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(g) Rs. 14,560 as agency service expenses, and

(h) Rs. 29,680 on account of expenses of stamps, registration and drafting charges,"

12. At the hearing of this reference it has been accepted on both sides that if the answers to questions Nos. (1) and (2) are in the affirmative, it would follow that the Tribunal could in law allow to the assessee the amounts as referred to in question No. (3).

13. The broad approach of the Income-tax Officer and the Appellate Assistant Commissioner, which has not prevailed with the Tribunal, has been (a) that with the dropping of the banking business by the assessee, no other business remained with it for the business dealt with in the objects part of (c) and (d) to (s) in paragraph 3 of the memorandum of association was nothing more than part of its banking business, and (b) that after it dropped the banking business it could no longer either function as a bank or continue to use the word " bank " in its name. The first approach is obviously not correct for the memorandum of association says in so many words that each object is a separate object and is to be carried on by the assessee as if for each such object it was an independent company. The restrictive clause, as has already been stated, is confined to such of the items in paragraph 3 of the memorandum of association as deal with the business of banking and docs not operate to restrict the remaining objects in that clause. It has further been pointed out that Section 277F of the Indian Companies Act, 1913, as also Section 6 of Act 10 of 1949 clearly describe that those objects are additional business that a banking company may carry on. But obviously a non-banking company can also carry on the business of those objects. So that it follows that when a banking company drops its banking business as the assessee, it is still left with the power to carry on the business under the remaining objects as detailed in Section 277F of the Indian Companies Act, 1913, and Section 6 of Act 10 of 1949. The business under those objects can be carried on by a non-banking company ; there is no justification for the conclusion that when a banking company drops its banking business and retains the business of those objects it ceases to do any business whatsoever. No doubt, the assessee in view of Section 7 of Act 10 of 1949 could not use the word "Bank " in its name after March 10, 1951, but that did not stop it from continuing its financing business other than the banking business. Afterwards, it did for this reason change its name as has already been explained. The Tribunal had before it the balance-sheet of the assessee as on December 31, 1951. It showed that even after the assessee had dropped its banking business, it maintained its capital with its assets and not only did it continue to make realisations of income from those assets but it also continued to discharge liabilities. Apart from this, it maintained its own staff to which it made regular payments, it continued to incur legal expenses connected with its business and it continued to pay fees to its directors obviously for their work done in connection with the management of the company. All this material was before the Tribunal. On this material it could come to the conclusion as it has done in giving an affirmative answer to the first question. The only factor that has been taken against the assessee having continued its business of financing, other than banking, is the fact that it advanced no loan to anybody until some time, in September, 1952, but mere inactivity for a period does not mean that its business ceased to exist or that it did not carry on business at all. A business may be inactive for a period and merely because of the dormancy of the business, the conclusion that it has ceased does not arise. . This is the view that has prevailed in General Corporation Ltd. v. Commissioner of Income-

15. In regard to the third question, it has already been stated that it has been accepted on both sides that if the answer to the first two questions is in the affirmative, the answer to the third question must be in the affirmative, that is to say, the Tribunal has rightly allowed the sums mentioned in the question in favour of the assessee. These may be briefly considered. The first is an amount of Rs. 5,83,944, the loss suffered by the assessee by the sale of securities at the time of transfer of its banking business to the transferee bank on March 10, 1951. This was disallowed by the Income-tax Officer and the Appellate Assistant Commissioner on the ground that it was a capital loss because it was suffered in the course of the winding up of the assessee. The Tribunal rightly finds that this is not a fact. The assessee dropped a part of its business of banking, but it did not enter the stage of winding up nor did it enter the stage of putting a complete stoppage to its remaining financing business of money-lending and sale and purchase of securities. So this amount has rightly been allowed to the assessee by the Tribunal as a loss in its business. The second amount is of Rs. 20,000 paid by the assessee to its general manager for premature termination of his employment because of the shrinking of its business on account of transfer of the banking business to the transferee bank. The approach of the Tribunal is sound that the termination of the services of this officer was in the interest of the business of the assessee and compensation paid for premature termination of his service was for the purpose of its business and hence a permissible deduction. The third item is of Rs. 24,694 paid to a former managing director of the assessee, whose services had been terminated before the commencement of the previous year, but income-tax and super-tax deducted from his salary were wrongly computed in the amount as stated and this was discovered during the previous year. The liability arose at the time of the discovery and the approach of the Tribunal is, therefore, correct in allowing this amount as a deduction to the assessee. The fourth item is of Rs. 6,181 as house rent pertaining to the second period between March 11 and December 31, 1951, which was disallowed on the ground of the assessee's business having become defunct, but that not being so, the conclusion of the Tribunal is correct that this amount is allowable to the assessee as a deduction. The next two sums of Rs. 15,000 and Rs. 10,000 concern expenditure on travelling expense for the first period and for the second period respectively. The same argument applies to these two amounts because the business of the assessee had not come to an end on March 10, 1951, and so these two amounts have been rightly allowed. The seventh amount is of Rs. 4,000 made for miscellaneous expenses. A claim of Rs. 9,403 was made for miscellaneous expenses for the second period, out of which the Income-tax Officer disallowed Rs. 7,000 but the Appellate Assistant Commissioner reduced the add-back to Rs. 4,000. The authorities proceeded on the basis that the business of the assessee had become defunct but, as that finding does not hold good, the Tribunal was justified in not sustaining the add-back of Rs. 4,000 and in deleting the same. The eighth amount is of Rs. 14,560 as agency expenses and as this was disallowed on the same basis as the fourth amount, so the Tribunal was justified in allowing this amount on the same basis as it allowed the fourth amount. The last amount is of Rs. 29,680 on account of expenses of stamps, registration and drafting charges. This expenditure incurred at the time of the execution of the instrument of transfer by the assessee in favour of the transferee bank was disallowed by the income-tax authorities on the ground that in consequence of the transfer the business of the assessee had come to an end. The Tribunal found to the contrary and as that finding has been maintained in this reference, the allowance of this amount by the Tribunal to the assessee as legitimate expenditure is correct. So all the items have in law been rightly allowed by the Tribunal to the assessee. The broad basis for disallowing the same was that the business of the assessee had come to an end on March 10, 1951, when it transferred its banking business to the transferee bank, but that basis not being correct, the only approach that could be made to those amounts was the one adopted by the Tribunal in the facts and circumstances of the case. So the answer to the third question is also in the affirmative.