COMMISSIONER OF INCOME TAX Vs. S P BALASUBRAMANIAM

JUDGEMENT

(1.) THE assessee is a music director and playback singer and according-to him, he is also occasionally involved in film production. It is his case that he had entered into a business venture with one Charan Chitra, a, partnership firm on February 28, 1977, under which he was to receive 5 per cent, of the amount realised from the film called "Charitra Hennulu" after the amount borrowed by that firm from Vijaya Pictures in a sum of Rs. 2 lakhs for which the assessee has stood guarantee, was repaid from the earnings of the movie. THE fact that the assessee had stood surety for the monies lent by Vijaya Pictures to Charan Chitra had come to light after a search in the assessee's premises on June 28, 1980. At that search certain diaries were also recovered, on the basis of which additions were made to the assessee's income.

(2.) THE assessee in his returns for the assessment years with which we are concerned, 1975-76, 1976-77, 1977-78 and 1981-82, claimed that no addition to his income was warranted and also that the interest paid by him on the monies which he had borrowed for the purpose of paying Vijaya Pictures by reason of the default committed by Charan Chitra was required to be allowed as a business loss.

(3.) IN so far as the question relating to the admissibility of the deduction claimed by the assessee for the amount paid by him as interest on the borrowing effected for the purpose of discharging the liability which he had incurred as the surety for loan obtained by Charan Chitra from Vijaya Pictures is concerned, the submission for the Revenue is that the assessee was not engaged in the business of film production and that this one time adventure was more in the nature of help rendered to a friend on considerations of friendship and cannot be regarded as a business venture. It was submitted that the assessee is not engaged in the business of film production and the guarantee given by him to help a friend and the loss resulting therefrom cannot be regarded as a business loss.