Hardayal Hardy, J.
(1) The respondent which will hereafter be referred to as the assessed, is a limited company carrying on the business of distribution and exhibition of cimatography films. The previous year relevant to the assessment year 1957-58 ended on 28-2-1957. In the the course of its film distribution business, the assessed made substantial and 'Rajput'. The contract with the producers provided that the assessed would first of all recoup the advanced amount out of the realisations on exhibition of the pictures and thereafter the collections would be shared between the producers and the assessed in specified shares.
(2) All the three pictures turned out to be failures and the assessed could not even recoup the advances, not to speak of earning any profits out of these three pictures. The total advances which could not be recouped amounted to Rs. 80,664.00. The assessed claimed it as a bad debt during the relevant accounting year. The Income-tax Officer accepted the debt as genuine and that it had become had during the previous year under consideration. He however held that it was not a trade debt but was a debt which had arisen in connection with the acquisition of a capital asset. The claim was accordingly disallowed by him as a capital loss and not as a had debt within the meaning of Section 10(2) (xi) of the Income-tax Act, 1922.
(3) On appeal before the Appellate Assistant Commissioner, it was held that the assessed had given advances to the producers for acquisition of distribution rights of the pictures which constituted the stock-in-trade of the assessed. It was also found that no capital asset as such was acquired or proposed to be acquired by the assessed by giving advances against the three pictures. The Appellate Assistant Commissioner also found that the financial condition of the producers became had and as such they were not in a position ;o re-pay the assesse's advances. The un-recouped advances thereforee represented trading loss of the assessed during the previous year under consideration and was accordingly admissible as a permissible deduction. In this connection the Appellate Assistant Commissioner referred to the decision of the Punjab High Court in Commissioner of Income-tax v. Basumal Jagat Narain and observed that in that case it was held that an irrevocable advance to a producer against distribution rights in films was an admissible deduction in the hands of the distributor. In that view of the matter, the Appellate Assistant Commissioner directed that the sum of Rs. 80,664.00 should be allowed as a. permissible deduction before arriving at the profits of the assessed.
(4) Against the decision of the Appellate Assistant Commissioner, the Income-tax Officer preferred an appeal before the Income-tax Appellate Tribunal. It was pointed out by the Revenue that the case of Basumal Jagat Narai was no longer good law in view of the decision of the Supreme Court in A. V. Thomas and Co. Ltd. v. Commissioner of Income-tax : [1963]48ITR67(SC) . The contention urged on behalf of the Revenue was that as the assessed had made advances against pictures under production they could not be treated as a had debt within the meaning of Section 10(2)(xi) and could not thereforee be allowed as a permissible deduction. The Tribunal however pointed out that the Appellate Assistant Commissioner had not allowed the claim as a claim for had debt within the meaning of Section 10(2)(xi). but had allowed a trading loss probably under Section 10(1) of the Act, although there was no reference in the order of the Appellate Assistant Commissioner to that particular sub-section.
(5) On a perusal of the various clauses of the said agreement between the assessed and Messrs. Jubilee Pictures dated 4-2-1952 and similar clauses in the agreements relating to the other two pictures the Tribunal formed the opinion that what the assessed company had acquired was only the right of distribution of these pictures in the southern Circuit and that right, according to the Tribunal, constituted the stock-in-trade of the assessed. The Tribunal accordingly held that the loss of Rs. 80,664.00 was a trading loss admissible under Section 10(1) of the Act. It seems that apart from the order an application was also made to the Tribunal under Section 35 of the Act to rectify certain mistakes apparent from records.
(6) At the instance of the Commisioner of Income-tax, the following question of law was referred by the Tribunal for the opinion of this Court:-
'WHETHER on the facts and in the circumstances of the case, the loss of Rs. 80,664.00 was a trading loss deductible under section 10(1) of the Indian Income-tax Act, 1922, in computing the business profits ?'
(7) When the question of making a reference was under discussion before the Tribunal an objection was raised on behalf of the assessed to the maintainability of the commissioner's application by the Appellate Bench of the Tribunal at Delhi as according to the assessed, such an application could only be filed at the headquarters of the Tribunal at Bombay. The objection was, however, over-ruled and it is no longer necessary to deal with that aspect of the matter.
(8) The only question that requires consideration is whether the sum of Rs. 80,664.00 was a trading loss deductible under Section 10(1) of the Act in computing the business profits of the assessed. On behalf of the assessed reliance was placed on a decision of the Supreme Court in Commissioner of Income-tax and Excise Profits Tax, Madras v. South India Pictures Ltd. : [1956]29ITR910(SC) whereas the Revenue has relied upon another decision of the same Court in Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax, West Bengal : [1955]27ITR34(SC) .
