Judgment Case ID: 6791

Judgment:
vil Appeal No. 1106 (NT) of 1976. From the Judgment and Order dated 22nd/23rd January 1976 of the Gujarat High Court in Income Tax Ref. No. 122 of 1974. Joseph Vellappilly	 K.J. John and Ms. Deepa Dikshit for the Appellant. S.C. Manchanda	 Ranvir Chandra and Ms. A. Subhashini for the Respondent. J. The appellant/Company	 hereinafter referred to as the assessee	 carries on. the business of manufacture and sale of art silk cloth. In the year 1957	 it purchased machinery worth Rs.2	81	741 and gave it on hire to M/s. Jasmine Mills Pvt. Ltd.	 Bombay at an annual rent of Rs.33	900. On August 11	 1966	 a fire broke out in the premises of M/s. Jasmine Mills causing extensive damage tO the machinery installed in their premises including the machinery hired by them from the assessee. The machinery belonging to the assessee became useless for any	 further use on account of the damage. M/s. Jasmine Mills had insured along with its own machinery	 the assessee 's machinery as well	 and on a settlement of the insurance claim	 M/s. Jasmine Mills received a certain amount out of which it paid a sum of Rs.6	32	533 to the assessee on account of the destruction of its machinery. The difference between the actual cost of the machinery and its written down value worked out to Rs.2	62	781. The assessee in its income tax return for the assessment year 1967 68 (relevant accounting year being 'the year ending on 31st August	 1966) showed the said amount as profit chargeable to tax under Section 41(2) of the Income Tax Act (hereinafter referred to as the "Act") The IncomeTax Officer	 however	 subjected to tax also the additional amount of Rs.3	50	792 being the difference be tween the amount of Rs.6	32	533 received on account of the insurance claim and the original 'cost of the machinery	 i.e.	 Rs.2	81	741	 treating the same as capital gains chargeable under Section 45 of the Act. The contention ad vanced by the assessee that the capital gains tax was not attracted to the amount received on account of the insurance claim since there was no transfer. 582 of capital asset as was contemplated by Section 45 read with Section 2(47) of the Act	 was negatived by the Income Tax Officer. The assessee appealed against the order to the Appellate Assistant Commissioner who also negatived the said conten tion of the appellant and" dismissed the appeal. The asses see 's contention was	 however; upheld in the appeal before the Income Tax Appellate Tribunal	 the Tribunal holding that: the amount was not received on account of a transfer of the capital asset but on account of the damage to it and that. Section 45 was attracted only when there was a trans fer of the capital asset. Being aggrieved	 the Revenue applied for reference of the case to the High Court on the	following two questions: (i) whether on the facts and in the circum stances of the case the transfer was justified in law in holding that there Was no transfer of capital asset by the assessee within the meaning Of Section 2(47) of the Act? (ii) whether on the facts and in the circum stances of the case the sum of Rs.3	50	792 being the excess of the cost of the machinery received from M/s. Jasmine Mills Pvt. Ltd. was chargeable to tax as Capital gains under Section 45 of the Act? The High Court answered the first question in the negative	 and consequently the second question in the affirmative. i.e.	 both questions in favour of the Revenue and against the assessee. This appeal has been filed by the assessee on a certifi cate granted by the. High Court. The short question that falls for our 'consideration is whether the money received towards the insurance claim on account of the damage to or destruction of the capital asset is so received on account of the transfer of the asset within the meaning of Section 45 of the Act and is. 	 there fore	 chargeable to the capital gains tax under the 'said section. It would be convenient to reproduce here the provisions of Section 45 of the Act as they stood at the relevant time: "45. Capital gains 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 and 54	 be chargeable to income tax under the head 'capital gains '	 and shall 583 be deemed to be the income of the previous year in which the transfer took place". Emphasis supplied	 Section 2(47) of the Act which defined transfer at the relevant time read ' as fol lows: "2. Definitions In this Act	 unless the context otherwise requires	. . . . . (47) 'transfer '	 in relation to a capital asset	 includes the	 sale	 exchange or relin quishment of the asset or the extinguishment of any rights therein or the compulsory acqui sition thereof under any law. " A reading of the two sections makes it abundantly clear that the profits or gains which are amenable to Section 45 must arise from the transfer of the capital asset which is effected in the previous year. The transfer may be brought about by any of the modes of transfer which include 	sale	 exchange	 relinquishment of the asset or the extinguishment of 'the rights therein	 or the compulsory acquisition of the asset under any law. It may be 'of the asset itself or of any rights in it. It may further be the result of a volun tary act or a compulsory operation. Whatever the mode by which it is brought about	 the existence of the asset during the process of transfer is a pre condition. Unless the asset exists in fact	 there cannot be a transfer of it. When an asset is destroyed there is no question of transferring it to others The destruction or loss of the asset	 no doubt	 brings about the destruction of the right of the owner or possessor of the asset	 in it. But it is nOt On account of