaration of the war by Japan.

3. In the order of the High Court dated September 25, 1957, the direction given to the Tribunal was: "to submit a supplementary statement of the case indicating therein the facts on which the Tribunal came to the conclusion that the loss occurred to the assessee as a result of enemy action, and also the facts as a result of which the assessee claimed that the goods which were frozen were ultimately lost to them and the point of time at which the book debts and the stock‑in‑trade were lost to the assessees?" On receipt of this order the Tribunal remanded the case to the Appellate Assistant Commissioner for a report. A copy of this report is made Annexure G and forms part of the case. In the meantime Income-tax, Shri A. I. Shaikh filed an affidavit dated 1st July 1959, stating that the assessee had recovered sale proceeds of his stock‑in‑trade in Japan and also obtained full compensation from the Indian Government and he placed reliance on a letter he had received from the Custodian of Enemy Property dated 10th February 1959. On the other hand, Kishinchand Lekhraj a partner of Pohomal Bros., filed an affidavit stating that the compensation received by the assessee did not include the value of stocks. The Tribunal submitted a supplementary statement on November 13, 1959, but did not make these affidavits a part of the case.

4. The High Court by its order dated April 19, 1960, was pleased to direct as under " The Court doth order that the said supplementary statement of case submitted by the said Tribunal herein dated the thirteenth day of November, one thousand nine hundred and fifty‑nine be and ‑the same is hereby referred back to the said Income‑tax Appellate Tribunal, Bombay Bench "A", with a direction that the said Tribunal do resubmit the said supplementary statement of case after including therein the affidavit of the Income‑tax Officer affirmed on the first day of July, on thousand nine hundred and fifty‑nine and the counter‑affidavit of Kishinchand Lekhraj affirmed on the twenty‑eighth day of September, one thousand nine hundred and fifty‑nine, being Exhs. "H" and "I" respectively to the said supplementary statement of case and for making necessary changes in the said supplementary statement of case on the footing that the said two affidavits form part of the said supplementary The Tribunal thereafter submitted another supplementary statement of the case making the two affidavits a part of the case but without changing any other part of the original supplementary statement of the case. When the matter went up to the High Court, again the High Court by its order dated 6th October 1962, observed as under: "This Court had not only required the Tribunal to make the two affidavits part of the supplementary statement of case, but also to record its finding on the controversy raised by the parties by their respective affidavits. In short the controversy raised is, according to the departmental representative, the compensation amount paid by the Government of India to the assessee included the value of the stock-in‑trade of the assessee, frozen by the Japanese authorities, while, according to the assessee, the amount received by him did not include any value for the stock‑in‑trade lost by the assessee." It directed the Tribunal to give its finding on the following points: "(1) What amount was paid by the Government of India to the assessee as compensation? (2) Whether the amount, if any, received by the assessee from the Government of India, included therein any amount representing the price of the stock-in-trade of the assessee frozen in Japanese action; and (3) The quantum of loss, if any, suffered by the assessee by reason of the freezing of his stock-in-trade by the Japanese authorities, in the light of its finding on the aforesaid two issues.

5. The Tribunal remanded the case to the Appellate Assistant Commissioner with the direction that he should examine Shri Kishinchand with reference to his affidavit and also allow the Custodian of Enemy Property to be examined by the assessee-firm. The Appellate Assistant Commissioner submitted his remand report based on based on examination by the Income-tax Officer of Shri Kishinchand and examination by the Appellate Assistant Commissioner himself of the Deputy Custodian of Enemy Property. The affidavit made by the Incometax Officer is already made Annexure H including the letter of the Custodian of Enemy Property dated February 10, 1959, and forms part of the case. The affidavit of Shri Kishinchand is already made Annexure I and forms part of the case. The remand order of the Tribunal, the remand report of the Appellate Assistant Commissioner, the statement of Shri Kishinchand before the Incometax Officer and the statement of the Deputy Custodian of Enemy Property before the Appellate Assistant Commissioner are made Annexures J , K , L and M respectively, and form part of the case.

