Case: Commissioner Of Income Tax, Karnataka Vs. M/S Bedi &amp; Company Private Limited

satisfactory, and disbelieving the plea that the amount was advanced as loan, the Income tax Officer treated it as income received from business and accordingly passed the order of assessment, under S.144 of the Income tax Act, bringing to tax the said amount of Rs. 32,58,500/- on December 2, 1970. The respondent - assessee pursued the appeal before the Appellate Assistant Commissioner who dismissed the same on December 16, 1972. The assessees appeal before the Income tax Appellate Tribunal was also dismissed on May 21, 1974. From that order of the Tribunal the above said question arose.4. In the Tribunal the Accountant Member and Judicial Member wrote separate orders but concurred on the dismissal of the appeal filed by the assessees. The Accountant Member agreed with the reasoning and conclusion of the Income tax Officer and the Appellate Assistant Commissioner that the loan was not bona fide transaction; the Judicial Member took the view that many of the circumstances relied upon by the Revenue were neutral and the others raised suspicion against the assessee but concurred in the conclusion reached by the Accountant Member on the ground that the assessee had suffered the assessment under S.144 and there was paucity of material.5. The High Court took note of all the factors mentioned in the order of the Tribunal but opined that the apparent set of things disclosed that the said amount was loan and that the burden of showing that the apparent was not real, lay heavily on the Revenue, but apart from relying on certain circumstances no material was brought on record by the Revenue to hold that the said amount was income from business. 6. Mr. K. N. Shukla, learned counsel for the appellant Revenue, argued that the High Court erred in arriving at its own finding of fact and that unless the findings recorded by the Tribunal were perverse the High Court ought not to have interfered with the findings of facts. In our view the submission is too broad to merit acceptance. There cannot be any doubt that High Court will not address itself to recording findings of facts unless the subject matter of the question referred to it by the Tribunal, either under sub-s.(1) or sub-s.(2) of S.256 of the Income tax Act, relates to the perversity of the findings arrived at by the Tribunal. That sort of question has to be distinguished from a mixed question of facts and law, which also requires consideration and discussion of facts but does not warrant returning findings of facts inconsistent with the findings recorded by the Tribunal while giving its opinion on the question referred to the High Court. In answering the question, in this case, the High Court had to deal with various facts on record to determine whether the amount in question was loan or income. If such discussion of facts has led to arriving at the conclusion that the amount was loan but not income. It cannot be urged that the High Court disturbed the finding of fact recorded by the Tribunal. 7. Here the Tribunal did not find any material to record specific finding that the amount in question is in the nature of commission paid by Parsons and Whittemore to the assessee; it took note of the fact that the loan was advanced by agreement dated November 15, 1958 and that the Reserve Bank of India had accorded permission for obtaining the loan; it has also taken into consideration an earlier memorandum of understanding between the assessee and the representative of foreign Creditor, of July 19, 1957, recording that the proposal to grant loan would materialise along with implementation of other agreements to be entered into with the Paper Mills Limited. The High Court in regard to the loan agreement dated November 15, 1958, observed that the agreement provided that the amount would be utilised for purposes of purchasing shares in the said Paper Mills and that the shares were accordingly purchased and they were treated as belonging to the assessee - company. The High Court also referred to a letter of the foreign Creditor addressed to the Income tax Officer in November 1970 in response to his query letter and opined that the Foreign Collaborator maintained that the transaction was loan as late as in November 1970. It also noticed the reasoning of the Revenue as reflected in the orders of the Income tax Officer and the Appellate Assistant Commissioner. The High Court is also justified in its comment that without recording any finding that the amount was commission or business receipt, the Tribunal was not justified in coming to the conclusion that it could be assessed as income. In our view the High Court has rightly held that the circumstances taken singly or cumulatively did not justify conclusion that the amount was not received as loan as it purported to be but was anything in the nature of commission or any receipt of business. In arriving at the conclusion to which it did, it was necessary for the High Court to refer to the facts and discuss them to answer the mixed question of facts and law and that is what the High Court had done.8. The facts on record apparently indicate that the transaction was one of loan. The circumstances relied upon by the Revenue, namely, that the loan had been advanced without security, that the loan had not been repaid and no interest on the loan was paid by the assessee and that the agreement of loan was executed contemporaneously with other two agreements with regard to supply of machine and construction of building for the Paper Mill cannot, without any further material, lead to the inference that the amount was not loan but business income. It appears to us that the last mentioned circumstance supports the plea of the assessee that the said amount was received as loan. For the aforementioned reasons we do not find any illegality in judgment of the High Court under appeal. 9.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In our view the submission is too broad to merit acceptance. There cannot be any doubt that High Court will not address itself to recording findings of facts unless the subject matter of the question referred to it by the Tribunal, either under sub-s.(1) or sub-s.(2) of S.256 of the Income tax Act, relates to the perversity of the findings arrived at by the Tribunal. That sort of question has to be distinguished from a mixed question of facts and law, which also requires consideration and discussion of facts but does not warrant returning findings of facts inconsistent with the findings recorded by the Tribunal while giving its opinion on the question referred to the High Court. In answering the question, in this case, the High Court had to deal with various facts on record to determine whether the amount in question was loan or income. If such discussion of facts has led to arriving at the conclusion that the amount was loan but not income. It cannot be urged that the High Court disturbed the finding of fact recorded by theHigh Court is also justified in its comment that without recording any finding that the amount was commission or business receipt, the Tribunal was not justified in coming to the conclusion that it could be assessed as income. In our view the High Court has rightly held that the circumstances taken singly or cumulatively did not justify conclusion that the amount was not received as loan as it purported to be but was anything in the nature of commission or any receipt of business. In arriving at the conclusion to which it did, it was necessary for the High Court to refer to the facts and discuss them to answer the mixed question of facts and law and that is what the High Court had done.8. The facts on record apparently indicate that the transaction was one of loan. The circumstances relied upon by the Revenue, namely, that the loan had been advanced without security, that the loan had not been repaid and no interest on the loan was paid by the assessee and that the agreement of loan was executed contemporaneously with other two agreements with regard to supply of machine and construction of building for the Paper Mill cannot, without any further material, lead to the inference that the amount was not loan but business income. It appears to us that the last mentioned circumstance supports the plea of the assessee that the said amount was received as loan. For the aforementioned reasons we do not find any illegality in judgment of the High Court under appeal.