http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9  

PETITIONER: BADRIDAS DAGA

       Vs.

RESPONDENT: THE COMMISSIONER OF INCOME-TAX

DATE OF JUDGMENT: 25/04/1958

BENCH: AIYYAR, T.L. VENKATARAMA BENCH: AIYYAR, T.L. VENKATARAMA GAJENDRAGADKAR, P.B. SARKAR, A.K.

CITATION:  1958 AIR  783            1959 SCR  690

ACT:        Income   Tax-Deduction-Misappropriation   by   employee-Loss        incidental to the conduct of the business-Indian  Income-tax        Act, 1922 (II Of 1922), S. 10(1), (2)(Xi), (2)(XV).

HEADNOTE: The appellant engaged an agent for the purposes of  carrying on his business and conferred on him large powers of manage- ment including authority to operate on bank accounts.  While acting  under such authority the agent withdrew moneys  from the  bank  and used them for the discharge of  his  personal debts.   The  appellant was able to recover from  the  agent only  a part of the amount misappropriated by him,  and  the balance  had to be written off at the end of the  accounting year as irrecoverable.  The question was whether the  amount which  was  misappropriated  and  found  irrecoverable   was allowable as a deduction under the Indian Income-tax Act  in determining the profits of the appellant. Held, that the amount in question is not allowable either as a  bad debt under s. 10(2)(Xi) or as a business  expenditure under  S. 10(2)(XV) Of the Indian Income-tax Act, 1922.   It can,  however, be deducted in computing the profits  of  the appellant under 691 s.   10(1)  of the Act as a loss incidental to the  carrying on of his business. Where an agent or an employee of a businessman in charge  of the  business  is  given authority to operate  on  the  bank accounts  and withdraws moneys in the purported exercise  of that authority, his action is referable to his character  as such  authorised  agent or employee and any  loss  resulting from  misappropriation  of  the money by him  would  be  one incidental to the carrying on of the business, and it is not necessary  to  show  that the money was  withdrawn  for  the conduct of the business. Curtis v. J. & G. Oldfield, (1925) 9 Tax Cas. 319 and  Rama- swami Chettiar v. Commissioner of Income-tax, Madras, (1930) I.L.R. 53 Mad. 904, explained and distinguished. Venkatachalapathy Iyer v. Commissioner of Income-tax, (1951) 20  I.T.R.  363, Lord’s Dairy Farm Ltd. v.  Commissioner  of Incometax,  (1955) 27 I.T.R. 700 and Motipur  Sugar  Factory

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 9  

Ltd.  v. Commissioner of Income-tax, (1955) 28  I.T.R.  128, approved.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 149 of 1956. Appeal  by special leave from the judgment and  order  dated December 22, 1954, of the former Nagpur High Court in  Misc. Civil Case No. 36 of 1954. R.   J.  Kolah,  J.  M.  Thakar, Ramesh  A.  Shroff,  J.  B. Dadachanji,  S.  N.  Andley  and  Rameshwar  Nath,  for  the appellant. H.   N. Sanyal, Additional Solicitor-General of India, K.N. Rajagopala Sastri and R. H. Dhebar, for the respondent. 1958.  April 25.  The Judgment of the Court was delivered by VENKATARAMA AIYAR J.-This is an appeal against the  judgment of the High Court of Nagpur in a reference under s. 66(1) of the Indian Income-tax Act, 1922, hereinafter referred to  as the Act. The  appellant  is  the sole proprietor  of  a  firm  called Bansilal Abirchand Kasturchand, which carries on business as money-lenders, dealers in shares and bullion and  commission agents  in  Bombay,  Calcutta and other  places.   He  is  a resident of Bikaner, and manages the 692 business  at the several places through agents.  During  the relevant  period,  the agent of the firm at Bombay  was  one Chandratan, who held a power-of-attorney dated May 13, 1944, conferring  on  him  large powers  of  management  including authority  to operate on bank accounts.  During the  period, November  15, 1944, to November 23,1944, the agent  withdrew from  the  firm’s  bank  account  sums  aggregating  to  Rs. 2,30,636-4-0,  and  applied  them  in  satisfaction  of  his personal  debts  incurred in speculative  transactions.   On November  25, 1944, the cashier of the firm sent a  telegram to the appellant informing him of the true state of affairs. Thereupon, the appellant went to Bombay on December 3, 1944, and on the 4th, cancelled the power-of-attorney given to the agent, and by notice dated December 6, 1944, called upon him to  pay the amounts withdrawn by him.  The agent replied  on December  8,  1944, admitting the  misappropriation  of  the amounts  and  pleading for mercy.  On January  16,1945,  the appellant  filed  a suit against him in the  High  Court  of Bombay for recovery of Rs. 2,30,636-4-0 and that was decreed on  February  20, 1945.  A sum of Rs. 28,000  was  recovered from  Chandratan  and adjusted towards the  decree  and  the balance  of Rs. 2,02,442-13-9 was written off at the end  of the accounting year as irrecoverable. Before  the Income-tax authorities, the dispute  related  to the question whether this amount of Rs. 2,02,442-13-9 was an admissible deduction.  The Tribunal found that the amount in question  represented  the loss sustained by  the  appellant owing to misappropriation by his agent, Chandratan, but held on  the  authority  of the decision in Curtis  v.  J.  &  G. Oldfield,  Limited  (1) that it was not a trading  loss  and therefore  could not be allowed.  On the application of  the appellant,  the Tribunal referred the following question  of law for the decision of the High Court, Nagpur: Whether the said sum of Rs. 2,02,442-13-9 being part of  the amount  embezzled by the assessee’s Munim is allowable as  a deduction under the Indian Income- (1)  (1925) 9 Tax Cas. 319. 693 tax  Act  either under Section 10(1) or  under  the  general

