Pathak, C. J. - (1.) This appeal by certificate granted by the Allahabad High Court is directed against a judgment of the High Court answering the following questions in favour of the Revenue and against the assessee in an income-tax reference:"(1) Whether on the facts and in the circumstances of the case, and on a correct interpretation of the lease deed dated 22-8-1960, the Tribunal was right in holding the profits of the glass factory during the relevant accounting year accrued to the assessee company (2) If the answer to the question No.1 is in the affirmative, whether the Tribunal was right in holding that the entire proof its and not one half of the profits of the glass factory during the relevant accounting year accrued to the assessee-company -,
(2.) The assessee, Messrs. Vibhuti Glass Works is a public limited company. It has a glass factory and also carries on other business. The accounts of the glass factory are closed on 31 March each year, while the assessee closes its accounts on 30 September each year. We are concerned with the assessment year 1962-63.
(3.) For several years the glass factory business had been suffering losses resulting in increasing debt. It took heavy loans from the Banaras State Bank, Varanasi, for which purpose its stocks and stores were hypothecated to the Bank. It also took loans from the Uttar Pradesh Government and the land, buildings and machinery were mortgaged accordingly. The assessee found it difficult to emerge out of its financial embarrassment. It discovered also that it needed certain equipment in order to produce better quality goods and also required funds for its working capital and for repaying loans to other creditors. It approached the Industrial Finance Corporation, New Delhi, and the State Finance Corporation for financial assistance and the Industrial Finance Corporation agreed to grant a loan of Rs. 20 lakhs on condition (a) that the State Government guaranteed repayment and (b) that the State Government postponed their charge under the mortgage deeds and the Industrial Financial Corporation was allowed to have the first charge. The State Government agreed to those conditions provided the assessee allowed the State Government to take over the running of the glass factory for a period of 20 years. The State Government also stipulated that if and when the profits of the business exceeded a prescribed limit, a share of those profits would go to the State Government. The assessee agreed to this arrangement and executed a document dated 22 August 1960 incorporating the requisite conditions.;