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Interpretation of whether a specific sum was advanced in the ordinary course of money-lending business for tax purposes. Analysis: The case involved four applications by Vissonji Sons & Co. and its partners under Section 66(1) of the Income-tax Act, seeking a reference to the High Court of Bombay regarding questions of law arising from Tribunal orders. The dispute centered around a sum of Rs. 7,20,000 affecting the assessment of the firm and its partners. The firm's appeals were consolidated, and the facts were detailed, indicating the loan history, lack of security for advances, and the voluntary surrender of Rs. 7,20,000 during the company's reconstruction scheme. The key issue was whether this sum constituted a bad debt under Section 10(2)(xi) of the Income-tax Act. The judgment by Beaumont, C.J. focused on whether the Tribunal was correct in finding that the Rs. 7,20,000 was not advanced in the ordinary course of the appellants' money-lending business. The judgment clarified that the question referred was limited in scope to this specific finding. The facts highlighted the intertwined nature of the firm and the managing agency, indicating that legally, there was only one firm due to the identical partners. The finding suggested that the loan was linked to the managing agency business rather than the money-lending business, as no interest was charged, and no similar advances were made in comparable situations. The cancellation of the debt during the company's reconstruction was deemed to enhance the shareholders' value, benefiting the partners. The judgment concluded that there was sufficient evidence to support the Tribunal's finding that the advance was not made in the ordinary course of the money-lending business, emphasizing the lack of interest charges and the debt's cancellation as part of the reconstruction scheme. In conclusion, the Court affirmed the Tribunal's finding, stating that there was substantial evidence to support the conclusion that the Rs. 7,20,000 was not advanced in the ordinary course of the appellants' money-lending business. The judgment highlighted the specific circumstances surrounding the loan, the lack of interest charges, and the debt's cancellation during the company's reconstruction. The Court held that the finding was based on adequate evidence, leading to an affirmative answer to the question raised.
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