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 9  

principles  of  determining  the  profit  and  loss  of  the assessee or Section 10(2)(xv) ? " The  learned Judges held that the case was governed  by  the decision  in  Curtis v. J. & G. Oldfield, Limited  (1),  and answered the question against the appellant.  An application under  s. 66(A)(2) for a certificate was also dismissed  and thereafter, the appellant applied for and-obtained leave  to appeal  to  this Court under Art. 136, and that is  how  the appeal comes before us. The  question  whether  moneys  embezzled  by  an  agent  or employee are allowable as deduction in computing the profits of  a  business  under  s. 10 of the Act  has  come  up  for consideration  frequently before the Indian courts, and  the decisions  have not been quite uniform.   Before  discussing them, it is necessary that we should examine the  principles that  are  in  law applicable to the  determination  of  the question.  Three grounds have been put forward in support of the  claim  for deduction: (1) that the los 3  sustained  by reason  of  embezzlement is a bad debt  allowable  under  s. 10(2)(xi)  of  the Act; (2) that it is  a  business  expense falling within s. 10(2)(xv) of the Act; and (3) that it is a trading loss, which must be taken into account in  computing the profits under s. 10(1) of the Act.  As regards the first ground,  the  authorities have consistently  held  that  the deduction  is not admissible under s. 10(2)(xi) of the  Act, and  that, in our view, is correct.  A debt arises out of  a contract  between the parties, express or implied, and  when an agent misappropriates monies belonging to his employer in fraud  of  him and in breach of his obligations to  him,  it cannot  be  said  that  he  owes  those  monies  under   any agreement.   He is no doubt liable in law to make good  that amount,  but  that  is not an obligation arising  out  of  a contract, express or implied.  Nor does it make a difference that  in the accounts of the business the amounts  embezzled are  shown as debits, the amounts realised towards them,  if any,  as  credits, and the balance is finally  written  off. They  are merely journal entries adjusting the accounts  and do not import a contractual liability. (1)(1925) 9 Tax Cas. 319. 694 Nor  can  a  claim  for  deduction  be  admitted  under   s. 10(2)(xv),  because  moneys  which  are  withdrawn  by   the employee  out of the business till without authority and  in fraud  of the proprietor can in no sense be said to be "  an expenditure  laid out or expended wholly and  exclusively  " for the purpose of the business.  The controversy  therefore narrows itself to the question whether amounts lost  through embezzlement  by an employee are a trading loss which  could be deducted in computing the profits of a business under  s. 10(1).   It  is to be noted that while s.  10(1)  imposes  a charge  on  the  profits or gains of a trade,  it  does  not provide how those profits are to be computed.  Section 10(2) enumerates various items which are admissible as deductions, but  it is well settled that they are not exhaustive of  all allowances  which  could  be made  in  ascertaining  profits taxable  under  s.  10(1).   In  Incometax  commissioner  v. chitnavis (1), the point for decision was whether a bad debt could  be deducted under s. 10(1) of the Act,  there  having been   in   the  Act,  as  it  then  stood,   no   provision corresponding to s. 10(2)(xi) for deduction of such a  debt. In  answering the question in the affirmative,  Lord  Russel observed: " Although the Act nowhere in terms authorizes the deduction of  bad debts of business, such a deduction  is  necessarily allowable.  What are chargeable in income-tax in respect  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 9  

