# WEST BENGAL v. CALCUTTA AGENCY LTD

- **Citation:** [1950] 1 S.C.R. 1008
- **Court:** Supreme Court of India
- **Decided:** 1950
- **Bench:** Shri Harilal Kania Cj, Patanjal! Sastri, Das
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/west-bengal-v-calcutta-agency-ltd-126
- **Pages:** 11

## Headnote

fo·li.tn Income-tax Act (XI of 1922), ss. 10 (2) (xv), 66-Reference-Jwrisdiction of High Ooilf·t-Duty to decide case ori facts
stated by Tribuna.l-Accepting arauments of CO'ltnsel as proved fa.cts
and basing decision on them, impropriety of-Business expenditnrePayments to avoid disclosure of misfeasance of director.~-Burden of
prcof.
The jurisdiction of the High Court in the matter of incometax references is an advisory jurisdiction and under the Inco:netax Act the decision of the Appellate Tribunal on facts is final
unless it can be successfully assailed on the ground tha~ there was
,_
S.C.R.
SUPREME COURT REPORTS
1009
no evidence for the conclusions on facts recorded by the Tribnnal.
1950
It is therefore the duty of the High Court to start by looking at
tbe facts found by the Tribunal and ans~'e!: the questions of lHW Cornmiss:oritr of
on that footing.
It is not p1·oper to depart fron1 this rule of law
Incnme-tax,
as it will convert the High Court into a fact finding authority,
Wcst Bengal
which it is not, under the advisory jurisdiction.
v.
As the statement of the case prepared by the Appellate Tri· Calcutta Ag•ncy
bunal in accordance v.'ith the rules fran1ed under the Income-tax
Ltd.
Act is prepared with the knowledge of the parties concerned and
they have full opportunity to apply for any addition or deletion
from that statement, if they have approved of the state1nent n1ade
by the Tribunal, it iR the agreed etatement of facts by the parties
on w bich the Iligh Court has to pronouncs its judgment.
The
High Court would be acting improperly if it takes the arguments
of the counsel for the assessee as if they were facts and bases its
conclusion on tboso arguments.
One of the directors of the assessee company, acting in the
capacity of managing agents of certain l\'fills, had dra\vn some
hundis in the name of tho Mills, aod as the Mills repudiated liability, suits were filed on the hundis against the Mills and the
assessees. The assessees thereupon agreed to reimburse the Mills
by permitting the latter to deduct a moiety of the commission
pa.yable to them under the agreement of managing agency, against
payments which the Mills may have to make under the decrees.
In their assessment fio income-tnx the assessees claimed that the
amounts so deducted should bo excluded from their asRessable
income as business cxpenditme under s. 10 (2) (xv) of tbe Incometax Act.
The Appellate Tribunal found that the assessees had
agreed to pay off the decree a1nount from the remuneration due to
them, that the decre.e was passed against them evidently for some
misfeasance committed by their directors, that the books of both
companies showed that the assessees were paid their remuneration in full, and that the expenditure was not therefore laid out
for the purpose of carrying on the business, and also that, as the
payment was made for the liquidation of a debt, it was not a
revenue expenditure. In the High Court the assessees' counsel
argued, relying on the case cf Mitchell v. B. W. Noble Ltd.(1),
that the payments were made by th• assessees to avoid the
publicity of an action against them and the consequent exposure
and loss of reputation as a. managing agency company, and as
such the payments were deductible as business expenditure. The
High Court accepted this argument and reversed the decision of
the Tribunal.
Held, that the High Court acted wrongly in accepting the
argurr1ents of the assessees' counsel as if they were proved facts
and basing its decision on them ; and, as the facts necessary to
support the claim for exemption under s. 10 (2) (xv) had not been
established at any stage of the case, the assessees were not entitled
to the deduction cJ.imed.
(11 (1927] l K.B. 719,
1~9
•
1010
SUPREME COURT REPORTS
[1950)
1950
Judgment of the Calcutta High Court reversed.
0
. .
/
APPELLATE JumsDICTION : Civil Appeal No. 59 of
onimissioner o
1"come-tax,
1950.
West Bengal
Appeal from a Judgment of the High Court of Judiv.
cature at Calcutta (Harries C

## Text

1950
Patntalal
Jankid-:u
v,
Mohanlal and
Another,
Pata1tjali
S11stri J.
!950
Deo, 21.
