Summarize the following court judgment. Appeal No. 1013 of 1963. Appeal from the judgment dated November 9	 1960	 of the Madhya Pradesh High Court in Civil Miscellaneous Appeal No. 40 of 1955. A. V. Viswanatha Sastri and Rameshwar Nath	 for the appel lant. B. Sen	 Balwan Singh Johar and 1. N. Shroff	 for the respondents. The Judgment of the Court was delivered by Subba Rao J. This appeal by certificate preferred against the order of the High Court of Madhya Pradesh	 Indore Bench	 raises the question whether an item of Rs. 42	63	090 14 7 should have been allowed as a trading loss in computing the profits of the appellant company under section 3 of the Indore Industrial Tax Rules	 1927. The facts may be briefly stated. The appellant	 Indore Malwa United Mills Ltd.	 is 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 company at the same rate of interest viz.	 6%. " On November 28	 1929	 the appellant company entered into an agreement with M/s. Karimbhai Ibrahim & Sons Ltd. where under they were appointed as the Managing Agents of the appellant company in place of M/s. Karimhai Ibrahim & Co. Ltd. 561 On July 19	 1932	 the Board of Directors reaffirmed the resolution of June 8	 1926. Pursuant to the power conferred on the Managing Agents under the said agency agreement and the said resolution	 Karimbhai Ibrahim & Sons Ltd. borrowed large sums of money from outsiders	 entered them in the appellant company 's accounts and invested large sums with themselves "in current account with the company" in terms of the said resolution and utilised the same for their own purposes. Before the Annual General Body Meeting they used to bring large amounts into the accounts of the company and show that they had paid off their debts. After satisfying the General Body they would again withdraw large sums for their purposes. 'Me General Body was also aware of the loans and indeed it approved the said transactions. In the year 1933 the Managing Agency company went into liquidation. For the assessment year 1941	 the appellant company submitted its return of income and claimed thereunder a deduction	 among other items	 a sum of Rs. 49	13	316 under the head of bad debt and trading loss written off in the profits and loss account of the appellant company we are only concerned in this appeal with this item and	 therefore	 it is not necessary to notice any other particulars of the assessment. 'Me Assessing Authority allowed only Rs. 6	41	913 2 0 as bad debt and disallowed the amount due from Karimbhai lbrahim & 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 dehars 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 appel lant	 contended that the employment of the Managing Agents was incidental to the carrying on of the appellant 's business	 that	 as the Managing Agents had the power to borrow funds for the appellant company and invest the surplus in loans to themselves the loss caused by such investment was also incidental to the carrying on of the appellant 's business and	 therefore	 the said loss was deductible in arriving at the trading profits of the appel lant company. Mr. Sen	 learned counsel for the respondents	 raised before us two contentions	 namely	 (1) the assessment in question was made under the Indore Industrial Tax Rules	 1927	 that under 562 the said Rules tax was payable only in respect of the profits or gains of any cotton mill industry and that profits or loss pertaining to the money lending activity of the appellant company could not possibly be subject to tax or deduction under the said Rules; and (2) the debt due by the Managing Agents was not a trading debt inasmuch as the Managing Agents borrowed moneys not necessary for the business of the appellant company and lent to themselves the said amount and	 therefore	 it was a loss incurred by the appellant dehors the business of the company. The first question raised by Mr. Sen is based upon the dis tinction between the Indore Industrial Tax Rules and the corresponding	 provisions of the Indian Income tax Act. It is said that the Indore Industrial Tax Rules are only concerned with the cotton mill industry and the tax payable thereunder is in respect 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 other. We shall proceed with the appeal on the basis that for the purpose of deducting trading losses in computing trading profits there is no difference between the Income tax Act and the relevant Indore Industrial Tax Rules. The only question	 therefore	 is whether the loss claimed in the present case was a trading loss which is deductible in computing the profits of the company. The relevant principle of law has been laid down by this Court in Badridas Daga vs Commissioner of Income tax(1). There	 after considering the relevant decisions on the subject	 this Court laid down the following test : "The result is that when a claim is made for a deduction for which there is no specific provision in section 10(2)	 whether it is admissible or not will depend on whether	 having regard to accepted commercial practice and trading principles	 it can be said to arise out of the carrying on of the business and to be incidental (1) (1959] S.C.R. 690	 695. 