TMI Blog1962 (4) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions in gur carried on by its members. The company acted as principal to principal in transactions with its own members and when acting as clearing house for profits and losses incurred the assessee also used to charge certain fees from its members. As there were heavy fluctuations in the prices of gur, the Government, by a notification dated February 15, 1950, banned speculative transactions in gur. After the ban was imposed the members of the company decided that the pending contracts should be squared up at the closing rates of February 14, 1950. This gave rise to several civil suits by the members in defending which the company had to incur certain expenses. One of the members, namely, Mohan Lal Co., applied for the widing up of the company and for the appointment of a liquidator. Ultimately the widing up application was dismissed by this court. This court held the civil court should give a finding whether Mohanlal was a creditor. In this proceeding also the company had to incur litigation expenses. Certain other suits were filed against the company by some of its constituents. It incurred expenses in defending these suits also. The question which the Income-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n stated in the beginning of this judgment. We have gone through the various orders and in the first place we find that the question that was actually agitated before the Tribunal was not whether the litigation expenses amounting to ₹ 27,380-9-0 were allowable as business expenditure under section 10(2)(xv) but whether the amount could not be allowed to be set off as a loss against the other income of the assessee under section 24(1) of the Income-tax Act. It is true that in beginning of paragraph 2 of the appellate order it is stated that the dispute relates to the disallowance of litigation expenses but the last sentence in that paragraph states the finding in the following words: Consequently, the question of its setting off under section 24(1) does not arise. This means that the question which has been referred to us was not the question raised before and decided by the Tribunal. In this view it is not strictly necessary for us to answer the question which has been referred to us and it would be proper to return the reference unanswered on the ground that the question of law referred of us does not arise out of the appellate order of the Tribunal. As, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany, namely, Vijay Veopar Chamber, for carrying on business in other commodities. Its office premises and its furniture were let out to this new company. The ban was lifted by the Government in 1954 but the company did not revive its business. On the coming into force of the Government ban all the members of the company jointly decided that pending contracts should be squared up at the closing rates of February 14, 1950. If the intention of the company was to continue its business there was no occasion for such a decision by the embers of the company, which is consistent only with the view that the Government having prohibited transactions in gur, in which alone the company had been doing business, whether on its own account or on behalf of its members, it was felt that this business had come to an end and could no longer be done and that it only remined to square up pending transactions. The decision to square up pending transactions in this manner was in the nature of realisation of assets and closing up of a business or of winding up of a company. It is not clear whether the decision was arrived at by all the members of the company in regular general meeting of the company or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us years corresponding to the assessment years in question: vide the full bench decision of the Bombay High Court reported in B.M. Kamdar, In re [1946] 14 I.T.R. 10. It has been argued before us by learned counsel for the assessee on the basis of a decision of the House of Lords reported in Commissioners of Inland Revenue v. South Behar Railway Co. Ltd. [1925] 12 Tax Cas. 657, 712 that so long as trade debts remained undischarged would be a presumption that a company continued to carry on business as long as it is engaged in collecting periodically debts falling due to it in the course of its former business. Business is not confined to being busy; in many businesses long intervals of inactivity occur. The facts in the above House of Lords' case have been summarized in the head note as follows: Down to 1906 the South Behar Railway was held by the Respondent Company, namely, the assessee (subject to an option to purchase by the Secretary of State for India) and worked by another company on behalf of Secretary of State, the Respondent Company being entitled to a share in the profits in consideration of having supplied funds and materials for the construction of the railway ..... X X X X Extracts X X X X X X X X Extracts X X X X
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