Harries, C.J. - (1.) This is a Reference made by the Appellate Tribunal, Bombay Bench, under Section 66, Income-tax Act, stating a case for the opinion of this Court upon the following question: "Whether, on the facts & circumstances of the case, the sum of Rs. 10,000/- paid by the assessee to Madras Publishing House, or any part thereof was an allowable deduction in computing the assessee's income under Section 10 Income-tax Act." The assessees were Messrs. Globe Theatres Ltd., a public joint stock company, which carry on business as exhibitors of cinema pictures. For the purpose of the business they own certain cinemas & take leases of others & at present they are running seven cinemas in various cities in India.
(2.) It appears that the assessees in the year 1937 advanced a sum of Rs. 10,000/- to a company in Madras known as the Madras Publishing House Ltd. It seems that this latter company were proposing to build a cinema in Madras & this sum was advanced upon an undertaking given by the Madras Publishing House Ltd., that the assessees would have a lease of the premises. The financial position of the Madras Publishing House Ltd., however, was unsatisfactory & the cinema was never built with the result that the assessees of course never obtained a lease & wrote this sum off ass a bad debt.
(3.) The assessees claim that this sum was an allowable deduction in computing the assessees' income under Section 10, Income-tax Act. But the Income-tax Officer as well as the Appellate Assistant Commissioner did not allow the same as an allowable deduction. On appeal, however, the Appellate Tribunal came to the conclusion that it was a business expenditure & eventually the order of the Appellate Assistant Commissioner was set aside .& the case remanded to him for decision in accordance with law. Application was made to the Appellate Tribunal to state a case upon the question which I have indicated, & the case was stated.;