Judgment G.S.Singhvi, J. 1. The Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short, "the Tribunal"), has referred the following question of law for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 1,42,000 received by the assessee from the Mercantile Bank is in the nature of casual receipt and not partaking of the nature of income liable to tax for the assessment year 1974-75 ?" 2. The assessee is a registered firm engaged in the business of manufacturing and sale of brass, zinc and copper sheets. In the course of the business, the assessee placed an order with M/s. Ore and Chemical Corporation, New York, through its agent at Bombay for the purchase of 90 metric tonnes of copper ingots valued at $103805.87. The assessee also opened a letter of credit with the Mercantile Bank Ltd., Chandni Chowk branch, Delhi. The supplier despatched the goods on August 11/12,1965, by the steamer (S. S. Express) and received the value thereof from the Mercantile Bank, through its agent in America, namely Chase Mahattan Bank, New York, against the delivery of documents of title to the goods along with the bill of exchange drawn upon the assessee and endorsed in favour of the bank in terms of the letter of credit. The bank presented the bill of exchange to the assessee on August 20, 1965. The bill was payable on or before October 29, 1965. In the meanwhile, hostilities broke out between India and Pakistan. In view of that development, the Government of Pakistan ordered that the cargo of the steamer which was on its way from New York to India, via Karachi, be discharged at Karachi and confiscated the same. After expiry of the due date for payment, the bank caused the presentation of the bill of exchange to the assessee through notary public. Thereupon, the assessee paid an amount of Rs. 30,000. The bank also filed a claim for payment of insurance money on account of loss of the cargo because the goods despatched by M/s. Ore and Chemicals Corporation, New York were covered by a policy of insurance issued by New York office of Eaglestar Insurance Company Ltd. for $114495. The insurance company accepted the banks claim and paid the amount specified in the policy. The insurance company accepted the banks claim and paid the amount specified in the policy. By that time, the Indian rupee had been devalued against the dollar. As a result of this, the bank received a sum of Rs. 8,60,217.88 as equivalent of $114495. When the assessee came to know that the bank had realised an amount Rs. 8,60,217.88 as against the amount of Rs. 4,99,063 paid by it to M/s. Ore and Chemicals Corporation, New York, towards the cost of goods, it demanded a sum of Rs. 3,54,808 from the latter. The bank did not comply with the demand of the assessee who then filed a suit in the Delhi High Court. The suit was finally compromised and the bank paid a sum of Rs. 1,42,000. 3. The Income-tax Officer, "D" Ward, Yamuna Nagar (for short, "the Assessing Officer"), while making the assessment for the assessment year 1974-75, held that the amount received by the assessee from the bank was a trading receipt and was liable to be treated as such under Section 41(1) of the Income-tax Act, 1961 (for short, "the Act"). Accordingly, he made an addition of Rs. 1,42,000. The Appellate Assistant Commissioner, Ambala, confirmed the addition made by the Assessing Officer and dismissed the appeal filed by the assessee. 4. The second appeal filed by the assessee was heard by a two-member Bench of the Tribunal. While the Accountant Member agreed with the Assessing Officer and the Appellate Assistant Commissioner, the Judicial Member held that the provisions of Sections 41 and 43A of the Act could not be applied to the case of the assessee and the addition made by the Assessing Officer was legally unsustainable. Thereupon, the case was assigned to the Vice-President of the Tribunal. He agreed with the Judicial Member and held that the amount received by the assessee from the bank as a result of the compromise cannot be treated as trading receipt and the same could not have been added to its income for the purpose of levy of tax. Paragraphs 17 and 19 of the order passed by the Vice-President reads as under : "17. In my view, the amount of Rs. 1,42,000 received by the assessee, could not be held to be a trading receipt. Paragraphs 17 and 19 of the order passed by the Vice-President reads as under : "17. In my view, the amount of Rs. 1,42,000 received by the assessee, could not be held to be a trading receipt. The assessees obligation, in respect of the purchase of stock-in-trade was to pay the rupee equivalent of the amount $103,805.87 on the bill of exchange being presented. The assessee failed to discharge this obligation on the bill being presented and paid only an amount of Rs. 30,000 by way of deposit. That obligation was discharged by the bank on account of the letter of credit opened by the assessee and it only got itself reimbursed for the liability incurred by it, by getting the insurance claim settled. As far as the bank is concerned, the payment to the American company for the price of the goods as well as the reimbursement received by it from the insurance company were in dollars. The rupee equivalent of the dollar payment made by the bank was Rs. 4,99,063 whereas the rupee equivalent of the dollar received from the insurance company was Rs. 9,60,217.88. In this sense the bank did receive, in terms of rupees, considerably more than what it had paid to the American company. The question that arises is whether this was received by the bank on its own account or on the assessees account. If it was received on the assessees account, it would stand to reason that the entire difference of Rs. 3,34,808, after due adjustments, as set out at page 14 of the order of the learned Judicial Member, would have been payable to the assessee, by the bank. In fact, that was the amount for which the assessee also filed a suit. However, the fact remains that the suit was compromised for an amount of Rs. 1,42,000. 19. There is however, another aspect to be considered, namely, whether the provisions of Section 41(1) apply to the receipt. As pointed out by learned counsel for the assessee, no allowance either to the extent of Rs. 1,42,000 or more was made by the Income-tax Officer in the assessment of the assessee for any earlier year on account of loss or expenditure relating to the business so that the receipt of Rs. 1,42,000 as such, would now be liable to be taxed under the provisions of Section 41(1). 