transfer. It is on account of the disappear ance of the asset. The extinguishment of right in the asset on account of extinguishment of the asset. itself is not a transfer of the right but its destruction. By no stretch of imagination	 the destruction of the right on account of the destruction of the asset can be equated with ' the extin guishment of right on account of its transfer. Section 45 speaks about capital	 gains arising out of "transfer" of asset and not on account of "extinguishment of right". by itself. The capital gains is attracted by transfer and not merely by extinguishment of right howsoever brought about. The transfer may be effected by various modes and one of the modes is the extinguishment of right on transfer of the asset itself for on account of the transfer of the right or rights in 584 The extinguishment of right or rights must in any case be on account of its or their transfer in order to attract the provisions of Section 45. If is not	 and is on ' account of the destruction or loss of the asset	 as in the present case	 it is not a transfer and does not attract the provi sions of Section 45 which relate to. transfer and not1 to mere extinguishment of right but to one by transfer. Hence an extinguishment of right not brought about by transfer is outside the purview of Section 45. The High Court erred in ignoring the basic postulate that Section 45 does not relate to extinguishment of right but to transfer. Having concentrated its attention on the words "extinguishment of right" rather than on "transfer"	 the High Court	 with respect	 misdirected itself and proceeded on the basis that every extinguishment of right whether by way of transfer or not	 is attracted by Section 45. 5. Transfer presumes both the existence of the asset and of the transferee to whom it is transferred. In the case of the damage	 partial or complete	 or destruction or loss of the property	 there is no transfer of it in favour of a third party. The money received under the insurance policy in such cases is by way of indemnity or compensation for the damage	 loss or destruction of the property. It is not in consideration of the transfer of the property or the trans fer of any right in it in favour of the insurance company. It is by virtue of the contract of insurance or of indemni ty	 and in terms of the conditions of the contract. Under an insurance contract		 the assured cannot claim more amount than the sum insured. The sum insured is the maximum liabil ity of the insurer and the assured secures it by paying his premium which is accordingly fixed. 'Even within ' the. maximum limit	 the insured cannot recover more than What he establishes to be his actual loss	 whatever may be his estimates of the loss that he was likely to bear and whatev er the premium he may have paid calculated on the basis of the said estimate. The fact that while paying for the total loss of or damage to the property	 the insurance company takes over such property or whatever is left of it	 does not change the nature of the insurance claim which is indemnity or compen sation for the loss. The payment of insurance claim is not in consideration of the property taken over by the insurance company	 for one is not consideration for the other. It is incOrrect ' to argue that the insurance claim is the value of the damaged property The claim is assessed on the basis of the damage sustained by the property or the amount necessary to restore it to its original condition. It is not a consid eration for the damaged property. In the present case	 the insurance was on reinstatement. basis which meant that the 585 property was to be restored to the Condition in which it was	 before the fire. The insurance company paid the amount for the restoration of the 'machinery which had to be on the basis of its value at the time of the fire. The machinery in question was purchased in the year 1957 and the fire broke out. on August 11	 1966. Although nothing has come On record on the point	 taking into consideration the 'ordinary course of events	 it is legitimate to presume that the cost of machinery had gone up during the intervening period and the assured and	 therefore	 the assessee	 was entitled to recov er on the basis of the increased value of the machinery (refer to Halsbury 's Laws of England	 Fourth edition	 Vol. 25 under the heading insurance	 in para 654). ' 6. It is true that the definition of "transfer" in Section 2(47) of the Act is inclusive	 and therefore	 ex tends to events and transactions which may not otherwise be "transfer" according to its ordinary	 popular and natural sense. It is this aspect of the definition which has weighed with the High Court and	 therefore '; the 'High Court has argued that if the ' words "extinguishment of any rights therein" are substituted for the 'word "transfer" in Section 45	 the claim or compensation received from the insurance company would be attracted by the said section. The High Court has	 however	 missed the fact that the definition also mentions such transactions as sale	 exchange etc. to which the word "transfer" would properly apply ' in its popular and natural import. Since those associated ' words and expres sions imply the existence of the asset and of the transfer ee	 according to the rule of noscitur a sociis	 the expres sion ' 'extinguishment of any rights therein" would take colour from the said associated words and expressions	 and will have to be restricted t6 the sense analogous to them. If the legislature intended to extend the definition to any extinguishment of right	 it would not have included the obvious instances of transfer	 viz.	 sale	 exchange etc. 	 