9911796707
TMI Blog1957 (4) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... al against the assessee and also against Ramkrishna Dalmia. The suit was brought by Chimanram Motilal on the original side of the Bombay High Court. The suit was numbered as Suit No. 1280 of 1943, and in that suit the assessee company was impleaded as the first defendant and Ramkrishna Dalmia as the second defendant. It was alleged in the plaint by Chimanram Motilal that as a result of a negotiation between Juthalal Motilal of the plaintiff's firm and Ramkrishna Dalmia it was agreed that in consideration of the financial assistance to be rendered by the plaintiff to the Dalmia Cement Company Limited and to the other concerns in which the second defendant (Ramkrishna Dalmia) was interested, he (Ramkrishna Dalmia) would admit the plaintiff as a partner with three annas share in the managing agency of the Dalmia Cement Limited, with effect from the 1st January of 1939. It is said that Ramkrishna Dalmia also agreed that he would induce the assessee company to enter into a written agreement, agreeing to give to the plaintiff as from January, 1939, a three annas share in the commission earned by the assessee company as the managing agents of the Dalmia Cement Limited. It was further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that there was any agreement effected between Chimanram Motilal and the assessee company. It was also denied that Ramkrishna Dalmia was authorised to enter into any agreement with Chimanram Motilal on its behalf. It was also denied that the plaintiff had deposited a sum of ₹ 10,00,000 with the assessee company or with any other concern on its behalf. The second defendant, Ramkrishna Dalmia, admitted that there was negotiation between him and Chimanram Motilal for the supply of finance to the assessee company by giving to the plaintiff a share in the managing agency commission; but Ramkrishna Dalmia alleged that the parties were not able to agree to the terms of the agreement and there was no concluded contract between the parties. The suit did not come up for trial. There was apparently some negotiation between the parties for a private settlement and as a result a sum of ₹ 4,25,000 is said to have been paid by the assessee company to Chimanram Motilal and the suit was dismissed by the Bombay High Court with the consent of the parties. The claim of the assessee is that the amount of ₹ 4,25,000 should be deducted from its taxable profits under section 10(2)(xv) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the supply of finance between the assessee company and Chimanram Motilal and that no money was advanced to the assessee company by Chimanram Motilal on the basis of any such agreement. It was contended by Mr. Sampath Iyengar that the parties compromised the dispute, and as a matter of law the compromise of a disputed claim made bona fide is a good consideration for a promise even if the plaintiff's claim turns out ultimately to be invalid. In support of this proposition learned counsel referred to Cook and Others v. Wright 121 E.R. 822, Callisher v. Bischoffshelm [1870] 5 Q.B. 449 and Jayawickreme and Another v. Amarasuriya [1918] A.C. 869. Mr. Sampath Iyengar also referred to a passage from the judgment of Bowen, L.J., in Miles v. New Zealand Alford Estate Co. [1886] 32 Ch. D. 266 at p. 291, which is to the following effect: "It is a mistake to suppose it is not an advantage, which a suitor is capable of appreciating, to be able to litigate his claim, even if he turns out to be wrong. It seems to me it is equally a mistake to suppose that it is not sometimes a disadvantage to a man to have to defend an action even if in the end he succeeds in his defence ; and I think ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its nature in business or in accountancy whichever way one likes to put it, because from the legal point of view there may be no difference whatsoever as between the parties between a capital and an income sum. It may be totally irrelevant to the legal relationships into which they are proposing to enter. When, however, the tertius gaudens, in the shape of the Revenue, appears on the scene, that matter which as between the parties may have been a matter of not the slightest importance becomes immediately a matter of very great importance, and it is necessary to examine the circumstances of each individual case, including any documents which require to be construed, in order to ascertain what is the character to be attributed to the payment." The next argument on behalf of the assessee is that there is no material to support the finding of the Appellate Tribunal that there was no agreement for the supply of finance between the assessee company and Chimanram Motilal and that no money had been advanced to the assessee company by Chimanram Motilal. It was submitted by learned counsel for the assessee that the High Court had jurisdiction to interfere with the finding of the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en produced in support of its contentions. The account of Messrs. Chimanram Motilal in the books of Dalmia Cement Limited shows that the Dalmia Cement Limited received a sum of ₹ 5,00,000 on the 1st March, 1938, for being passed on to Dalmia Cement and Paper Marketing Company Limited. The assessee company had, however, nothing to do with the Dalmia Cement and Paper Marketing Company Limited. The Tribunal has remarked that a balance of ₹ 1,303-12-3 outstanding on the 13th November, 1940, was transferred to the personal account of Messrs. Sriram Harjimal, which was a Hindu undivided family