TMI Blog1970 (3) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... lender, and also of an art silk mill. The relevant assessment year is 1956-57, the corresponding accounting year being the year ended, on 31st March, 1956. The question of law referred is : " Whether, on the facts and in the circumstances of this case, the assessee is entitled to a deduction of Rs. 6,15,000 against business income of the relevant accounting year under section 10(1) and/or section 10(2)(xi) of the Indian Income-tax Act? " One Shamboolal Govindji Jobanputra was carrying one the business of distributing cinema films in the name and style of Sunrich Pictures and of doing publicity in the name and style of Crescent Publicity. He was also the owner of a cinema theatre known as the Kamal Talkies and was carrying on business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he necessary agreement be entered into for that purpose. On the 24th April, 1947, the assessee-company, along with the five other financiers, entered into an a agreement with Shamboolal. The agreement provides that the said 4,500 preference and 1,650 ordinary shares shall be taken up by the assessee-company in full satisfaction of the amount due to the assessee-company in respect of the said original loan of Rs. 6,00,000. Another private limited company was intended to be incorporated to act as the managing agents of Sunrich Pictures Ltd. and by the said agreement it was agreed that the assessee-company I should be allotted 515 fully paid-up shares of Rs. 10 each in that Company. A private limited company of the name of Kinema Services Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain shares. Thereafter, during the accounting years 1948-49,1949-50, 1950-51 and 1951-52, the assessee-company wrote off in instalments a sum of Rs. 5,15,000 on the ground that the said films had depreciated in value. Thereafter, only a balance of Rs. 1,00,000 remained to the debit of that account. On 13th January, 1949, a petition for winding up of Sunrich Pictures Ltd. was filed in this High Court and an order was made thereon on 18th February, 1950, ordering that the company be wound up. The official liquidator as liquidator of the said company thereafter called upon the assessee-company and the said five other parties to return the said films to him. The assessee-company and the said five others returned the said films to the officia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal held that the assessee-company, however, thereafter, converted that loan into a capital investment by taking the shares in the Sunrich Pictures Ltd., as also in its managing agency company without intending to acquire them as its stock-in-trade of its business. The Tribunal has held that the assessee-company did not carry on any share business at the time when the debt was written off, that the debt did not subsist after the assessee-company acquired the said shares in Sunrich Pictures Ltd. and Kinema Services Ltd. and that the said shares were held by the assessee-company as a capital investment and not as a trade investment. Now, Mr. Mehta, the learned counsel for the assessee-company, has not seriously pressed the claim for deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of its money-lending business. Now, a money-lender who has advanced loans and taken the security of, say, shares of a company, may, in the course of his business, be compelled to himself take over the shares which were only his security if he finds difficulty in otherwise recovering his loan from his debtor. But, such is not the case here. As a matter of fact, the said shares were not the security of the assessee-company in respect of the amounts due by Shamboolal in respect of the said loan of Rs. 6,00,000. The question, therefore, of the assessee-company being compelled to take over the said shares in the course of its money-lending business for the purpose of recovering its dues does not arise. The second factor to be borne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if at all, acquire shares by way of investment of his spare funds only temporarily because its main object would be to make funds available whenever business by way of money-lending came its way. The shares which the assessee-company, however, acquired were not only in a newly floated company, but were not even quoted in the market and it would be difficult for the assessee-company to dispose of those shares within any reasonably short time and the acquisition cannot therefore be said to be temporary. Mr. Mehta relied upon a decision of this High Court in Bansilal Ganga ram v. Commissioner of Income-tax. The principle which that decision lays down is that whether a particular property acquired by a money-lender is his capital asset or t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