Hence the expression "extinguishment of any rights therein". will have to be confined to the 'extinguishment of rights on account of transfer and cannot be extended 'to mean any extinguishment of right independent of or otherwise than on account of transfer. The High Court	 as stated earlier	 read the expres sion "extinguishment of any rights" in the assets as any extinguishment of right whether it resulted in or was on account of transfer. For the reasons which we have discussed earlier we find that approach is not correct. For the same reasons	 we are unable to accept the reasoning of the High Court that for "transfer" within the meaning of Section 45 the asset need not exist. We are afraid that the High Court 's reliance on Commissioner of Income Tax vs R.M. Amin	 586 Gujarat to hold that for the. transfer contemplated by Section 45	 the asset need not exist is not well merited. There	 the High Court was concerned with a chose in action	 viz.	 the shares	 and the amount received by the assessee shareholder on liquidation of the company representing his share in the assets of the company. The Court there had pointed out that the extinguishment of right of the asses seeshareholder in his share which was an incorporeal proper ty had come about on account of receipt by ' him of the amount representing the value of the shares. The amount received by the assessee shareholder does not represent any consideration received by him as a result of the extinguishment of his rights in 'the shares. The share merely represents the right to receive money on distribution of the net assets of the company in liquidation and it is by satisfaction of that right	 that the right is extinguished when such monies are received by the shareholder. The con sideration presumes quid pro quo and	 therefore	 transfer of the property or. of the rights in the property	 whether the property is corporeal or incorporeal. When the assets	 themselves are being distributed	 it is correct	to say that to the extent of distribution	 they are wiped out. It is in that sense that the assets do not exist to the extent that they are distributed. When the company 's assets are thus distributed	 is a sense the assets which are converted into money and which	 therefore	 exist in the form of money are transferred from the liquidator to the share holder. His rights in the assets come to an end when he receives his liquidated share of the asset. In such a case the assets do exist though in the converted form	 viz.	 cash and what is transferred is also the converted form of the asset. With respect	 therefore	it is not correct to say that in such cases the capital asset does not exist and does not change hand as capital asset. That the receipt of his share in the asset brings about automatically the extin guishment of the shareholder 's rights in the asset cannot, however, be gainsaid. The decision of the Gujarat High Court in R.M. Amin 's case (supra) was appealed against and this Court while approving ' the ratio of the said decision fur ther explained the nature of the 'money received by a share holder on the ' liquidation of a company. This Court reiter ating its earlier view in the case of Commissioner Of In come tax vs Madurai Mills Co. Ltd., , held that the act of the liquidator in distributing the assets of the company does not result in the creation of new rights. It merely recognises the legal rights which were in exist ence prior to the distribution. The shareholder receives money in recognition and satisfaction of his 587 right and not by operation of any transaction which amounts to sale, exchange, relinquishment of asset or extinguishment of any of his rights in such asset. So also when a partner retires from the partnership what he receives is his share in the partnership which is worked out and realised. It does not represent consideration received ' by 'him as a result of the extinguishment of his interest in the partnership assets. He has no share in any particular asset of the firm. Therefore, there is no trans fer of interest in any particular asset of the firm on account of the receipt of his share by a retired partner. As held in Commissioner of Income tax vs Mohanbhai Pamabhai, no part of the amount received by the assessee as a retired partner is assessable to capi tal gains tax under Section 45. 9. The High Court has explained these two decisions by giving. reasons which do not appeal to us. The COurt has tried to distinguish them from the facts of the present Case pointing out, firstly, t, hat there was no foundation either in law or in fact to believe that the amount which the assessee received from M/s. Jasmine 'Mills was paid to it in satisfaction or in working out of its right, if any, to recover damages under law or contract for the loss or dam age ' caused ' to the machinery. We do not see any difficulty in holding that it was an amount received by the assessee as damages on account of the loss of its machinery. It is difficult to describe it otherwise. The second reason given by the High Court is, with 'respect, equally fragile. It is held that the alleged right, if any, of the assessee t9 recover damages was not an absolute statutory right but one which was subject to a contract to the contrary and even if there was no such contract, it was merely an inchoate or contingent right in respect of which some investigation or legal proceeding and settlement or adjudication would be necessary for its ' satisfaction or fulfilment. We do not agree with this reasoning as well. The facts clearly show that M/s. Jasmine Mills as a bailee had insured the machin ery hired from the assessee, since it was liable to make good the loss of the machinery to the assessee. This is implied under a contract of bailment unless it is provided to the contrary. M/s. jasmine Mills further admittedly paid the insurance amount pro rata to the assessee. In the cir cumstances, we are unable to appreciate the distinction sought to be made by the High Court. We are also unable to see how it would make any difference to the point involved in the present case whether the Jasmine Mills had insured the assessee 's machinery as bailees or as agents of the assessee. 