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TMI Blog1960 (11) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... as suffered by him in the transaction in dispute. Appeal dismissed. - - - - - Dated:- 24-11-1960 - Judge(s) : J. L. KAPUR., M. HIDAYATULLAH., J. C. SHAH JUDGMENT The judgment of the court was delivered by KAPUR, J.--This is an appeal by special leave against the judgment and order of the High Court of Bombay in Income-tax Reference No. 55 of 1955, in which two questions of law were stated for opinion and both were answered in favour of the assessee and against Commissioner of Income-tax who is the appellant before us and the assessee is the respondent. The facts of this case are these : The respondent is a registered firm carrying on business as commission agents in Bombay. For purposes of its business it borrowed mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d several liability. An illustration will explain what we mean. A and B require Rs. 50,000 each. They find that the bank would not advance Rs. 50,000 to each on his individual security. They, however, find that the bank would be prepared to advance rupees one lakh on their joint and several liability. They take rupees one lakh on joint and several liability and then divide the money equally between themselves." It also found that the banks advanced monies to some constituents on their personal security also but they had to pay a higher rate of interest than when the money was borrowed on joint and several responsibility; that Rs. 1,00,000 borrowed from the bank was in accordance with the commercial practice of Bombay. On these facts t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actice of financing business by borrowing money on joint and several liability was established. It was agrued on behalf of the appellant that this court in Madan Gopal Bagla v. Commissioner of Income-tax had decided against the allowability of such losses. But the facts of that case when carefully scrutinsed are distinguisable and the decision does not support the contentions of the appellant. No doubt, certain features of that case and the present one are similiar but they differ in essential features. In that case the assessee was a timber merchant who obtained a loan of Rs. 1 lakh from the Bank of India on the joint security of himself and one Mamraj, which the assessee paid off. Mamraj became an insolvent and the assessee had to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. He would have to pay a lower rate of interest if he could procure as surety another businessman, who would be approved by the bank. This, however, did not mean that mutual accommodation by businessmen was necessarily an ingredient part of that custom. A could procure B, C or D to join him as surety in order to achieve this objective, but it did not necessarily follow that if A wanted to procure B, C or D to thus join him as surety he could only do so if he in his own turn joined B, C or D as surety in the loans, which B, C or D procured in their turns from the banks for financing their respective businesses. Unless that factor was established, the mere procurement by A of B, C or D as surety would not be sufficient to establish the custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who from time to time jointly with another person borrowed money out of which he employed a portion in his business. One of such amounts borrowed was Rs. 16,200 out of which the assessee took Rs. 10,450 for his business needs and the other debtor took the balance. The latter became insolvent and the assessee had to pay the whole of the money borrowed and claimed it as allowable deduction under section 10(2)(xi) or section 10(2)(xv) of the Act or as business loss and it was held that he was not entitled, because the loss sustained by the assessee ; was too remote from the business of bookselling carried on by him and was not sufficiently connected with the trade and, therefore, fell outside the range of those amounts which could properly be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id ; that the respondent had, in accordance with the commercial practice, borrowed the money, the whole of which he had to return because the joint promisor, Kishori Lal, had become bankrupt ; mutuality was also held proved. It cannot be said that the essential feature of the case now before us is in principle different from that of Commissioner of Income-tax v. Ramaswamy Chettiar. In both cases the finding is that there is mutuality and custom of borrowing money on joint pronotes for the carrying on of business. In our opinion, in the circumstances proved in the present case, and on the facts established and on the findings given, the respondent was rightly held to be entitled to deduct the loss which was suffered by him in the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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