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Issues:
1. Whether the sum advanced by the assessee company constitutes a debt within the meaning of Schedule II to the Excess Profits Tax Act. 2. Whether the act of lending money by the company was in the course of its business as per the memorandum of association. 3. Interpretation of the judgment of the Patna High Court in Dalmia Cement Ltd. v. Commissioner of Income-tax, Bihar and Orissa [1944] 12 I.T.R. 50 regarding the taxation of profits from share transactions. Detailed Analysis: 1. The primary issue in this case is whether the sum advanced by the assessee company qualifies as a debt under Schedule II to the Excess Profits Tax Act. The Tribunal concluded that since the company's primary business was not money-lending and it had not previously engaged in similar transactions, the advance did not constitute a debt. The court emphasized that determining whether an act is in the course of business is a question of fact based on evidence and circumstances of the case. The Tribunal's decision was based on factual findings and materials presented. 2. The second issue revolves around whether the act of lending money by the company aligns with its business objectives as per the memorandum of association. The company's memorandum allowed for lending money among its permissible activities. However, the court highlighted that merely because an act is permissible under the memorandum does not automatically make it part of the company's business. The court emphasized that pursuing an object listed in the memorandum requires ongoing engagement in that business activity, which was not evident in this case. The court held that the isolated transaction of lending money did not constitute part of the company's business. 3. The judgment of the Patna High Court in Dalmia Cement Ltd. case was cited in support of the argument that engaging in activities listed in the memorandum constitutes part of the business. However, the court distinguished this case by emphasizing the specific facts involved, such as the continuous dealing in shares as part of the company's business activities. The court clarified that each case must be assessed individually to determine if the actions align with the company's business objectives. The court highlighted the need to consider whether the company is actively pursuing the objects listed in its memorandum to determine if a particular transaction is part of its business. In conclusion, the court ruled against the assessee, stating that the advance of funds to another entity did not fall within the ordinary course of the company's business. The court emphasized the need for a direct connection between the company's regular business activities and the specific transaction in question to qualify it as part of the business. The judgment underscores the importance of factual analysis and evidence in determining the nature of business activities for taxation purposes.
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