Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business deduction/Loss - Allowable as - Assessment year 1961-62 - Assessee - Company along with two others promoted a company namely 'N' Ltd. and started another company i.e. VHD Ltd. as managing agents of 'N' Ltd. - They held shares in both companies - Assessee had also advanced certain money to 'N' Ltd. which went into liquidation during relevant assessment year - Assessee claimed loss in respect of value of shares held by it in 'N' Ltd. and amount outstanding form that company, as business loss - -Whether, since assessee company never traded in shares of 'N' Ltd. value of shares held by it could not be allowed as business loss - Held, yes - Whether, however, in view of fact that money lent by assessee to company under liquidation was with object of providing finances for a company in which assessee was substantially interested, debt was to be regarded as directly springing from its business activity and therefore, loss of debt amount was deductible as business loss - Held, yes FACTS According to the memorandum of association, the main object of the assessee was to acquire certain managing agency business from the predecessor firm as also to carry on business as managing agents, selling agents, commission agents, brokers etc. It could also carry on business of money lending, discounting and purchasing of bills and other negotiable instruments. The assessee-company along with two others promoted a company called N Ltd. The assessee and the two others also started another company called VHD Ltd. to manage N Ltd. as its managing agents. The shares in VHD Ltd. were held equally by the three parties, viz., the assessee-company and the two others. These three parties, also acquired certain shares in N Ltd. The assessee had also advanced certain moneys to N Ltd. During the relevant to assessment year N Ltd. went into liquidation, and the assessee accordingly claimed in its assessment Rs. 1,60,185 as loss in respect of the value of the shares held by the assessee in that company. It also claimed Rs. 1,30,925, being the amount outstanding from that company as a business loss. As far as the first claim was concerned, the ITO…

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