1008
SUPREME COURT REPORTS
[1950]
of section 14, it seems to me, they would be bringing
themselves under the bar of section 18 (2).
The
respondents cannot therefore claim that the loss of the
goods was explosion damage within the meaning of the
Ordinance so as to bring the case within section 14 and
at the same time contend that the loss was not "due
to or did not in any way arise ont of the explosion" in
order to a void the bar under section 18.
Both section 14 and section 18 have in view the physical cause
for the loss or damage to property for which compensation is claimed and not the cause of action in relation to the person against whom relief is sought. The
respondents cannot, in my opinion, be allowed to take
up inconsistent positions in order to bring themselves
within the one and to get out of the other.
I would therefore allow the appeal and dismiss the
counter-claim.
DAS J. agreed with the Chief Justice.
Appeal dismissed.
Agent for the appellants: Mohan Behari Lal.
Agent for the respondents : I. N. Shroff.
COMMISSIONER OF INCOME-TAX,
WEST BENGAL
v.
CALCUTTA AGENCY LTD.
[SHRI HARILAL KANIA CJ., PATANJAL! SASTRI
and DAS JJ.]
fo·li.tn Income-tax Act (XI of 1922), ss. 10 (2) (xv), 66-Reference-Jwrisdiction of High Ooilf·t-Duty to decide case ori facts
stated by Tribuna.l-Accepting arauments of CO'ltnsel as proved fa.cts
and basing decision on them, impropriety of-Business expenditnrePayments to avoid disclosure of misfeasance of director.~-Burden of
prcof.
The jurisdiction of the High Court in the matter of incometax references is an advisory jurisdiction and under the Inco:netax Act the decision of the Appellate Tribunal on facts is final
unless it can be successfully assailed on the ground tha~ there was
,_
S.C.R.
SUPREME COURT REPORTS
1009
no evidence for the conclusions on facts recorded by the Tribnnal.
1950
It is therefore the duty of the High Court to start by looking at
tbe facts found by the Tribunal and ans~'e!: the questions of lHW Cornmiss:oritr of
on that footing.
It is not p1·oper to depart fron1 this rule of law
Incnme-tax,
as it will convert the High Court into a fact finding authority,
Wcst Bengal
which it is not, under the advisory jurisdiction.
v.
As the statement of the case prepared by the Appellate Tri· Calcutta Ag•ncy
bunal in accordance v.'ith the rules fran1ed under the Income-tax
Ltd.
Act is prepared with the knowledge of the parties concerned and
they have full opportunity to apply for any addition or deletion
from that statement, if they have approved of the state1nent n1ade
by the Tribunal, it iR the agreed etatement of facts by the parties
on w bich the Iligh Court has to pronouncs its judgment.
The
High Court would be acting improperly if it takes the arguments
of the counsel for the assessee as if they were facts and bases its
conclusion on tboso arguments.
One of the directors of the assessee company, acting in the
capacity of managing agents of certain l\'fills, had dra\vn some
hundis in the name of tho Mills, aod as the Mills repudiated liability, suits were filed on the hundis against the Mills and the
assessees. The assessees thereupon agreed to reimburse the Mills
by permitting the latter to deduct a moiety of the commission
pa.yable to them under the agreement of managing agency, against
payments which the Mills may have to make under the decrees.
In their assessment fio income-tnx the assessees claimed that the
amounts so deducted should bo excluded from their asRessable
income as business cxpenditme under s. 10 (2) (xv) of tbe Incometax Act.
The Appellate Tribunal found that the assessees had
agreed to pay off the decree a1nount from the remuneration due to
them, that the decre.e was passed against them evidently for some
misfeasance committed by their directors, that the books of both
companies showed that the assessees were paid their remuneration in full, and that the expenditure was not therefore laid out
for the purpose of carrying on the business, and also that, as the
payment was made for the liquidation of a debt, it was not a
revenue expenditure. In the High Court the assessees' counsel
argued, relying on the case cf Mitchell v. B. W. Noble Ltd.(1),
that the payments were made by th• assessees to avoid the
publicity of an action against them and the consequent exposure
and loss of reputation as a. managing agency company, and as
such the payments were deductible as business expenditure. The
High Court accepted this argument and reversed the decision of
the Tribunal.
Held, that the High Court acted wrongly in accepting the
argurr1ents of the assessees' counsel as if they were proved facts
and basing its decision on them ; and, as the facts necessary to
support the claim for exemption under s. 10 (2) (xv) had not been
established at any stage of the case, the assessees were not entitled
to the deduction cJ.imed.
