JANAKIRAM K S Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee was a partnership firm doing business as freight brokers for various shipping lines including Ashoka Lines Ltd. Later, it became the proprietory concern of the assessee. It would appear that a firm known as Inden Biselers was in need of a vessel for the carriage of tiles from the ports on the west coast to ports in Ceylon. A charter-party was entered into by this firm with Ashoka Lines Ltd., the latter agreeing to provide a vessel called Menaka, later re-named Manek Prasad. THE Ashoka Lines Ltd. (hereinafter referred to as the owners) had to purchase the vessel and make it available to the charterers, Inden Biselers. THEy were however in somewhat straitened circumstances and had need of funds to enable the purchase. THE charterers agreed to advance a sum of Rs. 25,000 which was to be adjusted against the freight payable. THE charterers were, however, unwilling to rely solely on the owners with regard to the repayment of this sum. THEy accordingly required the assessee, the freight broker, to stand guarantee for the repayment of the amount. Such a guarantee was given by the assessee in a letter to the charterers.

(2.) THE advance was in due course paid by the charterers to the owners, who utilised the amount in the acquisition of the vessel Manek Prasad and fitted it out for the voyages in question. THE understanding was that the freight payable to the owners on account of the first seven voyages was to be adjusted the advance. In so far as the guarantee furnished by the assessee is concerned, it provided thus :

(3.) THE short question that we are called upon to determine is whether in undertaking to foot the loss which was properly that of the owners, the Ashoka Lines Ltd., in respect of a transaction which was principally between the owners, the Ashoka Lines Ltd., and the charterers, Inden Biselers, the assessee was engaging in a transaction which can be said to be in the course of his own regular business which was merely that of a freight broker.