588 There is further no dispute that the insurance policy con tained the reinstatement clause requiring the in surer to pay the cost of the machinery as on the date of the fire. As we have pointed out earlier, in an insurance policy with the reinstatement clause, the insurer is bound to pay the cost of the insured property as on the date of the destruction or loss, and it matters very little if the amount so paid by the insurance company is invested for purchasing the de stroyed asset or for any other purpose. In the circumstances, for the purposes of answering the question in hand, it was not necessary to inquire whether the amount received by the assessee was spent in replacement of the machinery or not. For the reasons given above, the decision of,the Allahabad High Court in Commissioner of Income tax vs J.K. Cotton Spinning& Weaving Mills Co. Ltd., which proceeds on the same reasoning as the impugned judg ment is also not a good law. InStead, we approve of the conclusion reached by the Madras High Court in C. Leo Macho do vs Commissioner of Income tax, for the reasons given by us above; 12. In the result, the ' appeal succeeds and the impugned decision is set aside. In the circumstances of the case, however, there will be no order as to costs. R.P, Appeal al lowed. 
6949	ivil Appeal No. 2446 of 1991. From the Judgement and Order dated 11.10.1990 of the Bombay High Court in F.A. No. 649 of 1990. Mrs. C.M. Chopra for the Appellant. Respondent in person. The Judgment of the Court was delivered by KULDIP SINGH, J. His parents advertised for  homely non medico" bride. Her parents responded. Marriage took place on January 24	 1988 at Noida near Delhi. They hardly lived as husband and wife at Pune for about seven months when on August 16	 1988 the husband filed a petition under Section 13 of the Hindu Marriage Act for dissolution of Marriage on the ground of cruelty. He alleged "she had a habit of smoking" and "it was found that she was in the habit of drinking and even once came drunk to the applicant 's house and abused everybody". He further alleged " it was found by the applicant that she was working as a model prior to marriage and he found few pictures of the respondent in bikini and semi nude clothes in magazines". She vehemently denied the allegations and claimed that the she was a homely	 vegetarian	 non smoking	 teetotaller and faithful house wife. The Family Court at Pune proceeded ex parte and granted divorce decree by the order dated November 30	 1989. Wife 's application for setting aside the ex parte decree was dismissed by the Family Court on June 24	 1990. The High Court by its judgment dated October 10/11	 1990 unheld the findings of the Family Court with the modification that in place of decree for dissolution of marriage it granted a decree for judicial separation. This appeal by way of special leave is by the wife against the judgments of the courts below. 85 During the pendency of the divorce proceedings before Family Court	 Pune	 the wife filed a petition	 on May 1	 1989	 before this Court seeking transfer of the case from the Family Court	 Pune to Delhi. This Court granted ad interim stay of the proceedings before the Family Court	 Pune. The stay remained operative till September 11	 1989 when this Court dismissed the transfer petition and vacated the stay. Thereafter the husband appeared before the Family Court on September 15	 1989 whereas the appellant wife remained absent. Notices were sent by registered post to the wife on her address at Noida and also at her Delhi address given by her in the proceedings before this Court. The notice came back with the remarks "not found". The Family Court ordered substituted service and a notice was published in the "Times of India" New Delhi of dated October 24.1989 asking the wife to appear before the Family Court on November 16	 1989 or the proceedings would be taken ex parte. On November 16	 1989 the Family Court ordered ex parte proceedings. The issues were framed on November 21	 1989	 the evidence of the husband was recorded on November 25	 1989 and the judgment was pronounced on November 30	 1989. The appellant filed an application dated December 18	 1989 for setting aside the ex parte divorce decree wherein she stated that after she was forced to leave her matrimonial home at Pune	 she was residing with her parents at Noida. She further stated that in October/November	 1989 she had gone to reside with her brother at Delhi. According to her she applied to the Army Authorities claiming maintenance out of her husband 's salary. Respondent husband is an Army officer. The Army Authorities sent a letter dated December 14	 1989 to her father wherein it was mentioned that his daughter 's application for maintenance allowance could not be entertained because the husband had already obtained a divorce decree from the court. A copy of the Family Court Judgment granting divorce decree to the husband was also annexed to the letter. The appellant claims that for the first time	 on or about December 14	 1989	 She came to know through her father that the respondent had already been granted an