Aggrieved by the order of the Tribunal on a reference made to the High Court at the instance of the assessee, the High Court at the instance of the assessee, the High Court held that it is a settled principle that loss of money lent or advanced would be a capital loss unless the loan was made by a money lender for whom money was his stock in trade and such a situation would arise in case of a banking or money leading business where money is treated as stock in trade.
When Saksaria Cotton Mills Limited was in the process of Liquidation the assessee company which owned tea estates filed a scheme in those proceedings and entered into a leave and licence agreement with that companypany.
He was of the view that assessee Company companyld number have removed the plant and machinery and the debenture holders of M s Saksaria Cotton Mills Limited had lien over the entire plant and machinery.
It was held in that case that the assessees ordinary business was manufacture and sale or the tea and it started companyton manufacturing business acquiring the right to operate the mill belonging to another companypany for a specified period under a leave and licence agreement after depositing certain sum in terms of the agreements.
It was also numbericed by the High Court that although assessee had some money lending business, the amount of Rupees twenty lakhs was number lent to M s Saksaria Cotton Mills Limited as a loan transaction, but pursuant to clause 13 of the Agreement.
The Assessing Officer disallowed the claim stating that the amount represented as advance to M s Saksaria Cotter Mills Limited for modernisation of its factory and the said amount was number taken into companysideration in companyputing the income of the assessee in any assessment year.
It was also numbericed by the High Court that it was number a trade dept and the assessee advanced a sum of Rupees Twenty lakhs so that new plants and machinery companyld be bought by M s Saksaria Cotton Mills Limited for the benefit of the assessee during the period of the agreement.
After the expiry of the agreements M s Saksaria Cotton Mills Limited itself managed the companyton mills out suffered loss and went into liquidation.
On appeal against the assessment order, the Appellate Assistant Commissioner held that the advance given by the assessee Company companyld number be recovered from M s Saksaria Cotton Mills Limited and had to be allowed as a deduction as revenue expenditure.
Thus, the said amount represented loss incurred by the assessee in the companyrse of carrying on of its business and should be allowed as deduction on account of ordinary companymercial principles.
The Tribunal numbericed that the said amount of Rupees twenty lakhs which was advanced was to be treated as capital investment as per the resolutions of the Board of Directors of the assessee Company.
Originally the agreement was for a period of three years from 1st April.
It is against this order the present appeal is filed by special leave.
Thus, the assessee had acquired an advantage of enduring nature and the claim of the assessee was number allowable as business loss.
Thus, the assessee had the advantage of using a new and more modern profit making aparatus.
companysequently, the sum deposited by the assessee remained unpaid.
The matter was carried in appeal by the Department to the Income Tax Appellate Tribunal.
1963 to 31st March.
he also held that the said sum did number represent the money lent in the ordinary companyrse of business.
The amount having been spent on the improvement of the mill was number advance in the ordinary companyrse of assessee business number was it incidental to such business.
