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TMI Blog1991 (5) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... of the year 1974. There were two other textile mills under the same management. They were (1) Mysore Spinning and Manufacturing Company Limited (Mysore Mills for short) and (2) Minerva Nulls Ltd. (Minerva Mills for short). A total sum of Rs. 37,11,433 was due from these two mills to the assessee, as per the assessee's books of accounts at the end of the relevant previous year. Those two mills were nationalised by the Sick Textile Undertakings (Nationalisation) Act, 1974. During the previous year relevant to this appeal. Assessee, therefore, claimed that the said sum of Rs. 37,11,433 due from these two mills was deductible in the computation of business income. The claim was rejected by Assessing Officer and that view was confirmed by the CIT(A). Assessee is before us in appeal. 2. Learned representative for the assessee drew our attention to the analysis of amounts due from these two concerns, as given in para-5 on pages 8 and 9 of the order of the CIT(A) and submitted that out of a total sum of Rs. 37,11,433, Rs. 17,07,108 representing interest which had been offered for taxation by the assessee in this year and preceding years by way of business income. He further submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Lalvani v. CIT [1970] 78 ITR 176 (Bom.) (d) CIT v. Gillanders Arbuthnot & Co. Ltd. [1982] 138 ITR 763 (Cal.). In the alternative, he submitted that vide Directors' Report of the assessee-company for the year ended 31st October, 1970, there was a proposal for making the Minerva Mills, a subsidiary and therefore, at any rate, the amount due from that debtor was certainly allowable as a business loss. 3. On the other hand, learned Departmental Representative submitted that it was not allowable as a business loss under section 28(1), let alone as bad debt under section 36 or business expenditure under section 37(1). He cited the following decisions---- (a) A. V. Thomas & Co. Ltd. v. CIT [1963] 48 ITR 67 (SC), (b) Indian Aluminium Co. Ltd. v. CIT [1971] 79 ITR 514 (SC) (c) Madan Gopal Bagla v. CIT [1956] 30 ITR 174 (SC) and in particular emphasized the Supreme Court decision in the case of Indian Aluminium Co. Ltd. He submitted that in that case deduction was held as not allowable for the amount of Indian income-tax, which should have been deducted at source, by that assessee while remitting to foreign company, the technical know-how fees, etc., when the said foreign comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sore Mills, against direct payments of Rs. 14,58,949 and amounts paid to sister concerns of Rs. 8,04,666, receipts were totalling Rs. 13,38,840. Obviously, receipts cannot be put against the amounts paid to creditors for expenses and fixed depositors. Assessee has not been able to show how direct payments made and the amounts paid to sister concerns, to the extent left due after receipts should be regarded as given for business purposes. However, there is quite some substance in the assessee's contention that the amounts paid to creditors for expenses and to the fixed depositors were for ensuring regular supply of stores and raw-materials on one hand for avoiding the run of the fixed depositors on the assessee-company itself. Similar would be the position in regard to the amounts due from Minerva Mills. Up to 31-12-1971, direct payments and debits were Rs. 5,37,120, out of which receipts were Rs. 3,65,258 and the assessee has not been able to show how the balance amount should be regarded as directly serving the purposes of assessee's business. However, amounts paid to the creditors for cotton, yarn, stores, etc., totalling Rs. 1,87,532 (Rs. 1,87,388.41 + Rs. 152.27) were only for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he supply of raw-materials, stores, etc. In the ultimate analysis totality of circumstances have to be taken into account to decide which of the transactions should be regarded as for business purposes. All the transactions with the same party need not bear the same characteristic. Some of them may be directly for business purpose, but not others. We have analysed the transactions on the basis of information available on record and the claims and counter-claims on the lines indicated above. 6. A slightly more detailed consideration of the Supreme Court decision in Indian Aluminium Co. Ltd.'s case is warranted. As indicated above, it is cited by the learned Departmental Representative to submit that each and every payment would not be deductible. He emphasized that when amount of tax deducted at source, borne by the assessee-company was held to be not deductible, there is no cause for holding that the loans given to the sister concerns should be deducted in computation of business income. We find that on material aspects, that decision of the Supreme Court is distinguishable. First and foremost point is that most of the discussion is in regard to claim as bad debt under section 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Minerva Mills being made a subsidiary of the assessee-company. This particular aspect does not make any difference in the present case, firstly because the Minerva Mills did not really become the subsidiary company. Secondly, the mention of it was in the reports for the year ending October 1970, while as per the analysis of the accounts given above, the payments to Minerva Mills started in the calendar year 1971. Assessee has not shown that when the payments were made to Minerva Mills, there was reasonable possibility of the Minerva Mills being made a subsidiary of the assessee-company. So, that decision of the Hon'ble Calcutta High Court also does not help the assessee. 9. Before parting, we may mention that before the Departmental authorities, assessee had made alternative claims under section 36 as bad debt and under section 37(1) as business expenses. As already noted, before the Tribunal, claim is restricted to the category of ' business loss '. All the same, we may mention that the alternative claims under section 36 and section 37(1) have been rightly rejected by the Departmental authorities and rightly not pursued before the Tribunal by the assessee. Claim for bad debt is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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