6. The facts which are not in dispute are as under: The assessee-firm had, at the time of declaration of war by Japan, balances with banks amounting to 3,01,301 Yen at Kobe and 3,870 Yens at Yokohama. It had in addition cash on hand or by way of advance against good amounting to 15,608 Yens at Kobe and 3,506 Yens at Yokohama. The stock‑in‑trade at Kobe, was valued at 93,878 Yens and at Yokohama at 1,23,183 Yens and the book debts amounted to 28,787 Yens in Kobe and Yokohama. In addition, there were immovable properties valued at 50,003 Yens at Yokohama and 25,1100 'Yens at Kobe, There were also sundry assets like furniture, cutlery, linen, etc. The total assets at "Yokohama were worth 2,78,493, Yens and at Kobe 5,56,705 Yens. There were liabilities amounting to 52,268 Yens at Yokohama. After the end of the war, on September 2, 1945, the balance to the credit of the assessee firm was 4,09,346 Yens. As a result of agreement between the Government of India and the Japanese Government, the assessee firth received an amount of Rs. 2,87,517 on or about 20th October, 1958, and the question is to deter mine whether any part of the amount received included compensation on account of loss of stocks.

7. The Income‑tax Officer, in his affidavit, had claimed on the strength of a letter received by him from the Custodian of Enemy Property that the assessee had a bank balance of 409,346 Yens at the end of the war and that the amount was made up of the assessee's bank balances at the break of the war as and increated by credit due to sale of the assessee's properties end as reduced by expenditure on account of taxes, staff, etc. According to him, goods of the assessee which were frozen in Japan were not totally lost to the assessee and the goods were old by or on its behalf, the proceeds stood credited to its account in Yens and it received adequate compensation for that balance. It was contended that the assessee's goods were never physically taken possession of by the Japanese Government, that the merchant were allowed to sell goods themselves or under orders of the Japanese Government and the sale proceeds were required to be deposited in the bank accounts which were under prohibitory orders. This claim of the income tax Officer was based on a letter he received from Custodian of Enemy Property dated 10th February 1959, which is already trade a part of Annexure "H". The Deputy Custodian of Enemy Property was examined by the Appellate Assistant Commissioner and it is clear from the examination that the information given by the Custodian was in general tetras, that he no copy of any orders of the Japanese Government, that he had no details of the composition of the bank balances of the assessee‑firm and he could not give details about the stocks of the Indian firm sold under orders of the Japanese Government, much less, what amount of stocks were sold by the assessee‑firm. All he could say was that the closing balances in the assessee's account in Japan could consist of bank balances at the time of the freezing order of the assets of foreigners in Japan in July‑August 1941, increased by interest during the period of war and realisations from the assets and reduced by the permitted expenditure.

8. Shri Kishinchand Lekhraj, on the other, hand, stated in his affidavit that apart from the trading stocks the firm had cash balances in Japan amounting to 324,345 Yens and also immovable and other properties in all valued at more than 7 lakhs Yens and he went on to state that the composition of 409,346 Yens did not include value of stocks. In his examination by the Income‑tax Officer, however, he conceded that the assessee's bank balances on September 2, 1945, did not include any compensation for loss of immovable properties in Japan. He had also to admit that he had no particulars to verify his presumption that the balance allowed to the assessee in 1945 included only old balances plus interest and no amount for the stocks left over in Japan.