(11 (1927] l K.B. 719,
1~9
•
1010
SUPREME COURT REPORTS
[1950)
1950
Judgment of the Calcutta High Court reversed.
0
. .
/
APPELLATE JumsDICTION : Civil Appeal No. 59 of
onimissioner o
1"come-tax,
1950.
West Bengal
Appeal from a Judgment of the High Court of Judiv.
cature at Calcutta (Harries C.J. and Chatterjea J.)
Galcu~~/Y'"'Y dated 9th Septern ber, 1949, in a reference under
·
section 66 (2) of the Indian Income-tax Act, 1922.
(Reference No. 8 of 1949).
M. C. Setalvad, Attorney-General for India (G. N.
] oshi, with him) for the appellant.
S. Mitra (B. Banerjee, with him) for the respondents.
1950. December 21. The Judgment of the Court
was delivered by
Kan•a o. J.
KANIA C.J.-This is an appeal from the judgment
of the High Court at Calcutta (Harries C.J. and
Chatterjea J.) pronounced on a reference made to it
by the Income.tax Tribunal under section 66 (2) of
the Indian Income.tax Act.
The relevant facts are
these. The respondents are a private limited company
which was brought into existence to float various
companies including cotton mills. In November, 1932,
the Basanti Cotton Mills Ltd. was incorporated and
the respondents were appointed their managing agents.
Their remuneration was fixed at a monthly allowance
of Rs. 500 and a commission of 3 per cent. on all gross
sales of goods manufactured by the Mills Company.
The fixed monthly allowance was liable to be increased
in the event of the capital of the company being
increased. The details are immaterial. lt appears
that certain hundis were drawn by one of the directors
of the respondent company, acting in the capacity of
the managing agents of the :Mill Company, in the name
of the Mill Company and the same were negotiated to
others. The Nath Bank Ltd. claimed payment of
these hundis.
The Mill Company repudiated its
liability as it appeared from the books of the Mill
Company that they had not the use of the sum of
Rs. 1.80,000 claimed by the Nath Bank Ltd. under
the hundis. The Nath Bank Ltd. instituted four suits
·I'
•
S.C.R.
SUPREME COURT REPORTS
1011
against the Mill Company, in two of which the res1950
pondent company were party-defendants. The Mill Comm;:.;;;n.,· of
Company was advised to settle the suits and the resIncom•·ta:r:.
pondent company entered into an agreement with the w .. t Bengal
Mill Company, the material part of the terms of which
•.
rnns as follows ·-
Calcutta Agency
•
Ltd.
" Memorandum of Agreement made between the
Calcutta Agency Limited of the one part and Basanti
Kama c. J.
Cotton Mills Ltd. of the other part. \;\/HEREAS the
Nath Bank Limited demanded from the Mills the
payment of the sum of Rs. 1,80,000 and interest thereon AND WHEREAS the said Mills repudiated their
liability in respect thereof as it appeared from the
books of the said Mills that the said Mills did not have
the use of the said sum of Rs. 1,80 000 or any part thereof AND WHEREAS the said Nath Bank Ltd. thereupon instituted four suits in High Court being suit
Nos. 1683, 1720, 1735 and 1757 of 1939 for the said
aggregate sum of Rs. 1,80,000 and the interest thereon
AND WHEREAS the said Mills have been advised to
settle the said suits amicably AND WHEREAS the
Calcutta Agency Limited by its Directors, S.N. Mitter
or S.C. Mitter, having been and being still the Managing Agents of the said Mills have undertaken to
reimburse the said Mills in respect of the decrees to oe
made in the said four suits in the manner hereinafter
appearing NOW THESE PRESENTS WITNESS
AND IT IS HEREBY AGREED AND DECLARED
(i) That out of the commission of 3% payable by
the said Mills to the said Agency under Regulation 131
of the Articles of Association of the Company, the
Company shall have paramount lien on and deduct
and set off a moiety thereof against any payment
which the said Mills may make in respect of the decrees
or any of them and/or costs of the said suits.
(ii) The said moiety shall be one half of the
commission so payable less such sum as the Directors
of the Mills may from time to time allow to be
deducted."
..
Under the said agreement, the respondent company
paid
to the Mill Company Rs. 22,500 made up of
•
1012
SUPREME COURT REPORTS
[1950]
t9oO
Rs. 18,107 as principal and Rs. 4,393 as interest in the
0
-:--:-
1accounting year. The assessee company claimed this
omm1ssioner o
.
