TaxTMI 
TaxTMI 
1966 (6) TMI 3
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....on of the monies advanced, rights of distribution in specified areas. There was an agreement on June 13, 1951, between the assessee and a certain Thyagaraja Bhagavathar under which there was an acquisition of the rights of distribution of a picture known as Shyamala in the districts of Trichy and Coimbatore. Under that agreement, a sum of Rs. 50,000 was advanced by the assessee to Thyagaraja Bhagavathar. The condition regulating the distribution of the picture was that the assessee should first reimburse himself to the extent of the sum of Rs. 50,000 advanced and become entitled to a commission on a progressive scale in respect of realisations over and above that sum of money. It was also agreed that in the event of the realisations less t....
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....espect of that matter. The assessee claimed a deduction of another sum of Rs. 2,500 As the expenses incurred in the litigation, and, here again, it was disallowed by the Income-tax Officer but allowed by the Appellate Assistant Commissioner. From this decision of the Appellate Assistant Commissioner, there was an appeal to the Income-tax Appellate Tribunal by the Income-tax Officer which was dismissed. Both the Tribunal and the Appellate Assistant Commissioner were of the view that, while the sum of Rs. 2,500 was an expenditure incurred for the conduct of the litigation and was deductible, a sum of Rs. 36,300 allowed by the Appellate Assistant Commissioner, was a trade loss. The question referred to us in this reference reads : " Whethe....
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....r distribution, and the agreement provided for its repayment in a particular way. A debt so advanced for the acquisition of the right of distribution in the course of a business, which the assessee was conducting as a distributor and exhibitor of pictures, is clearly a debt due to him in respect of the business within the meaning of section 10(2)(xi) of the Indian Income-tax Act, 1922. Mr. Swaminathan appearing for the assessee is right in asking us to say that a loss incurred by the assessee in that way is a trade loss, not only because the profit of the business carried on by the assessee can be computed only after deducting from the gross profits the amount lost in the form of doubtful debts, but also for the reason that the amount lost....