Judgment

HIDAYADULLAH, J. (for self and Kapur, J.) : This is an appeal by the Commissioner of Income-tax, Bombay, against the judgment and order of the High Court of Bombay dated October 23, 1958, by which the High Court answered two questions referred to it under Section 66(2) of the Income-tax Act in favour of the respondent Jadavji Narsidas and Co. The High Court certified this case as fit for appeal to the SC and hence this appeal.

2. The facts are simple. The year of account is the S. Y. 2001 corresponding to October 10, 1944, to November 4, 1945, and the assessment year is 1946-47. The respondent is a firm consisting of four partners and was registered under Section 26-A of the Income-tax Act for the relevant year. The assessee firm carries on business which is mainly speculation. In the year of account it claimed inter alia a loss Rs. 1,05,641 which, it was said, arose in speculation in a venture of the assessee firm with one Damji Laxmidas. This venture was carried on in the name of Damji Laxmidas on behalf of an alleged firm in which Damji was said to have a share of -/6/-and the assessee firm the balance. A deed of partnership dated November 14, 1944, was also produced befo