Commissioner of Income Tax vs Dhampur Sugar Mills Ltd.

Om Prakash, J.—At the instance of the Revenue, the Income Tax Appellate Tribunal has referred the following question for our opinion :

" Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the loss of Rs. 11,839 on the sale of U.P. State Development Bonds was allowable under Sections 28 and 29 of the Income Tax Act, 1961 ? "

The facts, briefly, are that the opposite party had purchased U.P. State Development Bonds for the amount aggregating to Rs. 3,23,190. The contention of the opposite party, M/s. Dhampur Sugar Mills Ltd., was that the said bonds had been purchased at the behest of the district authorities and that it was necessary for the mill to maintain the goodwill and good relations with the district authorities, for otherwise the business of the sugar mill would have suffered. The Tribunal recorded a finding that the purchase of the bonds was connected with the business of the assessee. The mill, when the crushing season approached, sold the bonds but at a loss of Rs. 11,839 and it is this loss of which the deduction has been claimed.

The finding of the Tribunal that the investment in the bonds at the instance of the district authorities related to the business and hence the loss on their transfer is a business loss is a finding of fact" and that cannot be disturbed by us in advisory jurisdiction.

On similar facts, in Patnaik and Co. Ltd. Vs. Commissioner of Income Tax, Orissa, , the Supreme Court held that the loss on sale of such bonds was a revenue loss. Following the said authority, we hold that the opposite party is entitled to claim deduction of Rs. 11,839 as a revenue loss and that was rightly allowed by the Tribunal.

In the result, the question referred to us is decided in favour of the opposite party and against the Revenue. Let the record be sent to the Tribunal to pass an order conformably to this order u/s 260 of the Income Tax Act, 1961.