Incomo-ta:c
before the Income-tax Appellate Tribunal as a deducWeat Benadi tion permitted under section IO (2) (xv) of the Indian
v.
Income-tax Act. The relevant part of that section
Calcutta Agency runs as follows :-
Ltd.
"10. (1) "The tax shall be payable by an assessee
Kania o. J. under the head 'Profits and gains of business, profession or vocation' in respect of the profits or gains of
any bminess, profession or vocation carried on by
him.
(2) Such profits or gains shall be computed after
making the following allowances, namely:-
....................................
(xv) any expenditure (not being in the nature
of capital expenditure or personal expenses of the
assessee) laid out or expended wholly and exclusively
for the purpose of such business, profession or vocation."
In the statement of the case submitted by the
Tribunal after reciting the fact of the incorporation of
the company and the terms of the compromise mentioned above, the arguments urged on behalf of the assessee
company have been recapitulated. The first argument
was that under the first proviso to section 7 of the
Indian Income-tax Act, this payment was liable to be
exempted. The Tribunal rejected that argument. On
the reference, the High Court also rejected the same
and it was not presented before us.
The next argument of the respondents was that in respect of
Rs. 22,500 it was entitled to exemption under section
10(2) (xv) of the Income-tax Act on the ground that
the payment was an expenditure which was not in the
nature of a capital expenditure or personal expenses of
the applicant company but was an expenditure laid
out wholly and exclusively for the purpose of its business. They urged that if the applicant company did
not agree to pay this amount, Basanti Cotton Mills
Ltd. could have brought a suit against the company
to realise this amount due on the hundis which would
•
..
-
•
S.C.R.
SUPREME COURT REPORTS
1013
have exposed the applicant company to the public and
1950
in order to save themselves from the scandal and maintain the managing agency they agreed to the deduction Commissioner of
of certain amounts from the managing agency commis.
1"come-ta•,
sion due to it and thereby brought it within the
West ,Bengal
principles of the decision of 1Vlitchell v. B. W. Noble Oalcutt."Agency
Ltd.(1)
The Tribunal found as facts: (1) That the
Ltd.
applicant company agreed to pay off the decretal
amount from the remuneration which they are entitled
K.,nia o. J.
to get from the Basanti Cotton Mills.
(2) The decree
was passed against the applicant company evidently
for certain misfeasance committed by its directors and
the applicant company agreed to pay it off from its
remuneration.
(3) The books of account of Basanti
Cotton Mills Ltd. would show that they were paying
the applicant company in full its remuneration and
the books of the applicant company also show that it
was entitled to its remuneration in full.
(4) In the
circumstances the Tribunal held that the expenditure
was not laid out wholly and exclusively for the purpose
of carrying on the business. (5) Besides, the Tribunal
was of the opinion that in this case it was not a
revenue expenditure at all. As the payment had to
be made towards liquidation of the decretal amount
the Tribunal held, in the circumstances of this case,
that it was a capital payment. On behalf of the respondent it was argued in the further alternative that
the Privy Council decision in Raja Bijoy Singh
Dudhuria's easel.') would cover the present case. That
contention was rejected by the Tribunal.
This statement of the case prepared by the Incometax Tribunal and submitted to the High Court for its
opinion was perused by the parties and they had no
suggestions to make in respect of the same. The statement of the case was thus settled with the knowledge
and approval of the parties. When the matter came
before the High Court, Mr. Mitra, who argued the case
for the present respondents, as shown by the judgment
of the High Court, urged as follows:-" If the applicant
company had not agreed to pay the amount mentioned
i 1l [J 921) 1 R. B. 719.
12) 61.T,C. 449,
•
1014
SUPREME COURT REPORTS
[1950]
1950
in the aforesaid agreement, then the Basanti Cotton
Mills Ltd. would have sued the company for the realiOommi"'•""' of sation of the amounts due on the hundis and it seems
Incom•·tax,
that there would have been no defence to the action.
West Bengal T .