9. The learned counsel for the assessee contended that the assessee firm had assets worth 7 lakhs Yens in Japan and that even excluding immovable properties worth 75,009 Yens, other assets were worth 6,75,000 Yens. In lieu of its assets the firm got only 409,346 Yens and it got this as compensation for cash and bank balances and other assets like furniture crockery, etc. He contended that there was no evidence to support the department's plea that any of the stocks of the assessee were sold, that any of the sale proceeds were credited to the bank account and in the absence of such evidence it would not be correct to treat any part of the compensation as being on account of stocks taken over and/or sold. He also pointed out that the assessee‑firm would have been entitled to interest exceeding Rs.36,000 on amounts outstanding in its account and that item would have also formed a part of the compensation received. The departmental representative, on the other hand, contended that the assessee was entitled to compensation only in respect of its bank balances which amounted‑to 305,231 Yens and that this balance had to be reduced on account of expenditure amounting to 25,000 Yens incurred for the firm during the years of war. Although, at one stage, the Department was willing to concede that there might have been some addition to the balance on account of book debts recovered in excess of liabilities, at the final hearing the departmental representative contended that no adjustment was necessary on account of book debts because it would be too much to presume that during the war any debtors could have paid any outstanding to the assessee firm. According to him, therefore, the assessee's balances would have been 280,231 Yens whereas it got 409,346 Yens and the excess of 129,115 Yens was received on account of loss of stocks and book debts. The learned counsel for the assessee in his reply contended that the assessee's balances other than bank balances could, not be ignored and at any rate they would not have been allowed to with draw the moneys from the bank balance without satisfying the authorities that they had no cash balance for defraying their expenditure.

10. While there is no direct evidence about the sale of stocks or credit ing of the sale proceeds to the bank account of the assessee‑firm, having regard to the general practice adopted by the Japanese Government as con firmed by the Custodian of Enemy Property, it seems to us that the closing bank balance which increased from 305,231 Yens to 409,346 Yens during the war years included some amounts on account of disposal of stocks. On the same basis the closing balance included some interest which accrued during the period of war on the balance which was lying to the credit at the out break of the war. We would estimate the interest so credited at 36,000 Yens as suggested by the learned counsel. With regard to the book debts and liabi lities, we do not accept the contention of the departmental representative that no adjustment must be made. After all, the assessee itself has claimed only 21,583 Yens as bad debts, so that the balance of the debts were good and must have gone to swell the bank balances. On the other hand, the liabilities of 52,268 Yens must have gone to reduce the bank balances. With regard to the balance other than bank balance also, we are unable to accept the contention of the departmental representative that they should be ignored. To the extent that the firm had cash balances it would have saved on expenditure and its withdrawals from the bank account would have been less and since such balances are less than expenditure which the Department itself has estimated at 25,000 Yens, we are of the view that the rash balances other than bank balance must be taken into account. The amount which can be attributed to the trading stocks out of the compensation received would, therefore, be worked out as under: Yens Yens Bank balance at the outbreak of the war 305,231 Add other cash balances at Yokohama & Kobe 19,144 Interest 36,000 Book debts recovered 88,519 448,864 Less : Withdrawals for expenditure 25,000 Liabilities 52,268 77,268 371,596 As against this the assessee received 409,346 Yens. The excess of 37,750 Yens can reasonably be attributed to the sale proceeds of stocks and to that extent the loss claimed by the assessee on account of stocks must be reduced.

11. With reference to the questions directed to be enquired into in the last paragraph of the High Court's order dated 6th October 1962, we find as under (1) The Government of India paid Rs. 2,87,517 as compensation to the assessee. (2) The amount received by the assessee from the Government of India included therein some amount representing the stock‑in‑trade of the assessee frozen as a result of the Japanese action. The amount is estimated at 37,750 Yens equivalent to Rs. 30,766. (3) The quantum of loss suffered by the assessee by reason of the freezing of its stock‑in‑trade by the Japanese authorities would be 179,311 Yens equivalent to Rs. 1,46,130.

