TMI Blog1978 (9) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... work for Tukvar Co. Ltd. which the directors of the latter may decide and would receive reasonable and proper remuneration therefor as would from time to time be agreed between the parties. (d) The general management of the affairs of Tukvar Co. Ltd., viz., business transactions, property etc., would be entrusted to the assessee, who would be under the control and direction of the directors of Tukvar Co. Ltd. (e) In addition to the power or authority expressly conferred by the agreement the assessee would be entitled to exercise powers of the directors of Tukvar Co. Ltd. as may from time to time be lawfully delegated to them provided that the assessee would not exercise power to borrow moneys except within limits previously fixed by the directors at a board meeting. (f) The assessee would be at liberty at any time to resign its office as secretary upon leaving at the registered office of the Tukvar Co. Ltd. three weeks' notice in writing of their intention to do so. The assessee acted as the secretary of Tukvar Co. Ltd. till November, 1957. In 1955, Tukvar Co. Ltd. was in need of funds. On a guarantee furnished by the assessee, Tukvar Co. Ltd. was allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AAC confirmed the order of the ITO. There was a further appeal by the assessee before the Tribunal, where it was contended that the assessee as managing agent of other companies had to carry on the business of the managed companies to the best of its capacity and that the bank guarantee had been furnished by the assessee for such business consideration. Whatever be the reason for the withdrawal of the suits by the parties, the fact remained that the assessee did forgo its claim against Tukvar Co. Ltd. and could not realise anything from the latter. It was contended on behalf of the revenue, inter alia, that under the agreement the assessee was under no obligation to provide finance to Tukvar Co. Ltd. and, therefore, the guarantee was not given for any business purpose. Consequently, the loss arising could not be said to have been incurred during the course of the assessee's business. Alternatively, it was contended that the assessee withdrew its suit against Tukvar Co. Ltd. not because of the latter's inability to pay the debt or that the assessee would not be able to realise the amount but because Tukvar Co. Ltd. had themselves filed a suit against the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, it could not be said that the assessee had furnished the guarantee in favour of Tukvar Co. Ltd. out of business consideration. It was contended further that the main consideration of the assessee in withdrawing its claim against Tukvar Co. Ltd. was the withdrawal of the latter's claim against the assessee. There was a compromise as a result of which the debt became extinguished. The consideration for the extinguishment of this debt was forgoing of the counter-claim of Tukvar Co. Ltd. against the assessee. Learned counsel submitted that, on such facts, it could not be held that the debt had become bad. On the contrary, the debt had been discharged and ceased to be a debt. In support of the above contentions, learned counsel drew our attention to a decision of the Privy Council in CIT v. S. M. Chitnavis [1932] 2 Comp Cas 464; AIR 1932 PC 178 ; LR 59 IA 290, where it was held that a debt which had become bad within a period which did not fall within the year in question, it could not be treated as a bad debt for that year. Another decision of the Privy Council in F. E. Dinshaw v. CIT [1934] 2 ITR 319 was also cited. A decision of the Supreme Court in Essen Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf was under any legal obligation to finance the sole selling agent or to stand guarantee for loans obtained by such agent. The guarantee furnished was not found to have facilitated the carrying on of the assessee's business even indirectly or to be in the larger business interests of the assessee. The sum claimed was held not allowable as a bad debt under s. 10(2)(xi) of the Indian I.T. Act, 1922. Learned counsel for the assessee contended on the other hand that whether a debt is bad or not is a question of fact in every case. He submitted that it had been found by the Tribunal in the instant case that the debt had become bad in the previous year and the revenue did not challenge this finding. The matter, therefore, stood concluded. In support of his contentions, learned counsel relied on the observation on behalf of the Privy Council in the case of Chitnavis [1932] 2 Comp Cas 464; AIR 1932 PC 178; LR 59 IA 290, cited on behalf of the revenue : "Whether, a debt is a bad debt, and if so, at what point of time it became a bad debt, are questions which in their Lordships' view are questions of fact, to be decided in the event of dispute by the appropriate Tribunal, and not by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the debt of the managed company was incidental to the carrying on of the assessee's business. Such findings have not been challenged by the revenue and which, in view of the settled law, stand concluded. Learned counsel for the revenue drew our attention to the agreement between the assessee and the said Tukvar Co. Ltd. and invited us to hold that it was no part of the assessee's business to lend money to its employees. This may be a possible conclusion. But there was sufficient material before the Tribunal to arrive at a different conclusion. For the reasons given above, we are not inclined to interfere with the finding of the Tribunal. That question 1(b) is ancillary to question 1(a) was not seriously disputed. In that view of the matter, we answer both the questions in the affirmative and in favour of the assessee. Our notice has been drawn to several documents which have been incorporated in the paper book filed in this reference. The documents are not mentioned in the index of the book, nor have they been incorporated by the Tribunal in the statement. We directed the revenue earlier to file an affidavit stating the facts and circumstances under which the said doc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
