AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1964 (10) TMI 20
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.... a public limited company incorporated and registered under the Indore Companies Act, 1914. Since the incorporation, it has been carrying on business of manufacturing cloth. Under the memorandum of association of the said company, for the purpose of the textile business, it was authorized to raise or borrow money from time to time and to invest its funds, inter alia, in loans to others. For the purpose of carrying on the business, the appellant-company originally appointed M/s. Karimbhai Ibrahim & Co. Ltd. as its managing agents. On June 8, 1926, the board of directors of the appellant-company passed a resolution to the following effect: " Resolved that surplus fund of the company be invested with the agents in current account with the co....
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....item and, therefore, it is not necessary to notice any other particulars of the assessment. The assessing authority allowed only Rs. 6,41,913-2-0 as bad debt and disallowed the amount due from Karimbhai Ibrahim & Sons Ltd. on the ground that the said borrowings were not made for the purpose of the business of the company. On appeal, the appellate authority also took the same view. On further appeal, the High Court confirmed the finding of the appellate authority on the ground that the losses incurred by the company were really dehors the business of the company, though they might involve fraudulent conduct of the managing agents. Hence, the present appeal. Mr. A. V. Viswanatha Sastri, learned counsel for the appellant, contended that the ....
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....of the said industry, while under the Income-tax Act, the tax is payable in respect of the income of the business of the assessee. But a perusal of the proceedings during all the stages does not disclose that any such argument was advanced at any time. Assuming that the contention was correct, if it had been raised before, the assessee might have been in a position to establish by relevant evidence that the particular amount borrowed by the managing agents was from and out of the amounts borrowed for the purpose of the said industry. We cannot allow a question which at its best is a mixed question of fact and law to be raised for the first time before us. We do not propose to express our opinion on the same one way or the other. We shall pr....
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....ween that case and the present one is that the agent misappropriated the amount in that case, whereas in the present case the managing agents, in exercise of the powers conferred by the appellant, borrowed the moneys, but failed to return the same. If embezzlement of moneys entrusted to an agent is incidental to a business, by the same token moneys legally utilized by the agent must more appropriately be incidental to the business. In a recent decision in Commissioner of Income-tax v. Nainital Bank Ltd., this court held that an amount lost to the bank by dacoity was a loss incidental to the business of banking. There, in the course of the business, large amounts were kept in the bank premises, and this court held that the risk of loss by da....
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.... the memorandum of association as well as under the express power conferred by the said resolution, the company, through the managing agents, could invest its funds by way of loans. If there was no mishap the managing agents would have paid the entire amount and if they did not, the company could have recovered the entire amount from them. The result, therefore, was that both the borrowing by the managing agents on behalf of the company from third parties and the lending to themselves created legal obligations. They were obligations created in the course of the business. The money lent would be a debit item in the accounts of the company in accordance with the accepted commercial practice and if the amount was realized it would be a credit ....