12. Both the parties accept the statement. H. G. Advani with M. G. Mane and Dilip Dwarkadas for Appellant. G. N. Joshi with R J. Joshi for Respondent. TAMBE, J. ‑By an order under subsection (2) of section 66 of the Indian Income‑tax Act, 1922 (XI of 1922), this Court directed the Tribunal to refer to us the following two questions of law which arose cut of the order made in appeal by the Income‑tax Appellate Tribunal : "Whether, on the facts and under the circumstances of the case, the petitioner‑firm was entitled to deduct from their taxable income, the loss suffered by them due to their stock‑in‑trade and book debts amounting to Rs. 1,94,495 being lost by the action of Japanese authorities in July 1941, by way of trading loss or loss of revenue nature? (2) Whether the petitioner‑firm was entitled in law to claim the amount of the said loss suffered by them converted into Indian currency at the rate of exchange prevailing at the time of such loss?" The facts of this case in brief are that the assessee, a partnership firm, is doing business in silk in different parts of the world, its head office being at Bombay. In the year of assessment 1942‑43, the relevant previous year being one commencing on 6th of April 1941, and ending with 31st of March 1942, it had its branches at Yokohama and Kobe. In July 1941, the property of the assessee‑firm as well as the property of the other Indian nationals was frozen by the Japanese Government. The properties so frozen consisted of cash in the bank account of the assessee firm both at Yakohama and Kobe, cash in hand, amounts which were due to the assessee‑firm from the persons to whom the goods had been supplied, stock‑in‑trade at both the aforesaid branches, immovable properties, furniture and house hold articles. Japan declared war on the 8th of December 1941. In the assessment year 1942‑43, the assessee‑firm claimed that in the relevant previous year it suffered loss on account of the aforesaid action of the Japanese authorities‑loss both in respect of the book debts which were due to the assessee‑firm and the stock‑in‑trade. The total loss claimed amounted to 2,38,644 Yens which at the rate of the currency then prevailing in the assess ment year came to Rs. 1,94,