563 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. " Where an agent employed by the appellant for the purpose of carrying on his business in exercise of the powers conferred on him operated on the bank accounts	 withdrew moneys from it and used them for discharging his personal debts	 this Court in the said decision found no difficulty in holding that the amount misappropriated and found irrecoverable was an allowable deduction under the Income tax Act. The only difference between 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 The Commissioner of Income tax	 U.P. vs M/s. Nainital Bank Ltd. (1) 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 dacoity was incidental to a banking business. If that be so	 the fact that the Managing Agents brought into the company 's till larger amounts than the company 's business demanded at a particular point of time would not make the borrowings or the lending of money to themselves any the less incidental to the sanctioned business operations. The question is not whether the Managing Agents committed a fraud on the company	 but whether the amounts 'borrowed were the funds of the company. If the creditors had filed a suit against the company	 could it have resisted the suit on the ground that the Managing Agents had no power to borrow the amounts for the reason that at the time they borrowed	 the amounts were in excess of the requirements of the business ? Decidedly not. There would not have been any defence to such a suit. After the borrowing the money became the company 's money. That apart	 there was no question of fraud in this case	 for the profit and loss account and the balance sheet placed before the General Body Meeting of the Company every year brought to its notice the total amount the company borrowed through the Managing Agents and the General Body approved of it. The only fraud	 (1) ; 564 if any	 consisted in the practice followed by the Managing Agents in bringing into the accounts of the company the entire amount lent to them in order to satisfy the shareholders that nothing was going wrong. The next step is the borrowing of money by the Managing Agents from the company. Under the memorandum of associa tion 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. 'Me 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 item. Both would be proper items of accounts for ascertaining the profit and loss of the company. If the debt became irrecoverable	 it would be a bad debt. We	 therefore	 find no difficulty in holding that the said debt which had become irrecoverable was a trading loss deductible in computing the profit of the appellant company in the assessment year. It was a loss incidental to the appellant 's business and is certainly sanctioned by commercial practice and trading principles. We	 therefore	 hold that the High Court went wrong in holding that the said amount represented loss incurred by the appellant dehors its business. In the result	 the appeal is allowed. The appellant will have its costs here and in the High Court. Appeal allowed.

The appellant company which carried on the business of manufacturing textiles was allowed by its Memorandum of Association to borrow money for the purpose of its business and to invest it inter alia in loans to others. Its Board of Directors passed a resolution to the effect that the company would invest its surplus funds in current account with the Managing Agents on interest. The Managing Agents borrowed large sums from outsiders	 entered the borrowings in the books of the company and invested large sum with themselves in current account. Before the Annual General Meeting they would bring back the money into the company 's accounts to satisfy the General Body that they had paid off their debts	 and afterwards would again withdraw large sums for their own purposes. In 1933 the Managing Agents ' company went into liquidation and it large debt was due from them to the company. In 1941 the debt having been found to be irrecoverable	 the appellant company claimed it as a bad debt and trading loss for the purpose of computing its income under the Indore Industrial Tax Rules	 1927	 the provisions of which	 in this regard	 were similar to those of the Indian Income tax Act	 1922. The assessing authority did not allow the claim	 nor did the Appellate Authority. The High Court also held that the losses incurred by the company were really dehors the business of the company. The company thereupon appealed to the Supreme Court. It was contended on behalf of the appellant that the employment of the Managing Agents was incidental to the carrying on of the appellant 's business	 that	as the Managing Agents had the power to borrow funds for the company and invest the surplus in loans to themselves	 the loss such investment was also incidental to the carrying on the appellant 's business	 and therefore the said loss was deductible in arriving at the	 trading profits of the company. HELD: The appeal must be allowed. The Managing Agents had borrowed the money from outsiders and invested it with themselves in accordance with the company 's resolution. The money borrowed from outsiders became part of the funds of the company	 and the creditors could have sued the company for it. Similarly the company could have sued the Managing Agents for the sums invested with them. Both the borrowing by the company and the investment with the Managing Agents created legal obligations. Appropriate entries were made in the company 's accounts in accordance with commercial practice. The amounts invested with the Managing Agents were entered as debts which became bad debts on becoming irrecoverable. In the circumstances the loss arising from the bad debts was incidental to the appellant 's business	 560 and deductible in computing the profits of the appellant company for the 	assessment year in question. [563 F H; 564 B E]. Badridas Daga vs Commissioner of Income tax	 [1959] S.C.R. 690 and Commissioner of Income tax	 U.P. vs M/s. Nainital Bank Ltd.	 ;