ex parte divorce decree by the Family Court. The appellant in her application inter alia stated as under: "The applicant submits that the applicant did not receive any notice/letter/summons or communication from this Hon 'ble Court 's office. Even there was no intimation given by postal 86 authorities and the applicant honestly states that till the receipt of the letter from the Army H.Q. New Delhi	 she was not aware of the date of proceeding. The applicant submits	 the applicant was under bona fide belief that she will receive a notice from this Hon 'ble Court. As such and being far from Pune	 either in Noida ( U.P.) or at New Delhi	 it was not possible for her to approach this Hon 'ble Court for any enquiry since she was also not permitted to appear through the lawyer. .At any rate and in any event	 the applicant also did not come across the public notice published in Times of India	 New Delhi on 24th October 1989 as stated in the decree. The applicant submits	 the applicant had every intention to resist the marriage petition filed by the opponent since the same was absolutely false	 frivolous and out and out false	 and has been resisted by the applicant by filing written statement	 preliminary objection including to approach the Supreme Court of India. The intention of the applicant was clear. The applicant submits	 the applicant was also advised by her Advocate that she will receive a fresh notice in due course of time after the stay was vacated by the Hon 'ble Supreme Court of India from this Hon 'ble Court. The applicant states	 she resides at a far long distance from Pune. She was also refused any assistance of lawyer. The applicant has no relation or any representative who can look after her in the present proceeding in Pune. It was in these circumstances	 the applicant was prevented by sufficient cause from appearing in the marriage petition proceeding No.561/89 and as such the said decree is required to be set aside . . The applicant states	 the applicant is unable to maintain herself	 she has no source of income . . The applicant submits because of the passing of ex parte decree	 she has been refused maintenance allowance. The applicant also prays for granting of maintenance allowance pending final disposal of this application." The Family Court dismissed the application for setting aside ex parte divorce decree on the following reasoning: "But where the party itself knows that stay obtained by it has been vacated	 there appears no warrant for the proposition that again a notice is required to be given to the said party. I do 87 not think that such advice was really given to the applicant. The applicant has not produced any evidence to the effect that she received such advice from a lawyer. It is her own statement. It is a self serving statement and can hardly be believed. I think that if the applicant was really keen and desirous to contest matrimonial petition	 she would have at once made enquiries to find out as to when the next date for hearing in this court was fixed after her application for transfer of the case was dismissed by the Supreme Court and the stay obtained by her was vacated. The order of vacating the stay was passed on 11th September 1989 by the Hon 'ble Supreme Court and the applicant knew fully well about it. The opponent who had also appeared in the Supreme Court in connection of that matter did appear in this Court on 15.9.1989. The record of P.A. No. 561/89 shows that opponent applied for issuing of notice to the present applicant. The notice was issued by registered post on two separate addresses. One of the address was the one shown by applicant herself in Supreme Court petition and the other address was the one which was admitted to be her address in the matrimonial petition (which was address of her father at Delhi). Both these notices were sent by registered post in due course. The court waited till return of this notice. On both these envelops postal authorities have endorsed that the present applicant was not found on these addresses. The opponent had	 therefore	 made application that the applicant was avoiding to take notice and hence substituted service by publishing in Times of India be made. Accordingly	 a notice was published as per order of the Court on opponent 's application. Thus the contention of the respondent that she had no notice of the further proceeding in marriage petition does not appear convincing. As stated already in the first instance	 there was no necessity for her to wait for receipt of the notice in the circumstances of the present case. The notices sent to her were obviously evaded	 otherwise there was no reason why the applicant was found on either of the addresses which she admits to be the correct addresses. Even if she was not present	 there was no reason why other major members of the family did not accept these notices. And lastly the publication of the notice 88 in one of the most widely circulated newspaper at Delhi was sufficient notice to the applicant. " The High Court upheld the reasoning and the conclusions reached by the Family Court and dismissed the appeals filed by the wife. The respondent appeared before us in person and himself argued his case. The learned counsel for the appellant raised the following points for our consideration: (a) That the Family Court and the High Court grossly erred in dismissing the application filed by the appellant for setting aside the ex parte proceedings; (b) That the divorce petition was filed hardly seven months after the marriage. Section 14 of the Hindu Marriage Act provides "it shall not be competent for any court to entertain any petition for dissolution