a  business  are  the profits and gains of a  year;  and  in assessing  the  amount of the profits and gains  of  a  year account  must necessarily be taken of all  losses  incurred, otherwise  you  would  not arrive at the  true  profits  and gains." It is likewise well settled that profits and gains which are liable to be taxed under s. 10(1) are what are understood to be  such according to ordinary commercial  principles.  ,The word  " profits....... is to be understood ", observed  Lord Halsbury in Gresham Life Assurance Society v. Styles (2),  " in  its  natural  and  proper  sense-in  a  sense  which  no commercial  man  would misunderstand ". Referring  to  these observa- (1)   (1932) L. R. 59 I.A. 290, 296, 297. (2)(1892) A.C. 309, 315 ; 3 Tax Cas. 185, 188. 695 tions,   Lord   Macmillan  said   in   Pondicherry   Railway Co.v.Income-tax  Commissioner (1):" English authorities  can only be utilized with caution in the consideration of Indian income-tax  cases owing to the differences in  the  relevant legislation, but the principle laid down by Lord  Chancellor Halsbury  in Gresham Life- Assurance Society V. Styles  (2), is of general application unaffected by the specialities  of the English tax system.  " The result is that when a claim is made for a deduction  for which there is no specific provision in s. 10(2), whether it is  admissible or not will depend on whether, having  regard to  accepted commercial practice and trading principles,  it can be said to arise out of the carrying on of the  business and  to be incidental to it.  If that is  established,  then the  deduction must be allowed, provided of course there  is no prohibition against it, express or implied, in the Act. These  being the governing principles, in  deciding  whether loss  resulting  from  embezzlement  by  an  employee  in  a business  is admissible as a deduction under s.  10(1)  what has  to  be  considered  is whether it  arises  out  of  the carrying  on  of  the  business and  is  incidental  to  it. Viewing  the  question  as a  businessman  would,  it  seems difficult  to  maintain  that  it  does  not.   A   business especially  such as is calculated to yield  taxable  profits has  to be carried on through agents, cashiers,  clerks  and peons.  Salary and remuneration paid to them are  admissible under  s. 10(2)(xv) as expenses incurred for the purpose  of the business.  If employment of agents is incidental to  the carrying  on  of  business, it must  logically  follow  that losses  which  are incidental to such  employment  are  also incidental to the carrying on of the business.  Human nature being  what  it  is,  it  is  impossible  to  rule  out  the possibility of an employee taking advantage of his  position as  such  employee  and misappropriating the  funds  of  his employer,  and the loss arising from  such  misappropriation must be held to arise out of the carrying on of business and to be incidental to it. (1)  (1931) L.R. 58 I.A. 239, 252. (2)  (1892) A.C. 309, 315; 3 Tax Cas. 185, 188 696 And that is how it would be dealt with according to ordinary commercial principles of trading. At the same time, it should be emphasised that the loss  for which  a deduction could be made under s. 10(1) must be  one that  springs directly from the carrying on of the  business and  is incidental to it and not any loss sustained  by  the assessee, even if it has some connection with his  business. If,  for example, a thief were to break overnight into  -,he premises  of a moneylender and run away with  funds  secured