1,42,000 or more was made by the Income-tax Officer in the assessment of the assessee for any earlier year on account of loss or expenditure relating to the business so that the receipt of Rs. 1,42,000 as such, would now be liable to be taxed under the provisions of Section 41(1). However, the Income-tax Officer had allowed a loss of Rs. 16,383 claimed by the assessee for the assessment year 1967-68. This amount which has been allowed by the Income-tax Officer is also a component of the assessees claim of Rs. 3,54,808 made against the bank. Thus, when the assessee received an amount of Rs. 1,42,000 from the bank, the allowance to the extent of Rs. 16,383 by way of loss for the assessment year 1967-68 has to be withdrawn under Section 41(1). Accordingly, I consider that out of the receipt of Rs. 1,42,000 an amount of Rs. 16,383 is liable to be included in the total income of the assessee under Section 41(1). The balance of Rs. 1,25,617 will be deleted. The assessee is entitled to the consequential relief." 5. We have heard Shri Rajesh Bindal, learned counsel for the Revenue, and Shri Akshya Bhan, learned counsel for the assessee. Section 41(1), as it stood in the year 1974, reads as under : "41.(1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not." 6. A reading of the above reproduced provision shows that the same is applicable to a case in which allowance or deduction has been made in the assessment and subsequently the assessee has obtained, whether in cash or in any other manner, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof. In that event, the amount has to be treated as profits and gains of business/profession and is chargeable to tax. 7. In the present case, the assessee had not claimed the value of the goods lost in any assessment year and no allowance had been made by the Assessing Officer on that account in any of the assessment years. The amount representing the cost of the goods was paid by the bank and the insurance company had reimbursed the bank. The bank got itself reimbursed to the extent of $ 114495 because it had made payment to the American company in dollars. Due to devaluation of the rupee, the bank received an amount of Rs. 8,60,217.88 as against the payment of Rs. 4,99,063 made to the supplier of the goods. It is, thus, clear that the benefit on devaluation of the rupee belonged to the bank and not to the assessee whose relation with the bank was merely that of a debtor and creditor. The amount received by the assessee as a result of settlement arrived at between the parties was nothing more than a casual receipt and not a trading receipt. Therefore, the same was not liable to tax and, in our considered view, the majority of the Tribunal did not commit any error in setting aside the orders passed by the Assessing Officer and the Appellate Assistant Commissioner. 8. In Universal Radiators v. CIT [1993] 201 ITR 800, the Supreme Court considered a question some what similar to the one raised in this case and answered the same in favour of the assessee. The facts of that case show that the appellant, a manufacturer of radiators for automobiles, booked copper ingots from a corporation in the USA for being brought to Bombay where they were to be rolled into strips and sheets and then despatched to the appellant for being used for manufacture. The facts of that case show that the appellant, a manufacturer of radiators for automobiles, booked copper ingots from a corporation in the USA for being brought to Bombay where they were to be rolled into strips and sheets and then despatched to the appellant for being used for manufacture. While the ingots were at sea, hostilities broke out between India and Pakistan, and the vessel carrying the goods was seized by the authorities in Pakistan. The appellants claim for the price of the goods was ultimately settled in its favour by the insurer in the USA. The Indian rupee was devalued and, therefore, in terms of rupees, the appellant got Rs. 3,43,556 as against its payment of Rs. 2,00,164 at the pre-devaluation rate. The appellant claimed that the difference was not taxable. The Income-tax Officer and the Appellate Assistant Commissioner rejected the claim but the Appellate Tribunal held that, when the goods were seized by the Pakistan authorities, they became sterilized and ceased to be the stock-in-trade of the appellant and the surplus was in the nature of a capital receipt and not a profit made by the appellant in the course of business : and that the money which came to the appellant was as a result of the settlement of the insurance claim and, therefore, the profits that resulted from it could not be considered to have arisen in the normal course of business. On a reference, the High Court reversed the decision of the Tribunal and held that the difference was taxable, on the reasoning that, if the appellant had got the goods imported into India and sold them, at a higher rate, as a result of devaluation, then the appellant would have been liable to tax on the difference between the sale price and the cost. On appeal, the Supreme Court reversed the order of the High Court and held that the amount received by the assessee was in the nature of a casual receipt and not a trading receipt. On appeal, the Supreme Court reversed the order of the High Court and held that the amount received by the assessee was in the nature of a casual receipt and not a trading receipt. Their Lordships of the Supreme Court noted that the appellant was engaged in the business of manufacturing the radiators and not ingots ; the ingots were imported to be converted into strips and sheets at Bombay; the link which could create direct relationship between the finished goods and the ingots was snapped even before the ingots reached Bombay; the payment for loss of the ingots did not bear any nexus with the appellants business and held that so long as the ingots did not reach Bombay and were converted into strips and sheets, the connection with the appellants business was remote and any payment made in respect of the loss of the ingots could not be said to accrue from business. Thus, any devaluation surplus was a casual and nonrecurring receipt and could not be treated as income from business of the assessee. 9. As a result of the above discussiop, the question referred by the Tribunal is answered in favour of the assessee and against the Revenue. 10. The reference is disposed of in the manner indicated above.