495. In the aforesaid amount the loss claimed by way of loss in stock‑in‑trade amounted to 2,97,061 Yens. In support of its claim, the assessee placed reliance on the inventory which is stated to have been submitted to the British Counsel showing the value of the property so lost to it on account of the enemy action. The Income‑tax Department on the other hand claimed that the Japanese Government had admitted the claim of the assessee as a result of which bonds to the value of 5,22,855 Yens were issued by the Japanese Government to the assessee. The position however was not accepted by the assessee. In the alternative, the assessee claimed loss on account of the depreciation in the value of Yen resulting from the change in the exchange rates from 1941 to 1945. The assessee's contentions were rejected. In the. appeal before the Income‑tax Appellate Tribunal, the Tribunal held that the case throughout had been that the loss to the assessee in respect of the stock‑in‑trade occurred in the previous year relevant to the assessment year 1942‑43 at the time the Japanese Government froze the properties of the assessee, including the stock‑in- trade, as an enemy property. On considering the evidence, it held that the loss accrued to the assessee as a result of the enemy action. But, accord ing to lie Tribunal, the loss was not a business loss but it was of a capital nature. On the satire line of reasoning the Tribunal took the view that Whatever compensation the assessee had received from the Japanese Government could cont be of a revenue nature. It appears that on this reasoning the Tribunal held that the loss resulting on account of the change in the exchange rates was not relevant. In this view of the matter, the Tribunal rejected the assessee's claim for deductions on the ground of loss in stock -in‑trade and book debts. The application made by the assessee under sub section (1) of section 66 of the Indian Income‑tax Act, 1922, was rejected by the Tribunal. On an application made by the assessee to this Court under subsection (2) of section 66 oh the Indian Income‑tax Act, this Court directed the Income‑tax Appellate 'Tribunal to refer to this Court the afore said two questions of law. The reference first came for hearing on the 25th of September 1957. On that day this Court remanded the case to the Tribunal giving the following directions to the Tribunal: "We, therefore, remand the matter back to the Tribunal to submit a supplementary statement of the case indicating therein the facts on which the tribunal came to the conclusion that the loss occurred to the assessees as a result of enemy action, and also the; facts as a result of which the assessees claimed that the goods which were frozen were ultimately lost to them and the point of tune at which the book debts and the stock-in-trade were lost to the assessees. In the supplementary statements submitted by the Tribunal on November 13, 1959, the Tribunal found as a fact that the goods which were originally frozen by July 1941, were, at the end of 1941, declared to be the enemy property and were lost to the assessee before the end of the year 1941 on declaration of war, These goods were therefore lost to the assessee in the year of account. The Tribunal further held that the assessee received some compensation in Yens in respect of loss of goods in the year 1945. The value of the Yen had at that time consiclemb13 gone down and the equivalent amount in Indian money would be only about Rs. 2,000 in 1945. It appears that before the Tribunal drew, up the supplementary statement of the case but after the report had been made by the Appellate Assistant Commissioner, the Department filed an affidavit of the Income‑tax Officer in which it was alleged that the assessee had received about Rs. 3 lakhs as compensation for loss of stock‑in‑trade in Japan. The Tribunal considered that it was surprising that the department did not bring this fact forward at an earlier stage and it therefore refused to go into the matter and rejected even to include the relevant affidavit and the document as parts of the statement of the case. Dealing with the department's contention that the loss did not occur in the year of account, the Tribunal held that the assessee did suffer the loss in respect of the stock‑in‑trade and book debts in year of account. Notice of motion was taken out by the Department for inclusion of the aforesaid affidavit and the relevant documents which went to show that the Government had paid compensation to the assessee to the tune of Rs. 3 lakhs which amount included the compensation for the loss of stock‑in‑trade also. On the said notice of motion, this Court, after hearing the parties at considerable length, made an order on April 19, 1960, directing the Tribunal to submit a further supplementary statement of case. The operative part of this order is in the following terms: "That the said Tribunal do re‑submit the said supplementary statement of case after including therein the affidavit of the Income‑tax Officer armed on the first day of July, one thousand nine hundred and fifty‑nine and the counter‑affidavit of Kishinchand Lekhraj affirmed on the twenty‑eighth day of September 1959, being Exhs. `H' and `I' respectively to the said supplementary statement of case and for making necessary changes in the said supplementary statement of case on the footing that the said two affidavits form part of the said supplementary statement of case." The Tribunal in re‑submitting the statement of case only included the aforesaid two Exhs. "H" and "I", in their statement of case, but did not record its findings on the rival contentions of the of the department and the assessee, the department claiming that Rs. 3 lakhs compensation paid by the Government of India to the assessee included compensation for loss stock‑in‑trade and the assessee contending that the compensation paid by the Government of India did not include any compensation for the loss of stock‑in‑trade. This Court wrote an elaborate order on 6th October 1962, and brought it to the notice of the Tribunal that in order to determine the questions before this Court, it was necessary to have the finding of Tribunal on the following three issues: "(1) What amount was paid by the Government of India to the assessee as compensation? (2) Whether the amount, if any, received by the assessee from the Government of India, included therein any amount representing the price of the stock‑in‑trade of the assessee frozen in Japanese action; and (3) The quantum of loss, if any, suffered by the assessee b~ reason o ‑the freezing of his stock‑in‑trade by the Japanese authorities, in the light of its finding on the aforesaid two issues." The Tribunal in its supplementary statement of case of date 5th Jul 1963, answered the aforesaid three issues in the following terms: "(1) The Government of India paid Rs. 2,87,517 as compensation to the assessee. (2) The amount received by the assessee from the Government of India included therein some amount representing the price of stock-in‑trade of the assessee frozen as a result of the Japanese action. The amount is estimated at 37,750 Yens equivalent to Rs. 30,766. (3) The quantum of loss suffered by the assessee by reason of the freeing of its stock‑in‑trade by the Japanese authorities would be 1,79,31 Yens equivalent to Rs. 1,46,130." The material findings thus which could' be gathered together from the original statement of case as well as the supplementary statement of case are that the quantum of loss suffered by the assessee by reason of the freezing` of the stock‑in‑trade by the Japanese authorities amounts to Rs. 1,46,130 and that loss occurred or accrued to the assessee in the assessment year 1942‑43, relevant previous year being one commencing from April 6, 1941,1 and ending with 26th of March 1942. These are the findings of facts and on these findings of facts and, in accordance with the ratio of the decision; of this Court in Pohoomal Bros. v. Commissioner of Income‑tax (1958) 34 I T R 64, it would' follow that the assessee‑firm is entitled to claim deduction by way of trading loss or loss of revenue nature. The first question therefore will have to be answered accordingly with the modification that the figure of Rs 1,46,130 be substituted in place of Rs. 1,94,495 as appearing in question No. 1 referred to us. Mr. Joshi, however, contends that in the year 1941 the goods were only frozen which meant that the assessee was not allowed to trade in those goods. The goods were not lost to the assessee. The Tribunal was therefor wrong in holding that loss in trade occurred or accrued to the assessee in the assessment year 1942‑