of which Ramkrishna Dalmia was the manager. There was a credit of ₹ 1,40,580-5-8 in the said account representing a transfer from the Karachi Branch of Dalmia Cement Limited on the 31st October, 1938. No copy of the personal account of Messrs. Chimanram Motilal in the books of Dalmia Cement Limited, Karachi, had been produced. The Tribunal drew an adverse inference from the non-production of this account and held that the sum of ₹ 1,40,500 and odd did not represent an advance made by Chimanram Motilal at all. The Tribunal also scrutinised the personal account of Chimanram Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no jurisdiction to interfere with the finding of the Tribunal on the question referred. The principle has been well stated by Lord Sterndale in Currie v. Commissioners of Inland Revenue [1921] 12 Tax Cas. 245 at p. 259: "The first question that has been debated before us is this: Is the question whether a man is carrying on a profession or not, a matter of law or a matter of fact? I do not know that it is possible to give a positive answer to that question, because it must depend upon the circumstances with which the court is dealing. There may be circumstances in which nobody could arrive at any other finding than that what the man was doing was carrying on a profession; and, therefore taking it from the point of view of a judge directing a jury, or any other tribunal which has to find the facts, the judge would be bound to direct them that on the facts they could only find that he was carrying on a profession. That reduces it to a question of law. On the other hand, there might be facts on which the direction would have to be given the other way. But between those two extremes there is a very large tract of country in which the matter becomes a question of degree; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship and, while doing so, to get paid as much as they could of the balance of their account'. So far as the object of getting payment of the balance of their account is concerned, the effect of that part of it is, as I have said, that they were trying to get payment of something due to them on trading account. But the real weight of the argument that was put before us was on the point as to termination of trading relation, and it was said that where you have a complex relationship, two companies with interlocked boards, the chairman of one holding a controlling interest in the other, a management agreement made, a hiring agreement made, loans, debentures issued, and so forth and so on, a payment for the purpose of getting rid of that complex relationship is not one which can be said to be wholly and exclusively laid out for the purposes of the appellant company's trade. It was also said that it was open to the Crown here to argue, as we were informed they had argued before the Commissioners, that, although the object of the payment might be for the purpose of trade, yet it was of a capital nature. It seems to me that, if we assume that the object was to terminate the tradin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the principle of Scammell's case [1939] 22 Tax Cas. 479 has any application to the present case. The second question referred to the High Court is "whether there was material before the Appellate Tribunal for reaching the finding that the memorandum of the oral agreement, dated the 1st March, 1947, was not a genuine document?" It was submitted by learned counsel for the assessee that the question of genuineness of the oral agreement was not argued before the Appellate Tribunal. In this connection learned counsel referred to the application of the assessee under section 66(1). In paragraph 22(b) of this application (page 26 of the paper book) it is mentioned that it was nowhere suggested during the course of the proceedings before the Income-tax Officer or the Appellate Assistant Commissioner that the memorandum of oral agreement was not a genuine document. It was also said that "to the best of the recollection of the assessee" even the Departmental Representative did not question the genuineness of the oral agreement before the Appellate Tribunal. But I do not accept the case of the assessee that the point was not argued before the Appellate Tribunal, for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in the application under section 66(2) made before the High Court. I accept the submission of Mr. R.J. Bahadur on this point and hold that there is no material to substantiate the contention of learned counsel for the assessee that the Appellate Tribunal has committed any mistake of record. The Tribunal also adverted to the circumstance that the execution of the memorandum had not been proved by the oral examination of the executants of the document. Lastly, the Tribunal has relied upon the circumstances that Chimanram Motilal was an uncle of Ramkrishna Dalmia, and Ramkrishna Dalmia was related to the shareholders of the assessee company and that Jaidayal Dalmia, a director of the assessee company, was a brother of Ramkrishna Dalmia. The argument of Mr. Sampath Iyengar is that none of these materials can justify the Appellate Tribunal in reaching the conclusion that the memorandum of oral agreement was not a bona fide document but was brought into existence on a subsequent date. Learned counsel referred to each of the materials mentioned by the Appellate Tribunal and contended that they were susceptible of inferences other than those drawn by the Tribunal. He also offered expla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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