of a marriage by a decree of divorce	 unless at the date of the presentation of the petition one year has elapsed since the date of the marriage". The divorce petition should have been dismissed as not competent in terms of Section 14 of the Hindu Marriage Act; (c) that even on merits the divorce decree is based on no evidence. The allegations in the divorce petition are wholly vague. In any case the evidence of Major Ved Prakash being wholly interested and contrary to the record the courts below fell into grave error in accepting serious allegations against the appellant on the basis of his evidence; (d) that the High Court acted illegally in substituting the decree of divorce to that of a decree for judicial separation. The High Court should have dismissed the divorce petition. We may take up the Fist Point. The appellant filed written statement before the Family Court	 Pune vehemently denying the allegations made against her by the respondent. She also raised preliminary objections regarding the maintainability of the divorce petition. She filed a transfer petition before this Court which was dismissed in September	 1989. She filed another transfer petition which was dismissed by this Court on April 12	1990 with the following observations: 89 "It is open to the petitioner to move the High Court under Section 24	 Code of Civil Procedure for consideration of her prayer that the case be transferred to another Judge. On the merits of this prayer	 we decline to make any observation. It would appear that the case is now listed before the Family Judge at Pune on 13.4.90. It will be appropriate that having regard to the apprehension expressed by the petitioner the Court should not proceed with the matter until her prayer for transfer is considered by the High Court. We accordingly direct the Family Court	 Pune to stay further proceeding in the case	 a period of 60 days from today to enable the petitioner to approach the High Court. " It is no doubt correct that the appellant did not approach the High Court for the transfer of the case but the fact remains that she was been seriously contesting the divorce proceedings and it would not be fair to assume that she deliberately choose to abstain from the Family Court and was intentionally avoiding the summons. The Family Court and the High Court have held that after the dismissal of the transfer petition and vacation of stay by this Court the appellant wife should have	 on her own	 joined the proceeding before the Family Court. According to the courts below no notice for appearance was required to be sent to the parties after the stay was vacated. It is not necessary for us to go into the question as to whether a fresh notice to the parties is necessary where the superior Court vacates the stay order and as a consequence the proceeding recommence before the court below. We are of the view that in the fact and circumstances of this case the interest of justice required the issue of such a notice. The admitted facts in this case are as under: (i) While dismissing the transfer petition and vacating the stay order this Court did not fix any date for the appearance of the parties before the Family Court	 Pune (ii) The Family Court had permitted the assistance of a lawyer to the appellant wife in the following terms: "As applicant is from Delhi and it would cause hardship	 permission is granted 90 for engaging an Advocate for pleading her case only for the purpose of presenting applications or serving notices and noting the orders of the Court. " (iii) The appellant did not engage a lawyer to represent her before the Family Court	 Pune. (iv) The appellant wife was residing with her parents at Noida (Delhi). Even the distance between Noida and Pune was a big hassle for the appellant especially when she had no counsel to look after the proceedings before the Family Court	 Pune. We are of the view that in the facts and circumstances of this case she was justified in her assumption that the proceedings before the Family Court would be resumed after fresh notice to the parties. The applicability of the Rules of natural justice depends upon the facts and circumstances of each case. We are of the view that in the facts and circumstances of this case she was justified in her assumption that the proceedings before the Family Court would be resumed after fresh notice to the parties. The applicability of the Rules of natural justice depends upon the facts and circumstances of each case. We are of the view that in this case fair play and the interest of justice required the issuance of a fresh notice to the parties after the stay order was vacated by this Court. We do not	 therefore	 agree with the findings of the Courts below to the contrary. In any case realising the requirements of natural justice the Family Court	 sent two registered notices to the appellant at her Noida address and also at the address given by her in the proceedings before this Court. Unfortunately	 both the notices came back with the endorsements that the appellant could not be found on the given addresses. There is no material on the record to reach a conclusion that the appellant refused to receive the notices. There is also nothing on the record to show as to whether the postal authorities made any efforts to deliver the registered letters to any of the appellant 's relations at the given addresses. The courts below are wholly unjustified in holding that the appellant refused to receive the notices and further that the said notices could have been received by any of her relations on the given addresses. After the notices sent by registered post were received back	 the Family Court did not make any attempt to serve the appellant through the process of the Court. The appellant was no stranger to the respondent. She was his wife. It could not have been difficult for him to find out the address where she was staying. Under the circumstances	 resort to the substitute service by way of publication in the newspaper was not justified. 