(9) It seems to us that on the view taken by the Tribunal the right of distribution of the three pictures constituted the stock-in-trade of the assessed and if thereforee whatever advances were made by the assessed to the producers and there was any loss in the re-payment of those advances, the loss has to be treated as a trading loss. This is what the Tribunal appears to have said :-
'HAVING regard to the terms under which the advances were made by the respondent company to the producers, we are of the opinion that what the assessed company acquired was only the right of distribution of these pictures in the Southern Circuit which, in our opinion, constituted the stock-in-trade of the respondent company. Clause 6 of the letter dated 6th February, 1952 re-produced in paragraph 12 (supra) clearly shows that in the event of advanced amounts being not re-couped within a period of 12 months from the release of the picture, the assessed company was entitled to refund of such amount as remained un-recouped. This also showed that what the assessed acquired was in the nature of stock-in-trade of its business.'
(10) The contention urged by the Revenue is that by its agreement the assessed had acquired the right of distribution of these films which was a capital asset as it was as a result of exploitation of the films that the assessed was to earn profits. The money paid by the assessed was to earn profits. The money paid by the assessed was, thereforee, for the acquisition of a capital asset and if in the recoupment of money the assessed suffered any loss the same could be the loss of a capital asset. It was contended that the case of South India Pictures, instead of supporting the argument of the assessed helped the Revenue. Reliance was placed on the following passage in the judgment of Das J. in that case : 'Further, in the present case there is no suggestion that any part of the moneys advanced by the assessed for the production of the films was outstanding. Assuming that to start with the films constituted capital assets, the entire capital outlay had been recovered and the security had been extinguished and that part of the agreements which constituted financing agreements had been fully worked out and had come to an end and the three films ceased to be capital assets and the assessed was holding the films only under that part of the agreements which constituted the distributing agency agreements which only were subsisting.'
(11) In the first place, the above observations were made as an alternative argument which was actually not accepted by the majority. The decision proceeded on the other point. In that case there were three composite agreements. The first part of each agreement was described as a financing agreement for the pictures had still to be produced. According to that part of the agreements, the moneys advanced by the distributor were to be held as a security till they were returned by the producer. The second part of the agreement dealt with what was called as an agency for distribution of the films. The first part of the agreement had been worked out and no money was due to the distributor from the producer. It was in respect of the second part of the agreement that the question of termination of the arrangement had arisen and it was held that this did not radically or at all affect or alter the structure of the assessed's business which continued as before.
(12) In the present case there is only one agreement, namely, the agency for distribution of the films. The distributor had no doubt advanced moneys to the producer for acquiring the rights of distribution but it did not have any security rights over the pictures. The distributor was also under no liability to complete the pictures as was the case before the Supreme Court. The distributor had no right to distribute these very pictures to others to earn any income, profits or gains. The pictures continued to be the property of the producers and after the period of the agency came to an end the pictures were to be returned to them. The assessed was not precluded from entering into an arrangement with other producers for procuring other pictures if the producers failed to provide the pictures.
(13) The acquisition of these pictures was like acquiring other items of stock-in-trade in the film distribution business of the assessed. It cannot, thereforee, be said that the assessed acquired capital assets for carrying on its distributing agency business. The amount which the assessed had still to receive back from the producers, was not the price of any capital assets sold or surrendered to the assessed nor was it the amount paid to the assessed for the surrender or sterilization of the asset; but was, as said by Rowlatt J. in Short Bros. Ltd. v. Commissioner of Inland Revenue 12 Tax Cas 935 to be received by the assessed in the course of its doing the agency business from a running business.
(14) Counsel for the Revenue next relied upon the case of Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax, West Bengal : [1955]27ITR34(SC) . The Supreme Court had accepted in that case the principles enunciated by the Full Bench of the Lahore High Court in Benarsidas Jagannath, In re: 15 I.T.R. 195 for distinguishing capital expenditure from revenue expenditure. The tests are laid at page 44 of the report. It seems to us that none of the principles laid down in that judgment can be of any help to the Revenue in the decision of this case.
(15) The question of distribution between revenue expenditure and capital expenditure was recently considered by the Supreme Court in Gotan Lime Syndicate v. Commissioner of Income-tax, Rajasthan and Delhi : [1966]59ITR718(SC) and it was said that none of the tests laid down in the various authorities, English as well as Indian, to distinguish between the two kinds of expenditure is exhaustive or universal. Each case must depend on its own facts, and close similarity between one case and another is not enough, because even a single significant detail may alter the entire aspect. In deciding such cases one should avoid the temptation to decide by matching the colour of one case against the colour of another.
(16) In Mohanlal Hargovind of Jubbulpore v. Commissioner of Income- tax 17 Itr 473 the Judicial Committee of the Privy Council was concerned with the case of grant of a 'contract of collecting and removing tendu leaves. The point raised was whether the Installments, payable by the assessed were expenditure made in acquiring one of the raw materials of assessed's manufacture, as capital expenditure within the meaning of the Income-tax Act of 1922. It was held that 'the contract was entered into by the assessed wholly and exclusively for the purpose of supplying themselves with one of the raw materials of their business, that they granted no interest in land, or in the trees or plants, that under them it was the tendu leaves and nothing but the tendu leaves that were acquired that the right to pick the leaves or to go on to the land for the purpose were merely ancillary to the real purpose of the contracts and if not expressed would be implied by law in the sale of a growing crop and that, thereforee, the expenditure incurred in acquiring the raw material was in a business sense an expenditure on revenue account and not on capital account, just as much as if the tendu leaves had been bought in a shop.'
