COMMISSIONER OF INCOME TAX Vs. MODY K M

JUDGEMENT

(1.) IN this reference the following three questions are referred to us at the instance of the CIT by the Tribunal, Bombay Bench `B' :

(2.) IT becomes necessary to state a few facts to enable us to consider the answers to be given. The respondent to this reference and the original assessee is K. M. Mody, a well-known personality in the cinema world since a number of years past. IT may be pointed out that when this reference was heard on 10th Sept., 1981, Mr. Dastur pointed out that the original assessee, K.M. Mody, had died and his heirs and legal representatives were Roosi K. Mody and Mrs. Manek Burjor Cooper. These were the son and daughter respectively of the said K.M. Mody. We passed an order on that date directing the CIT to carry out necessary amendment in the title of the reference on or before Monday, the 14th Sept., 1981. The direction has not been carried out by the CIT. On a number of occasions we have pointed out that the CIT and the solicitor to the Central Govt. are attending to litigation in the High Court in the most improper manner and it is sad that this has to be repeatedly mentioned both orally and even in judgments. To put it most mildly, the CIT has now proclaimed himself to be a most irresponsible and careless litigant at least as far as the Bombay High Court is concerned. IT would appear that either the CIT or the solicitor to the Central Govt. is not able to attend to their litigation in a proper manner. This has resulted in a number of applications being dismissed as also a number of references being not answered, as the CIT did not prosecute matters properly. In this case it is unnecessary, in our opinion, to follow the practice which we have adopted in other matters, that is, holding the CIT in the position of a litigant who is not prosecuting his litigation properly and hence not answering the questions submitted to us for our opinion, inasmuch as, the assessee may be prejudiced. This is because another reference for earlier years is still pending.

(3.) THE Tribunal thereafter considered the alternative submission advanced on behalf of the assessee, namely, that he was entitled to deduct the amount in question as a trading loss. On the basis of the material which was placed before it, it was found that the assessee had owned theatres, had rented theatres and had leased out the same to Western India THEatres Ltd. It was noted further that he had leased out machinery also and that he had financed and guaranteed various persons engaged in the production, distribution and exhibition of films. It was also found that he had carried on this financing activity by all the several methods normally known to the trade, one of which was by guaranteeing loans taken by the borrowers. It was also found that K. M. Mody had guaranteed the loan given to his brother, Sohrab Mody, in the course of his regular business. THE contention of the Revenue that this was out of brotherly feelings was rejected. THE common practice in the trade as also the common practice pertaining to loans raised by Western India THEatres Ltd. and Mody Pvt. Ltd. were also found in favour of the assessee by the Tribunal and is reflected in para 35 of the statement of the case. On this material, and, in our opinion, there is ample material which has been referred to by the Tribunal in its order, the Tribunal held that the various activities carried on by the assessee were interconnected and formed one composite and integral business.