9911796707
TMI Blog1960 (11) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... a registered firm carrying on business as commission agents in Bombay. For purposes of its business it borrowed money from time to time from banks on joint promissory notes executed by it and by others with joint and several liability. On September 26, 1949, the respondent borrowed Rs. 1,00,000 from the Bank of India on a pronote executed jointly with one Kishorilal. Out of this amount a sum of Rs. 50,000 was taken by the respondent for purposes of its business and the rest by Kishorilal. Kishorilal, however, failed to meet his liability and became a bankrupt. The respondent had, therefore, to pay the bank the whole amount, i.e., Rs. 1,00,000, with interest. Out of the amount taken by Kishorilal the respondent received in the accounting yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1,00,000 borrowed from the bank was in accordance with the commercial practice of Bombay. On these facts the following two questions of law were referred to the High Court : "(1) Whether the assessee's claim is sustainable under section 10(2)(xv) of the Act? (2) Whether the assesse's claim that the loss was a business loss and, therefore, allowable as a deduction in computing the profits of the assessee's business is sustainable under law ?" Both these queations were answered in favour of the respondent and against the appellant. Counsel for the Commissioner challenged the findings of the Tribunal in regard to the existence of a commercial practice in Bombay but this ground of attack is not available to him because not only did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf and one Mamraj, which the assessee paid off. Mamraj became an insolvent and the assessee had to pay the whole of the amount borrowed with interest thereon. The assessee there received a certain amount of money by way of dividends from the receiver and the balance he wrote off as bad debt in the assessment year and claimed it as an allowable deduction under section 10. The High Court there held that the debt could not be said to be a debt in respect of the business of the assessee as he was not carrying on the business of standing surety for other persons nor was he a money-lender, he being simply it timber merchant ; that it had not been established nor was it alleged that he was in the habit of standing surety for other persons " along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished, the mere procurement by A of B, C or D as surety would not be sufficient to establish the custom sought to be relied upon by the appellant so as to make the transaction of his having joined Mamraj Rambhagat as surety in the loan procured by Mamraj Rambhagat from the Imperial Bank of India, a transaction in the course of carrying on his own timber business and to make the loss in the transaction a trading loss or a bad debt of the timber business of the appellant." Continuing at page 180 it was observed : "There were thus elements of mutuality and the essential ingredient in the carrying on of the money lending business, which were elements of the custom proved in that case, both of which are wanting in the present case before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the trade and, therefore, fell outside the range of those amounts which could properly be brought into profit and loss account of the business. The decision in Commissioner of Income-tax v. Ramaswamy Chettiar was there distinguished on the ground that the decision must be confined to its own peculiar facts and did not apply to business as the one in Subramanya Pillai's case. The following passage from the judgment of Viswanatha Sastri, J., in that case is relevant : "But there, the business was one of money-lending and the court found that according to the well known and well recognised mercantile custom of Nattukottai bankers, they were in the habit of raising funds which formed the stock-in-trade of their money-lending business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was rightly held to be entitled to deduct the loss which was suffered by him in the transaction in dispute. Counsel for the assessee drew our attention to a Privy Council judgment, Montreal Coke and Manufacturing Co. v. Minister of National Revenue, but that case can have no application to the facts of the present case because it was found there as a fact that the assessee's financial arrangements were quite distinct from the activities by which they earned their income and expenditure incurred in relation to the financing of their business was not expenditure in the earning of their income within the statute. It was then contended that the loss of the respondent was a capital loss and for this again reliance was placed on the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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