TMI Blog1967 (3) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... come from insurance agency. Amer-Hind Manufacturers Limited was one of the companies for which the appellant-company was appointed managing agents from July 16, 1950. It was previously managed by another company called "American Agencies Limited". Amer-Hind Manufacturers Limited was engaged in the manufacture of carbon paper, ink and other allied products. It was in need of large funds for carrying on its manufacturing operations. The managing agency agreement between the appellant-company and Amer-Hind Manufacturers Limited provided that the appellant-company should lend or advance the necessary amounts required by the managed-company. In accordance with this agreement, the appellant-company advanced certain moneys to the managed-company f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance in respect of Rs. 4,03,203 in computing the profits of its business for the assessment year 1956-57. While examining this claim, the Income-tax Officer held that there was no prospect of the appellant-company recovering the amount from Amer-Hind Manufacturers Ltd. But the Income-tax Officer observed that under the terms of the managing agency agreement it was not obligatory on the part of the appellant-company to advance the amount and therefore the loss sustained by the appellant-company was a capital loss and it was not liable to be deducted as a business expenditure. The appellant-company preferred an appeal to the Appellate Assistant Commissioner of Income-tax who also rejected the claim. The appellant-company thereupon took the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant-company that the High Court has erred in law in not keeping in view the scope of the question referred to it. It was pointed out that the question referred to the High Court was, Whether there are materials for the Tribunal to hold that the debt in question was incurred in the course of the business so as to make its loss deductible under section 10(2)(xi) ", and it was contended that the High Court had no justification in observing that the advances made and the losses incurred by the appellant-company related to the structure or framework of the managing agency business and therefore the loss arising out of such advances and loans could only be capital loss. The argument was stressed on behalf of the appellant-company that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the necessity of the managing agent to finance the managed company. In the course of its order, the Appellate Tribunal has stated as follows : " It was notorious that the old managing agents could not deliver the goods, they having no funds and the managed-company was placed in a strait jacket as regards finance. Apart from clause 14 of the agreement, it is patent on the face that the assessee was taken in as managing agent replacing the old one just because it had resources and could find funds for making the managed company work. There is thus no substance in the objection of the Appellate Assistant Commissioner." The Appellate Tribunal also referred to the fact that the appellant-company was carrying on the business of managing-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he findings of fact recorded by the Tribunal. We consider that the High Court was in error in disregarding the findings of fact which the Appellate Tribunal has recorded. As we have already indicated, there was proper material before the Appellate Tribunal in support of its finding that the debt in question was incurred in the course of the business of the appellant-company so as to make it deductible under section 10(2)(xi) of the Income-tax Act. The Appellate Tribunal has found in this case that it was part of the managing agency business to provide funds to the managed company and there was no justification for the High Court to disregard the finding of the Tribunal on this aspect of the case. Reference has also been made to sub-clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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