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TMI Blog1970 (3) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the assessee is entitled to a deduction of Rs. 6,15,000 against business income of the relevant accounting year under section 10(1) and/or section 10(2)(xi) of the Indian Income-tax Act? " One Shamboolal Govindji Jobanputra was carrying one the business of distributing cinema films in the name and style of Sunrich Pictures and of doing publicity in the name and style of Crescent Publicity. He was also the owner of a cinema theatre known as the Kamal Talkies and was carrying on business of exhibiting cinema pictures in that theatre. By an agreement dated 18th October, 1945, the assessee-company, jointly with five others, agreed to advance loans to the said Sunrich Pictures. Under that agreement the assessee-company was to advance a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inary shares shall be taken up by the assessee-company in full satisfaction of the amount due to the assessee-company in respect of the said original loan of Rs. 6,00,000. Another private limited company was intended to be incorporated to act as the managing agents of Sunrich Pictures Ltd. and by the said agreement it was agreed that the assessee-company I should be allotted 515 fully paid-up shares of Rs. 10 each in that Company. A private limited company of the name of Kinema Services Ltd. was incorporated. The assessee-company was allotted 515 shares of Rs. 10 each in that company and the company was appointed managing agents of Sunrich Pictures Private Ltd. The assessee-company had, in the account of Messrs. Sunrich Pictures maintained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,000 remained to the debit of that account. On 13th January, 1949, a petition for winding up of Sunrich Pictures Ltd. was filed in this High Court and an order was made thereon on 18th February, 1950, ordering that the company be wound up. The official liquidator as liquidator of the said company thereafter called upon the assessee-company and the said five other parties to return the said films to him. The assessee-company and the said five others returned the said films to the official liquidator. The directors of the assessee-company, as a matter of fact, passed a resolution on 14th March, 1952, for return of the said films. The resolution also resolved to write back the amount of Rs. 1,00,000 standing to the debit of Sunrich Pictures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business. The Tribunal has held that the assessee-company did not carry on any share business at the time when the debt was written off, that the debt did not subsist after the assessee-company acquired the said shares in Sunrich Pictures Ltd. and Kinema Services Ltd. and that the said shares were held by the assessee-company as a capital investment and not as a trade investment. Now, Mr. Mehta, the learned counsel for the assessee-company, has not seriously pressed the claim for deduction under section 10(2)(xi). The reason is quite obvious. After the assessee-company acquired the said shares there was no debt remaining outstanding against Shamboolal. As there was no debt outstanding, no question of writing it off as a bad or doubtful de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds difficulty in otherwise recovering his loan from his debtor. But, such is not the case here. As a matter of fact, the said shares were not the security of the assessee-company in respect of the amounts due by Shamboolal in respect of the said loan of Rs. 6,00,000. The question, therefore, of the assessee-company being compelled to take over the said shares in the course of its money-lending business for the purpose of recovering its dues does not arise. The second factor to be borne in mind is that Sunrich Pictures Ltd and Kinema Services Ltd. were new companies floated a considerable time after the loan was advanced by the assessee-company to Shamboolal. Nothing has been shown by way of any compulsion or obligation on the assessee to ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not only in a newly floated company, but were not even quoted in the market and it would be difficult for the assessee-company to dispose of those shares within any reasonably short time and the acquisition cannot therefore be said to be temporary. Mr. Mehta relied upon a decision of this High Court in Bansilal Ganga ram v. Commissioner of Income-tax. The principle which that decision lays down is that whether a particular property acquired by a money-lender is his capital asset or trading asset is always a question of fact to be deter mined on the facts of each case, depending on the manner in which the money-lender deals with the property after acquiring it in the course of money-lending. The ratio of that decision, however, has no appli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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