43. In our opinion, there is a difficulty in the way of Mr. Joshi, the learned counsel for the revenue. That difficulty, in our view, is that it is not open to the revenue to raise this contention before us. In the appropriate order the Tribunal recorded two findings, namely, (1) that there was a trading loss to the assessee by reason of the Japanese action; and (2) that not only that the goods were frozen but on the declaration of war at the end of 1941, the goods were declared as enemy property and permanently lost to the assessee. The Tribunal, however, took the view that the loss was of a capital nature and was not a trading loss of the revenue nature. The finding of the Tribunal that the loss occurred in the year of accounting was not challenged by the Department either by making an application under section 66(1) of the Act to the Tribunal or by making an application to Court under subsection (2) of section 66 of the Act in the event of rejection of its application by the Tribunal. The reference was sought only by the assessee and the finding of the Tribunal which was challenged was only as regards the nature of the loss. That being the position, in our opinion, the contention now raised by Mr. Josh is foreign to the question which we have to consider. It is next contended by Mr. Joshi that, on the facts found, the total amount of compensation which the assessee received from the Government of India is Rs. 2,87,

517. The said amount represented compensation paid to the assessee in respect of the amount which was in the assessee's account in the banks at Yokohama and Kobe, loss of cash in hand at those places, loss of stock‑in‑trade, loss of immovable property, furniture and household articles. In estimating the amount of compensation, which represented the price of the stock‑in‑trade, the Tribunal ought to have apportioned the said amount of Rs. 2,87,517 in proportion to the amounts claimed by the assessee on the aforesaid various claims mentioned by the‑assessee in respect of its claim of compensation. The argument advanced relates to a question of fact, namely, what amount out of the total amount of Rs. 2,87,517 represented compensation paid by the Government of India to the assessee for loss of goods. The department is our opinion, should have raised this contention which relates to a question of: fact before the Tribunal which was a Court of facts. Lastly, Mr. Joshi contends that on the facts found the loss of stock‑in -trade amounted to 1,79,311 Yens and the compensation was paid to him some time in the year 1945 according to exchange rate prevailing at the time, and the equivalent amount in the Indian currency would be very much less than Rs. 1,46,

130. It is indeed true that if the loss of .1,79,311 Yens suffered by the assessee is converted into Indian currency at the rate of exchange prevailing in 1945 the amount would be very much less than Rs. 1,46,

130. But then we fail to see how the rate of exchange in the year 1945 would be relevant for this purpose when the finding of the Tribunal clearly is that the loss occurred to the assessee in the accounting year relevant to the assessment, year 1942‑

43. In making an assessment, the Income‑tax authorities have to consider the position as it emerges at the end of the accounting year. It is not in dispute that equivalent in the Indian currency according to the rate of exchange prevailing in the accounting year of the loss of 1,79,311 Yens would be Rs. 1,46,

130. In our opinion, there is no error in the finding of the Tribunal on the aforesaid third issue also. In the result, our answer to the first issue is in the affirmative subject to the modification of the substitution of the figure of "Rs. 1,46,130" in place of the figure "1,94,495". Our answer to the second issue also is in the affirmative. The Department shall pay 3,Lith costs of this reference to the assessee. Reference answered accordingly.