91 We are	 therefore	 of the view that there was sufficient cause for the non appearance of the appellant in the matrimonial petition before the Family Court. The view we have taken on the first point	 it is not necessary to deal	 with the other points raised by the learned counsel for the appellant. We	 therefore	 set aside the order of the Family Court dated June 24	 1990 and allow the appellant 's application dated December 18	 1989 and set aside the ex parte decree passed against the appellant in Marriage petition No. A 561/89. As a consequence the judgment of the Family Court	 Pune dated November 30	 1989 and the judgment of the High Court in First Appeal No. 649/90 dated October 10/11	 1990 are also set aside. The appellant had asked for transfer of her case from the Principal Judge	 Family Court	 Pune to some other court and this Court gave liberty to the appellant to move the High Court for the said purpose. We are satisfied that the reason given by the appellant for such transfer and the apprehensions entertained by her are wholly unjustified. We ar	 however	 of the view that the Principal Judge	 Family Court Pune	 has taken the grievances made by the appellant before this Court rather seriously and has commented adversely about the same. With a view to do complete justice between the parties we direct that this case be transferred from the file of Principal Judge	 Family Court	 Pune to the Principal Judge	 Family Court	 Bombay. The parties are directed to appear before the Principal Judge	 Family Court	 Bombay on June 22	 1992. Before concluding we wish to place on record that we tried to persuade the parties to live together and in the alternative to settle their dispute amicably but with no result. We allow the appeal in the above terms with no order as to costs. N.V.K. Appeal allowed.

Summary:
The appellant company purchased machinery worth Rs.2	81	741 in the year 1957 and gave it on hire to another company which insured the machinery. In the year 1966	 a fire broke out in the lendee company causing extensive damage to the machinery of the appellant. On a settlement of the insurance claim the lendee company paid to the appellant a sum of Rs.6	32	533 on account of the destruction of its machinery. The difference between the actual cost of the machinery and its written down value worked out to Rs.2	62	781 which the appellant (the asses I see) showed in its income tax return for the relevant year as profit chargeable to tax under section 41(2) of the Income Tax Act. The lncomeTax Officer subjected to tax also the additional amount of Rs.3	50	792 the difference between the amount of insurance claim and the original cost of the machinery treating the same as capital gains chargeable under section 45 of the Act	 and rejected the case of the appellant that the capital gains tax was not attracted to the amount received on account of the insurance claim since there was no transfer of capital asset as was contemplated by section 45 read with section 2(47) of the Act. The appeal of the assessee was dismissed by the Appel late Assistant Commissioner	 but its claim was accepted by the Income Tax Appellate Tribunal which held that the amount was not received on account of transfer of the capital asset but on account of damage to it and that section 45 was attracted only when there was a transfer of the capital asset. The reference at the instance of the revenue was an swered by the High Court against the assessee. Aggrieved the assessee filed the appeal before this Court on a certificate granted by the High Court. On the question: whether the money received towards the insurance claim on account of the damage to. or destruction of the capital 578 asset was so received on account of the transfer of the asset within the meaning of section 45 of the Act and was	 there fore	 chargeable to the capital gains tax under the said section	 Allowing the appeal	 this Court	 HELD: 1.1 The money received under the insurance policy is by way of indemnity or compensation for the damage	 loss or destruction of the property. It is not in consideration of the transfer of the property for the transfer of any right in it in favour of the insurance company. It as by virtue of the contract of insurance or of indemnity	 and in terms of the conditions of the contract. [584C D] 1.2 In the case of damage	 partial or complete	 or destruction for loss of property there is no transfer of it in favour of a third party. The fact that while paying for the total loss of or damage to the property	 the insurance company takes over such property or whatever is left of it	 does not change the nature of the insurance claim which is indemnity or compensation for the loss. The payment of insurance claim is not in consideration of the property taken over by the insurance company	 for. one is not consid eration for the other. The insurance claim is not the value of the damaged property. The claim is assessed on the basis of the damage sustained by the property or the amount neces sary to restore it to its original conditions. It is not a consideration for the damaged property. [584C	 F G] 1.3 In the instant case	 the amount received by the assessee was the one received by it as damages on account of the loss of its machinery. The lendee company	 as a bailee	 had