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TMI Blog1974 (5) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... company in connection with criminal complaints against the former managing director for misappropriation of company's funds and efforts to take forcible possession of company's business premises, respectively, are a permissible deduction from business profits of the assesseec company ? " The facts which are relevant to the first question, which can be gathered from the statement of the case and the supplementary statement of the case and the annexures thereto, may be briefly stated. The assessee in this case is M/s. Iron Traders Private Ltd., and the assessment year under reference is the year 1957-58, for which the relevant previous year is the financial year ending 31st March, 1957. The assessee along with other registered stockholders of iron and steel formed themselves into an association called the Iron & Steel Stockists (Civil Supplies) Association, Delhi, for the purpose of purchase and sale of disposal goods from the Government of India. This association (hereinafter called as the association) was formed in the year 1947. The members of this association contributed various sums according to their classification as A, B and C class of registered stockholders to the associa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight of the material placed before us in the form of the annexures to the supplementary statement of the case. Annexure " E " to the supplementary statement of the case is a copy of the proceedings of a meeting of the " A " and " B " class registered stock holders of iron and steel held on March 11, 1947, under the presidentship of the Deputy Director of Civil Supplies. In this meeting the following decisions were taken : " 1. An association of registered stockholders, who used to get their quotas regularly be formed and styled as Iron & Steel Stockists (Civil Supplies) Association, Delhi. This association will procure and sell all the steel. 2. The investment will be made by the registered stockholder according to classifications previously made and on which basis they had been getting their quota of steel from the Regional Deputy Iron and Steel Controller , Lahore. The net profits after deduction of all expenses of the association will be divided among the members in accordance with the capital invested on the basis of units allotted to each member as per para. 3 below." Annexure " G " is a copy of the rules and regulations of the association. According to these rules and reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et as at 30th November, 1949. LIABILITIES Rs. ASSET'S Rs. Deposit from members 5,90,000-0-0 Advance for goods: (as per list) Office commanding S. D. C. Harbanspura 8,39,326-6-0 Loans payable : Other advances : Laxmi Iron and Steel Mfg. 54,959-12-6 Delhi Iron & Steel Stockists Co. Ltd., (C. S.) Association Ltd. 6,339-8-0 Profit and Loss A/C Pt. Bhondumal Nihal Chand 11,052-14-6 Loss up to Nov., 1948.-- 3,690-15-11 Delhi Iron & Syndicate 46,993-0-0 L. Girdhari Lal Gupta 31,147-13-0 Loss of the year 16,470-11-9 Sh. Ram Chand Sharma 27,446-13-6 20,161-11-8 ------------------------ 1,71,599-12-0 Bank Overdraft payable : Punjab National Bank Ltd., Chawri Bazar, Delhi 1,04,224-1-11 Suspense : Pending adjustment 3-12-0 -------------------------- ------------------------------ 8,65,827- 9-11 8,65,827- 9-11 --------------------------- ------------------------------ Annexure " D " is the copy of the statement of accounts of M/s. Iron & Steel Stockists (C. S.) Association, Delhi, in respect of the assessee. The contributions or deposits made by the assessee and the payments made to the assessee are stated as under: " Statement of account of Messrs, Iron & Steel Stocki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was not in a position to sell the disposal goods to the association. It is, therefore, not clear what this amount of Rs. 22,500 paid by the assessee on March 31, 1955, actually represented. Then on January 16, 1957, the assessee received a sum of Rs. 72,244 from the association. This would mean that whatever was paid by the assessee to the association either as share capital or otherwise was paid back to the assessee. The payment of Rs. 10,000 by the assessee to the association on January 17, 1957, cannot obviously relate to the purpose for which the association was formed. A sum of Rs. 5,256 was adjusted on March 30, 1957, towards expenses. The nature of these expenses is not indicated. Whether this amount was deducted from the contribution of the assessee towards the share capital of the association or from the other amounts paid by it is therefore not clear. Under these circumstances, there is no material to support the contentions of the assessee either that the amount of Rs. 74,500 represented the price of the stock-in-trade of the assessee or that it represented the expenditure incurred for preserving the assessee's business. It cannot, therefore, be said that this amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the board of directors of the assessee-company passed on February 2, 1956. From this resolution, it would appear that it was brought to the notice of the directors of the assessee-company that an amount of Rs. 5,000 had been withdrawn from the account of the assessee-company with the Punjab National Bank Ltd., Kanpur, on October 1, 1955, through the branch manager of the assessee-company at Kanpur and this amount was handed over to Shri Shiv Saran Lal on the same date. It would further appear that Shri Shiv Saran Lal did not deposit this amount at the head office of the assessee-company nor did he utilise this amount for the business of the company. The directors of the assessee-company had called upon Shri Shiv Saran Lal to deposit this amount but the latter had failed to do so Annexure " M " is the copy of a resolution of the board of directors of the assessee-company passed on August 6, 1966. This resolution noted that Shri Shiv Saran Lal had failed to deposit the amount of Rs. 5,000 and, therefore, the managing director was authorised to file a criminal complaint as well as a civil suit against Shri Shiv Saran Lal in respect of this amount. Annexure " N " is the copy of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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