Law: Income Tax Act, 1922

Section: 4(1),12(7)

Law: Income Tax Ordinance, 1979

Section: 23(1),22(a)

(a) Income-tax Act (XI of 1922)---S. 4(1), Explanation--Income-tax Ordinance (XXXI of 1979), S.12(7)--Department having not accepted relevant amount as s debt cannot treat it as a loan or advance falling under the mischief of S.4(1), Explanation of the Act or S.12(7) of the Ordinance. (b) Income-tax Ordinance (XXXI of 1979)-- ---Ss. 23(1) & 22(a)--Loss in the course of business-Assessee-¬Company stood guarantee to a Bank for advance of loan to another company which was having assessee-Companys controlling interests and had been advancing finances to the assessee-Company to take it out of its financial troubles--Loan was obtained on joint and several security of both the companies--Part of loan amount was also advanced by the other company to the assessee-Company--Failure of other company to pay back the loan advanced to it and assessee-Company had to pay the said amount to the Bank--Not possible to distinguish the two loans as separate transactions and attribute the loss with regard to one transaction to one business and with regard to the other transaction to the other business--Assessee,held, suffered the loss in course of business which was incidental to the business of the company and loss was not of the capital nature. Commissioner of Income-tax v. Birla Brothers (Private) Limited (1971) 24 Tax 12; Madan Gopal Bagla v. C.I.T. West Bengal (1956) 30 I T R 174; Jokhiram Ramchander v. C. I. T. Bombay City (1966) 61 I T R 693; Madras H.C. C.I.T. v. Indian Overseas Bank Ltd. (1963) 40,,1 T R 725; National Petroleum Co. Ltd. v. C.I.T. Bombay (1945) 13 I T R 336; C.I.T. v. Jagannath Kisonlal (1956) 30 I T R 654; (1961) 41 I T R 360 SC; Jokhi Ram Chandra v. C.I.T. Bombay (1966) 61 I T R 693; Indore Malva United Mills Ltd. v. State of Madhya Pradesh and others (1965) 55 I T R 736 SC; C.I.T. v. S.R. Pillai (1950) 18 I T R 85; C.I.T. v. M.G. Bag19 (1952) 21 I T R 142 and C.I.T. v. Chettia (1946) 14 I T R 236 ref. (c) Income-tax Ordinance (XXXI of 1979)-- ---Ss. 23(1) & 22(a)--Business loss--Where accounts are kept on receipt basis allowance must be granted in the year of disbursement irrespective of the question when the liabilities arose--Where the accounts are kept…

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