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 9  

therein, that must result in the depletion of the  resources available  to  him for lending and the loss  must,  in  that sense, be a business loss, but it is not one incurred in the running  of the business, but is one to which all owners  of properties are exposed whether they do business or not.  The loss in such a case may be said to fall on the assessee  not as  a  person carrying on business but as  owner  of  funds. This  distinction,  though fine, is very material as  on  it will  depend whether deduction could be made under s.  10(1) or not. We  may  now  examine the authorities in the  light  of  the principles   stated   above.   In   Jagarnath   Therani   v. Commissioner  of  Income-tax (1), the facts  were  that  the assessee who was carrying on business entrusted a sum of Rs. 25,000  to  his gumastha for payment to a creditor,  but  he embezzled it.  The question referred for the opinion of  the High  Court  was  whether  that  sum  could  be  allowed  as deduction in the computation of profits.  In answering it in the affirmative, the learned Judges observed that  according to  the  practice obtaining in England,  sums  embezzled  by employees  were  allowed  as  deductions  and  referred   to statements  of the law to that effect from Sanders’  Income- tax  and Super-tax, Murray and Carters’ Guide to  Income-tax Practice   and  to  the  following  passage  in   Snellings’ Dictionary of Income-tax and Super-Tax Practice: ,,If  a loss by embezzlement can be said to  be  necessarily incurred  in  carrying  on the trade  it  is  allowable  as. deduction  from  profits.  In an ordinary  case  it  springs directly from the necessity of deputing (1)(1925) I.L.R. 4 Pat. 385. 697 certain  duties  to  an employee, and  should  therefore  be allowed.  " They accordingly allowed the deduction as "a loss incidental to the conduct of the business". In Ramaswami Chettiar v. Commissioner of Income-Tax,  Madras (1),  the  assessee  was carrying  on  banking  business  in several  places in India and in Burma.  On October 21,  1926 thieves broke into the strong room in the business  premises at  Moulmiengyum  and stole cash and currency notes  of  the value  of Rs. 9,335.  The question was whether  this  amount could  be  allowed  as  a deduction.  It  was  held  by  the majority  of  the  Jndges  that it could  not  be.   In  the judgment  of  the learned Chief Justice, the  law  was  thus stated: " If any one is paid a sum due to him as profits and he puts that  in his pocket and on his way home is robbed of it,  it would be, I think, difficult to contend that such a loss was incidental  to  his  business.  Still more so  when  he  has reached  his home and put those profits in a strong room  or some other place regarded by him to be a place of safety.  1 can  well understand that, in cases where the collection  of profits  or payment of debts due is entrusted to a  gumastha or servant for collection and that person runs away with the money  or otherwise improperly deals with it,  the  assessee should  be allowed a deduction because such a loss  as  that would  be  incidental  to his business.  He  has  to  employ servants for the purpose of collecting sums of money due  to him and there is the risk that such servant may prove to  be dishonest  and  instead of paying the profits over  to  him, convert  them to his own use.  But I cannot distinguish  the present case from the case of any professional man or trader who, having collected his profits, is subsequently robbed of them  by a stranger to his business.  In this case, none  of the thieves were the then servants of the assessee, although

