TMI Blog1961 (10) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... the borrower. Such advances were made to one Kathiresan Chettiar and Solaiappa Chettiar on foot of agreements entered into. These agreements are of the year 1944. It would also appear that such advances had been made even from 1942 and in fact the advances of Solaiappa Chettiar were in continuation of the earlier advances made in respect of a mill which mill was subsequently purchased by Solaiappa Chettiar. In November, 1945, due to misunderstandings and disagreement among the partners, the assessee partnership had to be dissolved. A resolution was passed by the partners to this effect. It was decided on that occasion that the assessee should sell the land, buildings and machinery belonging to the business but recover the outstandings a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee's business activities, as the partnership dead contained no provision for financing outside parties. He further held that the debts had become bad in 1945 itself and could not therefore be taken into account in the assessment for 1950-51. An appeal was taken to the Appellate Assistant Commissioner who differed from the Income-tax Officer and held that the advances were in the course of the assessee's business, that the write-off was genuine and that the debts bad not become had except in the previous year relevant to the assessment year. The deduction was accordingly allowed. The department appealed to the Tribunal. The Tribunal took the view that the financing of the other oil mills was part and parcel of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verned by memorandum or articles of association which generally sets a limit to the scope of the activities of the company. For a partnership to carry on business, it is not generally necessary that there should be a deed setting out the scope of the business. It is open to the members of the partnership to embark upon any line of activity and so long as that line of activity is of such a nature that it can be regarded as business as generally understood, it cannot be said that the activity is not part of the business of the partnership. We have already referred to the fact that the system of making advances to other mills were commenced even in 1942. By virtue of this line of activity, the assessee was getting not only interest on the outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g further advances after it stopped its general business. Both in the representations made to the Income- tax Officer and in the appeal to the Appellate Assistant Commissioner, the assessee pointed out that it was impossible to call in the advances at short notice and that, if the firm was to recover the amounts, it had to keep the borrowers going in business. It was, therefore, necessary to make further advances which the firm did as part of its activity. The Income-tax Officer apparently declined to accept this contention and on no material whatsoever he chose to infer that the advances must, to the knowledge of the assessee, have become incapable of recovery even in 1945, a view which had been rightly found incorrect both by the Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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