Law:

Section:

Section 9 of the Income-tax Act, 1961 - Income - Deemed to accrue or arise in India - Assessment years 1962-63 to 1964-65 - In order to import certain plant and machinery, assessee company entered into agreement with foreign company - Under said agreement machinery was to be delivered at European ports - Plant was not to be erected or put up by non-resident company but assessee-company was to set up plant in India - Price was to be paid in terms of foreign currency - 30 per cent of price was to be paid against three bills of exchange to be drawn by non resident company and assessee was also to pay interest on said bills of exchange - ITO held that in respect of that interest, assessee would be liable under section 9(1)(i) as agent of non-resident company - Whether most of elements of contract were most densely grouped with foreign country where non-resident company was carrying on its business and thus debt which assessee company owed to non-resident company was not asset held by non-resident company in India - Held, yes - Whether, therefore, interest which was payable in respect of this debt was not income arising from or through any asset held by non-resident company in India and consequently, there could not be said to be any liability of assessee-company as agent of non-resident company so far as this aspect of income was concerned - Held, yes - Whether, even otherwise since non-resident company could not be said to have lent amount of unpaid purchase price to assessee-company either in cash or in kind, there was no question of interest payable assessee-company to non-resident company being deemed to be 'income' accruing or arising from any money lent at interest and brought into India in kind - Held, yes FACTS The business of the assessee-company was to manufacture cement. In order to import certain plant and machinery the assessee-company entered into an agreement with a foreign company. Under the terms of the agreement plant and machinery were to be delivered by the foreign company 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, on supply of machinery and the remaining 50 per cent, of the…

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