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 9  

one of them had formerly been his cook.  " These  observations,  while they support the  right  of  the asssee to deduction of loss resulting from (1)(1930) I.L. R. 53 Mad. 904, 906, 907. 698 embezzlement by an employee, also show the extent and limits of that right. In  Bansidhar  Onkarmal V.  Commissioner of  Incometax  (1), there  was  a theft of money by an accountant, but  it  took place after the office hours, and it was held, following the decision in Ramaswami Chettiar v. Commissioner of Income-tax (2)  that  it could not be allowed as a deduction  under  s. 10(1)  of the Act, as it was not incidental to the  carrying on  of the trade.  But it was observed by Narasimham J.  who delivered  the  leading judgment that it might have  made  a difference  if the theft had been by the  accountant  during the office hours.  In Venkatachalapathy Iyer v. Commissioner of  Income-tax (3), the assessees were a firm  of  merchants engaged in the business of selling yarn.  Its accountant was one  Rajarathnam lyengar, whose duty it was to receive  cash on sales, make disbursements and maintain accounts.  He duly entered  all  the  transactions in the cash  book  but  when striking  the  balance  at the end of  each  day  he  short- totalled the receipts and overtotalled the disbursements and misappropriated  the difference.  The question  was  whether the  amounts thus embezzled could be deducted.  On a  review of  the authorities, Satyanarayana Rao and Raghava  Rao  JJ. held that the loss was incidental to the carrying on of  the business and should be allowed.  The appellant contends that this  decision is decisive in his favour ; but  the  learned Judges  of the Court below were of the opinion that  on  the facts it was distinguishable and that the present case  fell within  the decision in Curtis v. J. & G. Oldfield,  Limited (4). It is necessary to examine the decision in Curtis v.J. &  G. oldfield  (4) somewhat closely, as the main  controversy  in the  Indian  courts  has  been  as  to  what  was  precisely determined therein.  There, the facts were that the managing director  of a company who was in exclusive control  of  its business,  had,  availing himself of his  position  as  such managing director, withdrawn large amounts from time to time and applied them to his own personal affairs.  This went  on for (1)  [1949] 17 I.T.R. 247. (3)  [1951] 20 I.T.R. 363. (2)  (1930) I.L.R. 53 Mad. 904, 906, 907. (4)  (1925) 9 Tax Cas. 319. 699 several years prior to his death, and thereafter, the  fraud was  discovered,  and  the amounts  overdrawn  by  him  were written  off  as irrecoverable.  The  question  was  whether these  amounts could be allowed as a deduction, and  it  was answered  in  the negative by Rowlatt J. Now, it  should  be observed  that  the learned Judge did not say  that  amounts embezzled by an employee in the course of business would not be admissible deductions.  On the other hand, he observed: "  I  quite  think,  with Mr. Latter, that  if  you  have  a business......  in  the course of which you have  to  employ subordinates, and owing to the negligence or the  dishonesty of the subordinates some of the receipts of the business  do not  find their way into the till, or some of the bills  are not collected at all, or something of that sort, that may be an  expense connected with and arising out of the  trade  in the most complete sense of the word." He went on to observe:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 9  

" I do not see that there is any evidence at all that  there was  a loss in the trade in that respect.  It  simply  means that the assets of the Company moneys which the Company  had got  and  which had got home to the Company,  got  into  the control of the Managing Director of the Company, and he took them out.  It seems to me that what has happened is that  he has  made  away with, receipts of the Company  de  hors  the trade  altogether  in  virtue of his  position  as  Managing Director in the office and being in a position to do exactly what he likes." Thus,  what  the  learned Judge really  finds  is  that  the embezzlement  was not connected with the carrying on of  the trade but was outside it, and on that finding, the  decision can  only be that the deduction should be  disallowed.   But the  learned Judges in the Court below would appear to  have read  the above observations as meaning that, as a  rule  of law, embezzlements made prior to the receipts of the amounts by  the assessees would be incidental to the carrying on  of the  trade and therefore admissible, but that  embezzlements 89 700 made after receipt are not connected with the carrying on of the trade and are therefore inadmissible.  We do not so read those  observations.  It is a question turning on the  facts of  each case whether the embezzlement in respect  of  which deduction  is claimed took place in the carrying on  of  the business, and the observations of the learned Judge that  it did  not so take place have reference to the facts  of  that case, and can afford no assistance in deciding whether in  a given case the embezzlement was incidental to the conduct of the business or not. Now,  in Curtis v. J. & G. Oldfield Limited(1), the  company was  doing  business  in  wine and spirit,  and  in  such  a business it is possible to hold that when once the price  is realised  and put into the bank, the trading has ceased  and that  the subsequent operations on the bank account are  not incidental  to the carrying on of the trade.  But  here,  we are  dealing  with  a banking business,  which  consists  in making  advances, realising them and making fresh  advances, and for that purpose, it is necessary not merely to  deposit amounts in banks but also to withdraw them.  That is to say, a continuous operation on the bank account is incidental  to the  conduct  of the business.  The theory  that  when  once moneys are put into the bank they have " got home " and that their  subsequent withdrawal from the bank would be de  hors the business, will be altogether out of place in a  business such  as banking.  It will be a wholly unrealistic  view  to take  of  the  matter, to hold that  the  realisations  have reached  the till when they are deposited in the  bank,  and that  that marks the terminus of the business activities  in money-lending. It  should  also  be mentioned that in  Curtis  v.  J.  &’G. oldfield (1) though the assessee was a company, it was found that the shares were all held by the members of the Oldfield family, that the company had no auditor and no minutes book, that there was Cc an almost entire absence of balance sheets ",  and that one of the members, Mr. J. E. Oldfield, was  in management with wide powers.  In view of the fact that he (1) (1925) 9 Tax Cas. 319. 701 had a large number of shares in the company and that it  was in  substance  a private company, his withdrawals  would  be more  like a partner overdrawing his account with  the  firm than  an agent embezzling the funds of his employer, and  it could properly be held that such overdrawing has nothing  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 9  

