COMMISSIONER OF INCOME TAX Vs. SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES LIMITED

JUDGEMENT

(1.) IN this case at the instance of the Revenue the following question has been referred to us for our opinion :

(2.) THE assessment years with which we are concerned in the present case are asst. yrs. 1962 63 to 1964 65. The assessee is a limited company incorporated in 1956. The business of the assessee is to manufacture cement. In order to import certain plant and machinery, the assessee company entered into an agreement on December 12, 1956, with a foreign company known as M/s Ansaldo, S. P. A. (Ansldo Joint Stock Company) of Genoa, Italy. The agreement provided for various matters including the payment of price for the entire plant and equipment aggregating to Rs. 7,53,345. Under the terms of the agreement plant and machinery were to be delivered by M/s Ansaldo at one of the European ports. 35 per cent. of the price was to be paid on the date of the agreement; 15 per cent. in supply of certain machinery and the remaining 50 per cent. of the price was to be paid in five annual instalments of 10 per cent. 30 per cent. of the price was to be paid by the assessee against three bills of exchange to be drawn by the non resident company on the assessee and to be accepted by the assessee. The assessee was to pay six per cent. interest on the three bills of exchange on the expirty of six months from the date of issue of the above bills till their maturity and the interest was to be paid by means of other bills accepted at the same time and falling due at same maturities as the corresponding main bills of exchange. The assessee was to be entitled to pay the bills of exchange even before their maturity but if that was done, the payment of the interest was to be waived by the non resident company. There were clauses in the agreement as to what should be done if the deliveries were delayed and there were clauses with regard to tests and performance guarantee. The other clauses are in usual terms to be found in such contracts. One of the clause in the agreement provided that the price was to be paid in terms of pound Sterling and the rate of pound Sterling with reference to Italian Lira was fixed in cl. 10A.

(3.) UNDER S. 9(1) provision is made for certain types of income which are deemed to accrue or arise in India and under S. 9(1)(i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through or from any money lent at interest and brought into India in cash or in kind or through the transfer of a capital asset situate in India, is deemed to accrue or arise in India. Under the charging section income tax has to be charged in respect of the income which arises or accrues in India or under the deeming provisions of the Act is deemed to accrue or arise in India. On behalf of the Revenue. Mr. Kaji urged before us that the interest on the amount payable by the assessee to M/s Ansaldo was income accruing or arising though or from an asset held by a non resident company in India and, in the alternative, he contended, that this interest was income accruing or arising through or from money lent at interest and brought into India in cash or in kind. Though the second alternative is not covered by the question referred to us, we have heard counsel on the point because the question directly arise under S. 9(1)(i). If we had been inclined to accept the alternative contention of Mr. Kaji, we would have amended the question accordingly in order to bring out the real controversy between the parties.