TMI Blog1981 (6) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... isen to the assessee during the previous year relevant to the assessment year 1965-66 and whether such finding was not otherwise unreasonable or perverse ? 2. If the answer to question No.1 is in the affirmative, then whether, on the facts and in the circumstances of the case, the loss of Rs. 87,546 was a trading loss incurred by the assessee in the course of its business and was not a capital loss arising from the loss of capital invested in the subsidiary company ? The Tribunal, however, has referred one question refraining it as follows : " Whether the Tribunal was justified in law in treating the loss of Rs. 87,546 as a trading loss and not as a capital loss for the assessment year 1965-66 ?" The Revenue did not come up in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee were of the order of Rs. 47,976. The amounts due to the directors mentioned earlier had been repaid. The two directors mentioned were not connected with the assessee-company. There was a running account between the assessee-company and Group Marketing (India) Pvt. Ltd. on account of which there was a debit balance of about Rs. 87,546 at the beginning of April 1, 1965. This amount was written off by the assessee during the assessment year 1965-66 and was claimed as a bad debt. The ITO considered the facts as pointed out above and also noted that some of the office establishment charges of the subsidiary were transferred to the loan account with the assessee-company after the discontinuance of the activities of that subsidiary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he employees of the assessee-company were on the board of directors of the subsidiary company concerned and it is also fact that the income of the subsidiary showed an upward trend after the share capital of the subsidiary company was taken over by the assesseecompany. No doubt, the balance-sheet of the subsidiary as on 31st December, 1,965, does not inspire much confidence. However, the subsidiary was engaged in the business of consulting engineers and, by its very nature, the share capital and the assets were not formidable. The financial position was undoubtedly weak but the assessee did its very best to prop up the sagging finances of the subsidiary and bolster up its declining business. The assessee was intimately connected with the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the two decisions relied upon by him are of assistance to him. No doubt in the cases decided by the Supreme Court the question was about the allowability of the loss in respect of the managing agency income but here we have given a finding that the assessee was engaged in the business of financing its subsidiaries or that, at any rate, financing the subsidiaries was incidental to the assessee's main business activities which were diverse in nature. Therefore, that loss incurred by the assessee has to be allowed as on business account." As the Tribunal held that the assessee was engaged in the business as a holding company for financing its subsidiaries and on that basis and the other facts found by the Tribunal and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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