Law:

Section:

Income-tax--Capital or revenue expenditure-Assessee company partner in managing agency firm--Money advanced bymanaged company to third party on recommendation of a partner of firm--Third party repudiating claim-Assessee-company agreeing to make good part of the loss to managed company---Amount paid by assessee-company, a reve­nue expenditure. C.I.T. v. Delhi Safe Deposit Co. Ltd. (1974) 96 1 T R 597 affirmed. British Insulated and Helsby Cables Ltd. v. Atherton (1926) A C 205; (1925) 10 C 155 (H L), C. I. T. v. Malayalam Plantations Ltd. (1964) 7 S C R 693; 53 I T R 140 (S C); Mitchell v. B. IV. Noble Ltd. (1927) 1 K B: 19; 11 T C 372 (C A); Smith v. Incorporated Council of Law Reporting for England and Wales (1914) 3 K B 674 (K B) and Usher's Brewery Ltd. v. Bruce (19151 A C 433 (H L) ref. JUDGEMENT VENKATARAMIAH, J: This appeal by special leave is directed against the judgment and order dated 22nd larch 1973, of the Delhi High Court in Income-tax Reference No. 65 of 1968 made by the Income-tax Appellate Tribunal. Delhi, pursuant to an order made by the High Court under section 256(2) of the I.-T. Act 1961 (hereinafter referred to as "the Act"). The facts of the case are these: The assessee (the respondent therein) is a Public Limited Company. The assessee was a partner of a firm of managing agents known as Messrs Morari Lai Batra & Co. (hereinafter referred to as "the managing agency firm") which was managing another Public Limited Company called Messrs Bharat Carbon & Ribbon Manufactur­ing Co. Ltd. (hereinafter referred to as "the managed company"). There were in all three partners in the managing agency firm, the two other partners being V. K. Batra and Lai Balvant Roy who held 50 % share and 25 % share respectively in .hat firm. The assessee held the remaining 25 %. share. At the instance of V. K. Batra who held the major share in the managing agency firm, a large sum was advanced ay the managed company to a firm -known as Messrs H. K. Sinha & Sons at Calcutta. When a demand for repay­ment was made. Messrs H. K. Sinha & Sons repudiated the claim except to the extent of Rs. 11,409 and ultimately the managed company suffered a loss to the…

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