Dipak Kumar Sen, J. - (1.) The facts found or admitted in, and the proceedings leading up to, this reference are, inter alia, that Rampooria Brothers Pvt. Ltd., the assessee, is a private limited company which was incorporated some time in 1953. One of the objects of the assessee as recorded in its memorandum of association is as follows : "To lend money to such persons or companies and on such terms as may seem expeditious, and in particular to customers and others having dealings with the company and to guarantee the performance of the contracts or payment of money to any such persons or companies."
(2.) In the year 1963-64, the assessee furnished a guarantee in respect of certain contracts of carriage by one Great India Boat Company from one part of India to another through the territories of Pakistan for which sanction was granted by the Collector of Land Customs. In December, 1967, the assessee furnished counter-indemnity in respect of a loan of over Rs. 3,00,000 in favour of Bokaro Steel Ltd. at the request of one Asian Refractories Ltd. The aforesaid guarantee and the indemnity were furnished by the assessee without consideration.
(3.) Some time in July, 1968, the assessee guaranteed payment of a loan of Rs. 1 lakh with interest which was obtained by the said Asian Refractories Ltd. from the United Bank of India. The terms of the loan were that the principal amount and the interest thereon would be repaid by the Asian Refractories Ltd. by January 31, 1970. The assessee guaranteed the repayment of the said principal amount and interest and in the event of the failure of Asian Refractories Ltd., to pay the said debt within the due date undertook to make the payment out of rents receivable from premises No. 8, Ballygunge Circular Road, Calcutta, a property belonging to the assessee.;