do  with the trading activities of the firm,  whose  profits are  to  be  taxed.  It would, therefore,  be  an  error  to suppose  that  the observations made by Rowlatt  J.  in  the above  context  could be regarded as an  authority  for  the broad proposition that as a matter of law, and  irrespective of  the  nature  of business, there  could  be  no  business activities  with  reference to moneys after they  have  been collected,  and that, in consequence,  embezzlement  thereof could not be incidental to the carrying on of business.  And we  should further add that it would make no  difference  in the  admissibility  of the deduction  whether  the  employee occupies  a subordinate position in the establishment or  is an agent with large powers of management. Subsequent to the decision now under appeal, the Bombay High Court had occasion to consider this question in Lord’s Dairy Farm Ltd. v. Commissioner of Income-tax (1).  On a review of the authorities including the decision in Curtis v. J. &  G. Oldfield,  Limited (2), Chagla C. J. and Tendolkar  J.  held that loss caused to a business by defalcation of an employee was  a trading loss, and that it could be deducted under  s. 10(1).   In  Motipur Sugar Factory Ltd. v.  Commissioner  of Income-tax (3), an employee who had been entrusted with  the funds  of  a  company for  purposes  of  distribution  among sugarcane  growers in accordance with statutory  rules,  was robbed  of  them on the way.  It was held by  Ramaswami  and Sahai JJ. that the loss was incidental to the conduct of the trade, and must be allowed.  We agree with the decisions  in Venkatachalapathy  Iyer  v. Commissioner of  Incometax  (4), Lord’s Dairy Farm Ltd. v. Commissioner of Income-tax (1) and Motipur Sugar Factory Ltd. v. Commissioner of Income-tax(3).      (1) [1955] 27 I.T.R. 700.(2)  (1925)  9  Tax  Cas. 319.      (3) [1955] 28 I.T.R. 128.(4) [1951] 20 I.T.R. 363. 702 It was argued for the respondent that there was no evidence, much  less proof, that when Chandratan withdrew  funds  from the  bank, he did so for the purpose of making any  advance, and  that,  therefore, the withdrawal could not be  held  to have  been  for  the conduct of the  trade.   That,  in  our opinion, is not necessary.  When once it is established that Chandratan  was  in  charge of the  business,  that  he  had authority to operate on the bank accounts, and that he with- drew the moneys in the purported exercise of that authority, his  action is referable to his character as agent, and  any loss  resulting from misappropriation of funds by him  would be a loss incidental to the carrying on of the business.  It was also contended that the power-of-attorney dated May  13, 1944,  under which Chandratan was constituted agent  related not  only to the business of the appellant but also  to  his private  affairs,  and  that there was  no  proof  that  the embezzlement  was in respect of the business assets  of  the appellant  and not of his private funds.  No  such  question was  raised  before the Income-tax  authorities,  and  their finding  assumes that the moneys which were  misappropriated were business funds.  We are also not satisfied that, on its true construction,, the authority conferred on the agent  by the  power-of.attorney extended to the personal  affairs  of the appellant. In the result, we are of opinion that the loss sustained  by the appellant as a result of misappropiriation by Chandratan is  one  which  is incidental to the  carrying,  on  of  his business, and that it should therefore deducted in computing the  profits under s. 10(1) of the, Act.  In this view,  the order of the lower court must be set aside and the reference answered  in the, affirmative.  The appellant will  get  his

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 9  

costs  of  this  appeal and of the reference  in  the  Court below. appeal allowed. 703