TaxTMI 
TaxTMI 
2009 (1) TMI 404
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....iary company, was not a loss incidental to the business of the assessee and, as such, not allowable?" 2. The brief relevant facts of the case are as follows: (a) M/s Salem Magnesite Pvt. Ltd., the assessee-company, was solely in the business of mining. It was not in the business of financing or lending money. It had a fully owned subsidiary company by name Janjira Mining Co. Pvt. Ltd., which was also in the business of mining. (b) In the year 1968, for the purpose of constructing a jetty, the assessee-company lent to its aforesaid subsidiary company an amount of Rs. 5 lakhs repayable with 10 per cent. interest. In the years that followed, the subsidiary company Janjira Mining Co. Pvt. Ltd., suffered heavy losses and as a result, wa....
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....e Tribunal dismissed the Revenue's appeal. The assessee's appeal was also dismissed subject to certain observations made in paragraph 7 of the judgment which pertained to some other grounds which are not germane to the issue before us. In so far as the grounds concerning grant of deduction of Rs. 4,58,500 as a business loss, the Income- tax Appellate Tribunal dismissed this ground and recorded a finding in favour of the Revenue. (g) The assessee then filed an application for rectification before the Income-tax Appellate Tribunal, limited to its ground concerning the grant of deduction for the amount of Rs. 4,58,5 00. This application for rectification was rejected by the Income-tax Appellate Tribunal on May 11, 1987. (h) Thereafter on....
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.... the business and to be incidental to it. If that is established, then the deduction must be allowed, provided of course there is no prohibition against it, express or implied, in the Act." The further relevant observation of the Supreme Court on the issue in question was as under (page 16): "At the same time, it should be emphasised that the loss for which a deduction could be made under section 10(1) must be one that springs directly from the carrying on of the business and is incidental to it and not any loss sustained by the assessee, even if it has some connection with his business. If, for example, a thief were to break overnight into the premises of a money-lender and run away with funds secured therein, that must result in the....
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....assanji Sons and Co. P. Ltd. v. CIT reported in [1980] 125 TTR 462 (Bom). 7. We are afraid that the judgments in the aforesaid cases do not help the case of the assessee as the turn on different set of facts. 8. In V. S. Dempo and Co. Pvt. Ltd. [1994] 206 ITR 291 (Bom) the facts were that the assessee-company was doing active business with another company which was not its own fully owned subsidiary but in which the assessee-company had 50 per cent. shares. The loan given to the assessee was in fact utilised by the loanee company and the consideration was paid by making adjustment in the price of iron ore supplied by the said company to the assessee. These facts were different than those in the present case. The question before the Hi....
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....nt case turns upon different facts as narrated hereinabove. 10. In Indore Malwa [1965] 55 ITR 736 (SC) the assessee-company carried on business of manufacturing cloth and was also involved in grant of funds to others. In pursuance of its business it resolved to invest surplus funds with its managing agents as 10 per cent. interest. The managing agent borrowed, on behalf of the company, large sums of money from outsiders, entered them in the company's books of account, withdrew the sums and utilised them for their own purposes. The managing agents thereafter went into liquidation. In computing its profits the company claimed deduction which could not be recovered from the managing agents as bad debts and trading loss. In this background i....