Jd h
b'
d th
l'
t
t
v
his wou
ave su iecte
e app ican
company o
Oa!cutt."Ag•ncy the danger of public exposure and in order to save
Ltd.
itself from the scandal and in order to maintain the
managing agency, the applicant company agreed to
Kania o. J.
deduct certain amounts from the managing agency
commission and therefore such expenditure came within section 10(2) (xv) of the Act." The High Court
thereafter noticed several cases including 111 itchell' s
case(') and towards the close of the judgment delivered
by Chatterjea J. observed as follows:-"In this case it
is clear that the agreement was entered into with a view
to avoid the publicity of an action against the managing agents and consequent exposure and scandal and
in order to maintain the managing agency so that the
company could carry on its business as before.
The
payment in question did not bring in any new assets
into existence nor in my opinion can it properly be
said that it brought into existence an advantage for the
enduring benefit of the company's trade. The Appellate
Tribunal observed that the decree was evidently passed
against the appellant company for certain misfeasance by
its directors and the appellant company agreed to pay
it off from its remuneration ...... The object of the agree.
ment was to enable the company to remove a defect in
carrying on the business of the company and to earn
profits in its business. Therefore this case is covered
by the judgment of the Court of Appeal in Mitchell's
case(') ...... " Applying this line of reasoning the High
Court differed from the conclusion of the Tribunal and
allowed the deduction to the respondent company under
section 10(2) (xv) of the Income-tax Act, as claimed by
the respondents.
The Commissioner of Income.tax,
West Bengal, has come in appeal to us.
Now it is clear that this being a claim for exemption
of an amount, contended to be an expenditure falling
under section 10(2)(xv), the burden of proving the
(l) [1927] l K.B. 719.
...
..
•
S.C.R.
SUPREME COURT REPORTS
1015
necessary facts in that connection was on the assessee,
1950
it being common ground that the commission was due
-:--:-
and had become payable and was therefore the business cc7m""
0;'" of
income of the assessee company liable to be taxed in ,;.::m;;:;:.1
the assessment year. The jurisdiction of the High Court
v.
in the matter of income-tax references is an advisory Calcutta Agency
jurisdiction and under the Act the decision of the
Ltd.
Tribunal on facts is final, unless it can be successfully
Ka1ita C. J,
assailed on the ground that there was no evidence for
the conclusions on facts recorded by the Tribunal. It
is therefore the duty of the High Court to start by
looking at the facts found by the Tribunal and answer
the questions of law on that footing. Any departure
from this rule of law will convert the High Court into
a fact-finding authority, which it is not under the
advisory jurisdiction. The statement of the case under
the rules framed under the Income-tax Act is prepared
with the knowledge of the parties concerned and they
have a full opportunity to apply for any addition or
deletion from that statement of the case. If they
approved of that statement that is the agreed state.
ment of facts by the parties on which the High
Court has to pronounce its judgment. In the present
case the parties perused the statement of case and as
disclosed by the note made at the end of it had no suggestions to make in respect thereof. It is therefore clear
that it was the duty of the High Court to start with
that statement of the case as the final statement of
facts.
Surprisingly, we find that the High Court, in
its judgment, has taken the argument of Mr. Mitra as
if they were facts and have based their conclusion
solely on that argument. Nowhere in the statement
of the case prepared by the Tribunal and filed in the
High Court, the Tribunal had come to the conclusion
that the payment was made by the assessee company
to avoid any danger of public exposure or to save itself
from scandal or in order to maintain the managing
agency of the appellant company. The whole conclusion of the High Court is based on this unwarranted
assumption of facts which are taken only from the
argument of counsel for the present respondents before
•
•
1016
SUPREME COURT REPORTS
[1950)
1950
the High Court. The danger of failing to recognise
-. -.
that the jurisdiction of the High Court in these matters
Commm•onu of·
l
d ·
d
1
l
·
f J
T 'b
1
1
· t "
is on y a v1sory an
t ie cone uswns o t ie
n una
;,;:;m;~:a~z on facts are the conclusions on which the High Conrt
v,
is to exercise such advisory jurisdiction is illustrated
Oa'cutta Agency by this case. It seems that unfortunately counsel for
Ltd.
the respondents caught hold of Mitchell's case(1) and
-
basing his argument on the circumstances under which
Ka,zia 0. J.
d
a payment could be escribed as a business expenditure
falling within the terms of section 10 (2) (xv), argued
that the facts in the present case were the same.
Instead of first ascertaining what were the facts found
by the Tribunal in the present case, the process was
reversed and the procedure adopted was to take Mitchell's case(1) as the law and argue that the facts in the
present case covered the situation. In our opinion
this is an entirely wrong approach and should not
have been permitted by the High Court. The High
Court fell into a grave error in omitting first to ascertain what were the facts found in the case stated by the
Tribunal. The High Court overlooked that in Afitchell's
case(') the whole discussion started with a quotation
from the case stated by the Commissioners as the facts
of the case.
