TMI Blog1980 (7) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... were made as under in his account : Date Nature of Payment Amount Rs. 18-7-1961 Cash 1,000 15-9-1961 Through bank city 4,000 6-11-1961 Cash 2,500 30-4-1962 Paid by Luxmi Rattan Engg. Works Ltd. 7,500 30-4-1962 Transferred from general ledger 45,000 ------------- Total 60,000 ------------ The purpose for making these advances was stated to be to procure manufacturing licence under the provisions of the Industries (Development and Regulation) Act, and a licence or permit for the release of foreign exchange necessary for import of machinery, plant and equipment, for starting manufacture of fluorescent tubes. The assessee wanted to start this venture in collaboration with some West German parties, with whom an agreement had been entered into to that effect. Mohan Lal Vyas procured a manufacturing licence which was issued to the assessee on December 5, 1961, but he could not procure a licence or permit for the release of foreign exchange for the import of necessary machinery, plant and equipment, with the result that the Government revoked the manufacturing licence as well. Thereafter, the assessee filed a suit against Mohan Lal Vyas for recovery o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, agreed with the assessee and held that the claim could be allowed as a business loss under s. 28 of the Act. On the facts found it also held that the identity and genuineness of Mohan Lal Vyas had been established and that manufacture of fluorescent tubes was a business incidental to the assessee's business of manufacture of miniature bulbs. The Tribunal further held that the assessee had made the advance of the disputed amount to Mohan Lal Vyas to procure a manufacturing licence and a licence or permit for the release of foreign exchange to enable the assessee to import necessary machinery, plant and equipment. Mohan Lal Vyas did procure a manufacturing licence but he could not procure permit for release of foreign exchange and ultimately the manufacturing licence was revoked. On that view, it held that these amounts had been paid to Mohan Lal Vyas for the express purpose of starting an incidental business of manufacture of fluorescent tubes and since the whole enterprise ended in a fiasco, this amount of Rs. 60,000 became a dead loss to the assessee and it was bona fide written off in the previous year relevant to the assessment year 1964-65. The claim was thus allowed as a tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d embraces within its scope both the aspects, viz., the nature of the loss and the year in which it can be allowed. In our opinion, it does not do so. The question assumes that the disputed loss represented trading loss and it is only in respect of the year in which it is allowable that the opinion of this court has been solicited. The legal position in this respect is well settled and it is that the High Court can answer those questions which are actually referred to it; it cannot raise and answer new questions which have not been so referred. If the Tribunal refuses to refer under s. 256(1), a question of law which arises out of its order then the proper course for the court is to require the Tribunal under s. 256(2) to refer the same. What is open to the court is only this much that without raising new and different questions it can resettle or reframe the questions formulated by the Tribunal before answering them so as to bring out the real issues between the parties. Reference may be made to Karnani Properties Ltd. v. CIT [1971] 82 ITR 547 (SC), where it was laid down (p. 554): " The question as to the correctness of the facts found by the Tribunal was not before the High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be done by 15th of January, 1962, and in the event of delay or non-issue, he further undertook to return the amount. It may not be possible for this court to doubt the advance of Rs. 60,000 by the assessee to Mohan Lal Vyas between July, 1961, and April, 1962, since it was accepted by the Appellate Tribunal. From the above, it, however, comes out that Mohan Lal Vyas was to perform his part of contract by 15th of January, 1962, and in the event of his failing to do so, he was to return the amount to the assessee. In other words, on the facts found by the Appellate Tribunal, the advance of the disputed amount took place in the previous year relevant to the assessment year 1963-64, and further the contract itself was to be performed within that very year. It has been further found that the manufacturing licence which had been issued to the assessee on December 5, 1961, was revoked by the Government and we were informed that it was revoked on November 2, 1962. That will be relevant for the assessment year 1964-65. suit for recovery of this amount was filed some time in 1964, since the number of that suit was No., 106 of 1964. The suit was decreed ex parte but the decree was not put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot think that there would be much difficulty in answering the question. The disputed amount had been paid to Mohan Lal Vyas for obtaining a manufacturing licence and a licence or permit for release of foreign exchange. He did succeed in procuring a manufacturing licence which was issued on December 5, 1961, but he could not succeed in obtaining a licence or permit for release of foreign exchange. As noted above, it was the assessee's case before the Appellate Tribunal itself and that was on the basis of the stamped receipt dated December 31, 1961, given by Mohan Lal Vyas that the permit or licence for release of foreign exchange would be obtained by 15th January, 1962, and, in the event of delay or non-issue, he would return back the amount. He could not succeed in obtaining such permit or licence and, therefore, the default occurred in this very year. On either view of the matter, it was an expenditure or a loss of this year only because the money was paid for obtaining the licence. Since it had been paid in this very year it became an expenditure of this year. If the liability was to arise on the occurrence of default, then also it became a legal liability of this year because th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the liability is capable of estimate only and its actual quantification has to be postponed. According to Sri Gulati, the disputed loss would be the loss of the year in which the contract came to an end or became incapable of performance. Since the manufacturing licence was revoked on November 2, 1962, it would be taken that the contract came to an end and became incapable of performance and, therefore, it became a loss of the year under consideration. We find no merit in this submission because it was never the basis of the assessee's claim that the contract became impossible of performance when the licence was revoked. On the contrary, as we have noted above, the assessee's case before the Appellate Tribunal on the basis of the receipt dated December 31, 1961, was that Mohan Lal Vyas had undertaken to obtain foreign exchange (barter licence) which was expected to be finalised by 15th January, 1962, and in the event of delay or non-issue he further undertook to return the amount. The Appellate Tribunal, accepting this contention, observed : " It is true that Shri Mohan Lal Vyas was able to procure the manufacturing licence for the assessee. The fact, however, remains that h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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