TMI Blog1967 (8) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... " Narang Industries Limited (hereafter referred to as the assessee-company) is a public limited company owning a distillery. The assessee-company mainly derives its income from running a distillery. In 1947, one Shri Prem Singh approached the assessee-company with a scheme for manufacture of bricks. An arrangement was arrived at between the assessee-company and said Shri Prem Singh to start a brick kiln and the terms of the arrangement were confirmed by the assessee-company by letter dated February 17, 1947. Under that letter the assessee-company, inter alia, agreed to " take up the business on the following terms and conditions " : (a) That the assessee-company shall finance the business up to the amount required for turning out 50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compromised. Under the compromise the assessee-company was paid Rs. 5,000 and two claims of Rs. 3,063 and Rs. 2,950. Nothing, however, could be recovered on these claims and Rs. 15,700 remained due to the assessee-company. The said amount of Rs. 15,700 was written off in the accounting year relevant to the assessment year 1956-57 with which we are concerned. It is relevant to point out that the learned subordinate judge, who tried the suit mentioned above, decided the same on the footing that there was a partnership between the parties. It is in these circumstances that this amount of Rs. 15,700 was claimed as a bad debt under section 10. The Income-tax Officer decided that the loss was not allowable, being loss of capital. This finding w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus a capital loss and not a loss incidental to the business which the assessee-company was carrying on. In this view, it would be immaterial whether the assessee-company intended to carry on the new business in partnership with Shri Prem Singh or otherwise. Section 10(2) can have no applicability in these circumstances. The learned counsel for the assessee-company then argued that the loss could be allowed under section 10(1). Since we have held that the loss was not incidental to the assessee-company's business but was of a capital nature, section 10(1) is also not attracted. The question is, therefore, answered in the negative and against the assessee-company. There will, however, be no order as to costs. Question answered in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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