A scrutiny of the record in the present case shows
that before the
Income-tax Officer the
assessees
claimed only a deduction of the interest of Rs. 5,582
as a permissible deduction under section 10 (2) (iii) of
the Income-tax Act. That claim was rejected by the
Income-tax Officer.
When the matter went to the
Assistant Income-tax Commissioner it was argued that
the Income-tax Officer was in error in not allowing the
deduction of interest and was also wrong in not allowing
the entire sum of Rs. 22,500 as a deduction on the
ground that, that portion of the income (viz., Rs . .'22,500)
should be treated as not earned or deemed to be earned
by the assessees at all, having regard to the decision
of the Privy Council in Raja Bijoy Singh Dudhuria's
case.(') The first paragraph of the order of the Appellate
Assistant
Commissioner
contains the
following
(ll [1927) I K, B. 719.
12) 6 I.T.C. '49,
• •
'
..
•
S.C.R.
SUPREME COURT REPORTS
l017
statement:-" In disallowing this (interest) claim the
1950
Income-tax Officer was following the decision of my
.--
predecessor in his order dated the 18th March 1942 in Oommimoner 0!
Appeal No._ 1-~-~ 1 of.1941-42. My predecessor obser-
~:~·;;~~~1
•
ved: "Nothmg 1s m evidence to show that the managmg
v.
agency company had surplus money and such money Calcutta Ag••cv
· was invested or that there was any need to borrow.
Ltd.
Thus the need to borrow is not established. There is
no doubt that money was borrowed but lmless it can
Kania c. J.
to proved that the borrowing is for the purpose of the
business and the loan was u:sed in the business, the
interest cannot be allowed under section 10(2)(iii)."
The second objection raised before the Appellate
Assistant Commissioner was in these terms:-·' That
the Income-tax Officer should have allowed the said sum
of Rs. 22,500 as allowable expenditure being allocation of a sum out of the revenue receipt before it became
income in the hands of the assessee." The wording of
the objection and the argument noticed in the order of
the Appellate Assistant Commissioner show that the
contention was that this sum should be treated as not
having become the income of the assessee at all because
it was deducted at the source by the Mill company.
Reliance was placed for this contention on Raja Bijoy
Singh Dudhuria's case('). The contention was· rejected.
At the third stage, when the assessee urged his contentions before the Income Tax Appellate Tribunal, he
thought of urging as an argument that this was a permissible deduction under section 10 (2) (xv) because of
the principles laid down in Mitchell's case(2).
No
evidence, it appears, was led before the Income Tax
Tribunal, nor has the Tribunal recorded any findings
of fact on which the principles laid down in Mitchell's
case(') could be applied. The Tribunal's conclusions of
facts were only as summarized in the earlier part of
the judgment. It is therefore clear that the necessary
facts required to be established before the principles
laid down in Mitchell's case(2) could be applied, have
not been found as facts in the present case at any stage
of the proceedings and the High Court was in error
il) 6 I.T.C. H9.
130
(~) [19271 I K.B. 719.
•
•
1018
SUPREME COURT REPORTS
[1950]
1950
in applying the principles of Mitchell's case(1) on the
-. -.
assumption of facts which were not proved. The High
OomI missioner of Court was carried away, it seems, by the argument of
ncome~tax,
West Bengal the counsel and through error accepted the argument
v.
as facts.
Indeed, if it had noticed the contention
Calcutta Agenoy urged before the Income-tax Officer it would have seen
Ltd,
at once that the argument was in a measure conflicting·
with that contention which was based on the footKania a. 1· ing of Rs. 1,80,000 being a loan to the assessee on
which it had to pay interest, which was sought to be
deducted under section 10 (2) (iii) of the Income-tax
Act. In our opinion. therefore, this appeal should be
allowed on the simple ground that the facts necessary
to be established by the respondents to support their
claim for exemption under section 10 (2) (xv) of the
Indian Income-tax Act have not been established at
any stage of the proceedings and therefore they are
not entitled to the deduction claimed. The appeal is
therefore allowed with costs here and before the High
Court.
Appeal allowed.
Agent for the appellant : P.A. Mehta.
Agent for the respondents: Ganpat Rai.
(1) [19~1] 1 K.B. 719 .
•
'J'