G. G. Sohani, J.: By this reference under s. 256(1) of IT Act, 1961, (hereinafter referred to as Act) Tribunal, Indore Bench, has referred following question of law to this Court for its opinion: "Whether, on facts and in circumstances of case, Tribunal w s right in law in upholding findings of AAC that sum of Rs. 2,00,930 received by assessee from Railways during accounting year relevant to asst. yr. 1975-76 is neither chargeable under s. 41(1) of Act and consequently in upholding AAC s order deleting sum of Rs. 91,748 taxed by ITO? material facts giving rise to this reference briefly are as follows: assessee-firm entered into contract with Chief Engineer (Construction), Central railway, for executing earth work in connection with construction of bridges between Sumeri and Jeruwakhera. After partly executing contract, assessee abandoned contract as one of partners of assessee-firm was abducted by dacoits. Thereafter. assessee did not carry on any business. Thus, from asst. yr. 1967-68 onwards, on business was carried on by assessee firm. On 3rd Aug., 1974, assessee received sum of Rs. 2,00,930 full and final settlement of its claims against Railways, which were referred to arbitration. For relevant asst. yr. 1975-76 assessee contended that amount received by it from Railways was not taxable as business income as it related to discontinued business and that it was also not taxable under s. 41(1) of Act. ITO upheld contention of assessee that amount was not taxable as business income ss. 176(3)(A) of Act came into force in asst. yr. 1976-77. ITO was, however, of view that amount was chargeable to tax under s. 41(1) of Act. Aggrieved by order passed by ITO assessee preferred appeal before AAC. AAC held that as assessee was not carrying on business during assessment year in question and since s. 176(3)(A) of Act came into force from asst. yr. 1976-77 amount in question could not be taxed during asst. yr. 1975-76. AAC further held that since no actual allowance or deduction in respect of any loss, expenditure or trading liability had been allowed in any assessment year, amount received by assessee could not be subjected to tax under s. 41(1) of Act. AAC, therefore, allowed appeal preferred by assessee. Aggrieved by that order, Department preferred appeal before Tribunal. Tribunal upheld findings given by AAC and dismissed appeal. Hence, at instance of Department, Tribunal has referred aforesaid question of law to this Court for its opinion. ld. counsel for Department conceded that provisions of s. 176(3)(A) of Act were not attracted in instant case and that in view of findings of Tribunal that amount in question was received by assessee when assessee had ceased to carry on any business, Tribunal w s right in upholding view of AAC that sum received by assessee-firm from Railways during assessment year in question was n o t chargeable to tax as business profits. As regards Chargeability under s. 41(1) of Act, Tribunal has found that conditions prescribed for charging tax under s. 41(1) of Act were not fulfilled. Division Bench of this Court has held in Naubatram Nandram v. CIT (1972) 86 ITR 805 (MP). that s. 10(2A) of IT Act, 1922, corresponding to s. 41(1) of Act, envisages actual allowance or deduction and not notional one. In view of this decision, Tribunal in our opinion, was justified in holding that provisions of s. 41(1) of Act were not applicable. For all these reasons, our answer to question referred to this Court in affirmative and against Department. In circumstances of case, parties shall bear their own costs of this reference. *** COMMISSIONER OF INCOME TAX v. THAKURDAS JAIPARVESH & CO.