(17) The case is a close parallel to the present case and affords guidance for the view we are taking in the present case.
(18) That apart, even if it is assumed that the advance payments were meant to enable the assessed to acquire distribution rights in the films which led to the earning of income, profits or gain from the business and were, thereforee, a capital asset, it is doubtful if in the present case, the question can be asnswered in favor of the Revenue. The Tribunal as we have already seen, has held the rights of distribution as the stock-in-trade of the assessed and any payment made for the acquisition of such stock-in-trade has got to be held as revenue expenditure.
(19) Mr. Karkhanis, learned counsel for the assessed, pointed out that in the statement of case, this aspect of the controversy was accepted by the Revenue and no objection was raised either before the Tribunal or by an application filed in this Court. The jurisdiction which this Court exercises in such matters, has to be in keeping with the findings of fact recorded by the Tribunal which have to be accepted as correct. Our attention was drawn to a recent decision of the Supreme Court in Commissioner of Income-tax, West Bengal Iii v. Imperial Chemical (P) Ltd. : [1969]74ITR17(SC) where it was said :-
'IT is well established that the High Court is not a court of appeal in a reference under section 66(1) of the Act and it is not open to the High Court in such a reference to embark upon a reappraisal of the evidence and to arrive at findings of fact contrary to those of the 'Appellate Tribunal. It is the duty of the High Court while hearing the reference to confine itself to the facts as found by the Appellate Tribunal and to answer the question of law in the context of those facts. It is true that the findings of fact will be defective in law if there is no evidence to support it or if the finding is perverse. But in the hearing of a reference under section 66(1) of the Act it is not open to the assessed to challenge such a finding of fact unless he has applied for the reference of the specific question under Section 66(1)'.
(20) The same view was taken by their Lordships in India Cement Ltd. v. Commissioner of Income-tax Madras : [1966]60ITR52(SC) So , Commissioner of Income-tax, Madras v. Shri Meenakshi Mills Ltd. : [1967]63ITR609(SC) and Commissioner of Income-tax, Bombay City I v. Greaves Cotton and Co. Ltd. : [1968]68ITR200(SC) .
(21) Counsel for the Revenue cited on the other hand, two other decisions of the Supreme Court. In Commissioner of Income-fax, Bombay v. Scindia Steam Navigation Co. Ltd. : [1961]42ITR589(SC) which is a leading case on the subject, their Lordships were considering the question as to the circumstances under which the High Court could direct Tribunal to refer under Section 66(2) a question which was specified by the applicant in his application under Section 66(1) of the Act. No such question as to whether the right of distribution of films amounted to a capital asset was raised before the Tribunal. While dealing with the question their Lordships were pleased to lay down the following test:-
'(1) When a question is raised before the Tribunal and is dealt with by it. it is only one arising out of its order. (2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it. and is, thereforee, one arising out of its order. (3) When a question is not raised before the Tribunal but the Tribunal deals with it. that will also be a question arising out of its order. (4) When a question of law is neither raised before the Tribunal nor considered by it. it will not be a question arising out of its order not withstanding that it may arise on the findings given by it.'
(22) The argument of the learned counsel for the Revenue is that sometimes the question is framed in such general terms that. construed literally, it might take in questions which were never in issue. In such cases true scope of the reference will have to be ascertained and limited by what appears on the statement of the case. Having regard to the question as framed, it was open to this Court to construe the question in such a way as to determine the true scope of the reference. The controversy before the Tribunal was whether the loss of Rs. 80,664.00 was a revenue receipt or a capital receipt and that brought in the question as to whether the right acquired by the assessed constituted its stock-in-trade. As it appears the question decided by the Tribunal was as to whether the loss amounted to a trading loss deductible under Section 10(1) of the Act. The Tribunal having held that the acquisition of the right of distribution of these pictures constituted the stock-in-trade of the assesses. On that point no objection was raised by the Commissioner of Income-tax. We cannot, thereforee, elaborate the scope of the reference by allowing the counsel for the Revenue to bring in that question at this stage. Even otherwise we are of the view that the right did constitute the stock-in-trade of the assessed and was not a capital asset.
(23) A reference was also made by the learned counsel for the Revenue to a very recent decision of the Supreme Court in Commissioner of Income-tax, West Bengal I v. Indian Molasses Co. P. Ltd. : [1971]78ITR474(SC) . An examination of the judgment however shows that if a question of law is raised before the Tribunal even if an aspect of that question is not raised that aspect may be urged before the High Court. In the present case, no. attempt was made by the applicant to raise this question although there could be no doubt that such a question could have been raised and could have been considered by the Tribunal.
(24) Under these circumstances, we do not feel called upon to allow the learned counsel for the Revenue to raise that question before us. The result of the fore-going discussion is that in computing the business profits of these assessed the loss suffered by it is a trading loss deductible under Section 10(1) of the Act. The question is thereforee answered in favor of the assessed and against the revenue. The assessed will also have its costs. Counsel's fee Rs. 200.00.00.