insured the machinery hired from the assessee	 since it was liable to make good the loss of the machinery to the assessee. This was implied under a contract of bailment unless it was provided to the contrary. The lendee company paid the insurance amount pro rata to the assessee. [587D G] 1.4 The insurance was on reinstatement basis which meant that the property was to be restored to the condition in which it was	 before the fire. The insurance company paid the amount for the restoration of the machinery which had to be on the basis of its value at the time of the fire. The machinery in question was purchased in the year 1957 and the fire broke ' out on. August 11	 1966. Taking into considera tion the ordinary course of events	 it was legitimate to presume that the cast of machinery had gone up during the intervening period and the assured and	 therefore	 the assessee	 was entitled to recover on the basis of the 579 increased value of the machinery. [584H; 585A B] Halsbury 's Laws	of England	 Fourth Edition	 Vol. 25	 re ferred to. 2.1 The capital gains is attracted by transfer and not merely by extinguishment of right howsoever brought about. The transfer may be effected by various modes and one of the modes is the extinguishment of right on transfer of the asset itself or on account of the transfer of the right or rights in it. The extinguishment of right or rights must in any case be on account of its or their transfer in order to attract the provisions of Section 45 which speaks about capital gains arising out of "transfer" of asset and not on account of "extinguishment of right" by itself. [583G H; 584A] If extinguishment of right or rights is not due to transfer and is on account of the destruction or loss of the asset	 it is not a transfer and does not attract the provi sions of section 45 which relate to transfer and not to mere extinguishment of right but to one by transfer. Hence an extinguishment of right not brought about by transfer is outside the purview ors. [584A B] Whatever the mode by which a transfer is brought about	 the existence of the asset during the process of transfer is a pre condition. Unless the asset exists in fact	 there cannot be a transfer of it. [583E] Transfer presumes both the existence of the asset and of the transferee to whom it is transferred. [584C] 2.2 When an asset is destroyed there is no question of transferring it to others. The destruction or loss of the asset	 no doubt	 brings. about the destruction of the right of the owner or possessor of the asset	 in it. But it is not on account of transfer. It is on account of the disappear ance of the asset. The extinguishment of right in the asset on account of extinguishment of asset itself is not a trans fer of the right but its destruction. By no stretch of imagination	 the destruction of the right on account of the destruction of the asset can be equated with the extinguish ment of right on account of its transfer. [583E G] 3.1 Although the definition of "transfer" in Section 2(47) of the Act is inclusive	 and	 therefore	 extends to events and transactions which may not otherwise be "trans fer" according to its ordinary	 popular and natural sense	 yet it also mentions such transactions as 580 sale	 exchange etc. to which the word "transfer" would properly apply in its popular and natural import. Since those associated words and expressions imply the existence of the asset and of the transferee	 according to the rule of noscitur a sociis	 the expression "extinguishment of any rights therein" would take colour from the said associated words and expressions	 and will have to be restricted to the sense analogous to them. [585C E] If the legislature intended to extend the definition to any extinguishment of right	 it would not have included the obvious instances of transfer	 viz. sale	 exchange etc. Hence the expression "extinguishment of any rights therein" will have to be confined to the extinguishment of rights on account of transfer and cannot be extended to mean any extinguishment of right independent of or otherwise than on account of transfer. [585E F] 3.2 The High Court	 was not correct in reading the expression " 'extinguishment of any rights" in the assets as any extinguishment of right whether it resulted in or was on account of transfer nor was it right in assuming that for "transfer" within the meaning of Section 45 the asset need not exist. It erred in ignoring the basic postulate that Section 45 does not relate to extinguishment of right but to transfer. Having concentrated its attention on the words "extinguishment of right" rather than on "transfer"	 the High Court	 misdirected itself and proceeded on the basis that every extinguishment of right whether by way of trans fer or not	 is attracted by Section 45. [585F G; 584B] Commissioner of Income Tax vs Madurai Mills Co. Ltd.	 and Commissioner of Income Tax vs Mohanbhai Pamabhai	 	 referred to. Whether the lendee company had insured assessee 's machinery as bailees or as agents of the assessee would make no difference. The insurance policy contained the ' rein statement clause requiring the insurer to pay the cost of the machinery as on the date of the fire. [587G H; 588A] 5. In an insurance policy with the reinstatement clause	 the insurer is bound to pay the cost of the insured property as on the date of destruction of loss	 and it matters very little if the amount so paid by the insurance company is invested for purchasing the destroyed asset or for any other purpose. [588A B] C. Leo Macho do vs Commissioner of Income Tax	 	 approved. 581 Income tax Commissioner vs J.K. Cotton Spinning & Weaving Mills Co. Ltd.	 	 disapproved.