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TMI Blog1970 (8) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ries for advances made to the Gwalior factory. Under a notification issued by the Central Board of Direct Taxes the income arising to the assessees from the Gwalior factory during the account year ending March 31, 1955, was exempt from payment of income-tax and super-tax. In proceedings for assessment for the year 1954-55 of the assessees the Income-tax Officer disallowed, out of the amounts claimed for "shortage", Rs. 3,64,000 in the Gwalior factory, and Rs. 35,000 in the Hyderabad factory. Again the Income-tax Officer held that K. L. in its transactions had incurred a loss of Rs. 1,35,566, and since it had invested Rs. 20,88,077 in the Gwalior factory, income from which was exempt from payment of tax, loss amounting to Rs. 59,000 being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e partners' capital contribution. The best and the reasonable course under these circumstances was to allocate the loss in the proportion of the capital invested in the Gwalior branch to the total capital invested in the money-lending business by the branch. The allocation which has been made on that basis appears to us to be quite fair and reasonable." The Tribunal rejected an application of the assessees under section 66(1) of the Income-tax Act, requesting that certain questions be referred for opinion to the High Court. The assessees then applied to the High Court of Madhya Pradesh for an order directing the Tribunal to draw up a statement of case and to refer the following questions of law which arose out of the order of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,60,000 disallowed, the disallowance not being based on any irrelevant material, and accordingly no question of law in that behalf arose out of the order on which the Tribunal could be directed to state a case. Referring to the remaining two questions, the High Court observed: "In regard to the other two questions (Nos. (4) and (5)) sought to be referred, learned counsel for the assessee urged that no loss sustained in the money-lending business could at all be allocated to the assessee-firm. This was never the stand taken by the assessee before the taxing authorities or the Tribunal.....there can, therefore, be no question of the Tribunal being required to state the case of the assessee on a point which was never urged before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs that K.L. had made, and on that score no part of the loss could be allocated to the Gwalior factory and the entire loss must be taken into account in the working of K.L. The Tribunal rejected that contention because in their view the "partners' capital and the borrowings made by K.L. went into the investment of the Gwalior factory and it was not possible to give a finding whether the entire capital which was invested in the Gwalior factory was out of the partners' contribution", and that "the best and reasonable course was to allocate the loss in the proportion of the capital invested in the Gwalior factory to the total capital invested in the money-lending business by" K.L. K.L. was the name of the financial organizations of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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