Judgment

KAPUR, J. : This is an appeal by special leave against the judgment and order of the High Court of Bombay in Income-tax Reference No. 55 of 1955, in which two questions of law were stated for opinion and both were answered in favour of the assessee and against the Commissioner of Income-tax who is the appellant before us and the assessee is the respondent.

2. The facts of this case are these:The respondent is a registered firm carrying on business as commission agents in Bombay. For purposes of its business it borrowed money from time to time from Banks on joint promissory notes executed by it and by others with joint and several liability. On September 26,1949, the respondent borrowed Rs. 1,00,000 from the Bank of India on a pronote executed jointly with one Kishorilal. Out of this amount a sum of Rs. 50,000 was taken by the respondent for purposes of its business and the rest by Kishorilal. Kishorilal however failed to meet his liability and became a bankrupt. The respondent had therefore to pay the Bank the whole amount, i. e., Rs. 1,00,000 with interest. Out of the amount taken by Kishorilal the respondent received in the accounting year, from the Official Assignee, a su