The assessee was a partnership firm doing business as freight brokers for various shipping lines including Ashoka Lines, Ltd. Later, it became the proprietary concern of the assessee. It would appear that a firm known as ‘Inden Biselers’ was in need of a vessel for the carriage of tiles from the ports on the West Coast to ports in Ceylon. A charter party was entered into by this firm with Ashoka Lines, Ltd., the latter agreeing to provide a vessel called “Menaka”, later re-named “Manek Prasad”. The Ashoka Lines, Ltd. (hereinafter referred to as the owners) had to purchase the vessel and make it available to the charterers Inden Biselers. They were however in somewhat straitened circumstances and had need of funds to enable the purchase. The charterers agreed to advance a sum of Rs. 25,000 which was to be adjusted against the freight payable. The charterers were however unwilling to rely solely on the owners with regard to the repayment of this sum. They accordingly required the assessee, the freight broker, to stand guarantee for the repayment of the amount. Such a guarantee was given by the assessee in a letter to the charterers.

The advance was in due course paid