TMI Blog1970 (8) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... d and have their selling organisation spread all over India. The assessees also carry on a money-lending business at Gwalior in the name and style of Khanchand Lachmandas, hereinafter called "K. L.". In the books of account of K. L. were posted entries for advances made to the Gwalior factory. Under a notification issued by the Central Board of Direct Taxes the income arising to the assessees from the Gwalior factory during the account year ending March 31, 1955, was exempt from payment of income-tax and super-tax. In proceedings for assessment for the year 1954-55 of the assessees the Income-tax Officer disallowed, out of the amounts claimed for "shortage", Rs. 3,64,000 in the Gwalior factory, and Rs. 35,000 in the Hyderabad factory. Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the absence of evidence as to which fund went into the investment of the Gwalior factory, it is not possible for us to give a finding on the question as to whether the entire capital or which portion of it was invested in the Gwalior branch out of the partners' capital contribution. The best and the reasonable course under these circumstances was to allocate the loss in the proportion of the capital invested in the Gwalior branch to the total capital invested in the money-lending business by the branch. The allocation which has been made on that basis appears to us to be quite fair and reasonable." The Tribunal rejected an application of the assessees under section 66(1) of the Income-tax Act, requesting that certain questions be refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of Rs. 1,60,000 out of the amount disclosed by the assessees under the head "shortage of raw materials" was justified on the facts and in the circumstances of the case. In their view there was material before the Tribunal to sustain the amount of Rs. 1,60,000 disallowed, the disallowance not being based on any irrelevant material, and accordingly no question of law in that behalf arose out of the order on which the Tribunal could be directed to state a case. Referring to the remaining two questions, the High Court observed: "In regard to the other two questions (Nos. (4) and (5)) sought to be referred, learned counsel for the assessee urged that no loss sustained in the money-lending business could at all be allocated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended on behalf of the assessees that since the partners' capital exceeded the investments by K.L. in the Gwalior factory, it must be presumed that the entire investment had gone out of the account of K.L., out of the partners' capital and not out of the borrowings that K.L. had made, and on that score no part of the loss could be allocated to the Gwalior factory and the entire loss must be taken into account in the working of K.L. The Tribunal rejected that contention because in their view the "partners' capital and the borrowings made by K.L. went into the investment of the Gwalior factory and it was not possible to give a finding whether the entire capital which was invested in the Gwalior factory was out of the partners' contribution ..... X X X X Extracts X X X X X X X X Extracts X X X X
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