Law: Income Tax Act, 1961

Section: 256(1)

Income-tax---Business loss---Assessee-company engaged in managing other companies and in financing---Assessee-company financing managed company through its subsidiary---Loss incurred in transaction---Deductible as business loss. The assessee-company was engaged in managing other companies and also in financing. Monies were advanced by it to a company managed by it through its 100 per cent subsidiary. Subsequently, it took over the loan and sold it to another company for a lesser sum and wrote off the loss. The Tribunal held that it was entitled to deduct the loss. On a reference Held, that because of certain difficulties, the assessee could not directly advance the loan to the company managed by it. It advanced the sum to its 100 per cent subsidiary, which in turn, loaned the money to such managed company. The financing was really done by the assessee and such financing was-incidental to its business of managing agency. Hence, the loss incurred by the assessee in financing its subsidiary must be allowed as .a business loss. CIT v. Gillanders Arbuthnot & Co. Ltd. (1982) 138 ITR 763 (Cal.) ref. JUDGMENT AJIT K. SENGUPTA, J.---In this reference under section 256(1) of the Income-tax Act, 1961, the following questions of law have been referred to this Court: "(1) Whether, on the facts and in the circumstances of the case, th:, Tribunal's finding that the loan of Rs.48,52,951 was advanced by the asscsscccompany in the ordinary course of its business is based on relevant and adequate evidence and is reasonable? (2) On the facts and in the circumstances of the case and especially in view of the fact that part of the loan of Rs.48,52,951 was advanced by Burlow & Co. Ltd. and not by the assessee-company itself, was the Tribunal justified in holding that the sum of Rs.21,96,390 out of the aforesaid amount was allowable as a bad debt while computing the assessee's ,total income and that, it, ,was not a capital loss? Shortly stated, the facts are that the assessee is a limited company an,? derives income from managing agency and from various other sources. Air conditioning Corporation Limited was a company managed by the assessee-company. Another company, Burlow…

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