Law: Income Tax Act, 1922

Section: 66(1),10(2)(iii)proviso,18(3),43

Income-tax Act, 1922 -Sections 10(2)(iii), 18(3B) -- Interest on borrowed capital -Assessee claiming, interest paid to foreign creditors -Interest neither paid to any agent of foreign company in Pakistan nor tax therefrom deducted at source in Pakistan -Interest, whether allowable deduction -Held no - Agreement between Pakistan and India -Minutes of the Two-Man Committee -Whether can over-weigh the provision of law -Held no -- Interest on capital borrowed for purposes of business -Deduction at source -Nothing to show that assessee either retained tax payable on interest or paid interest to an agent of foreign Company in Pakistan or any body else -Assessee, held, not entitled to benefit of Section 10(2)(iii) -- JUDGMENT The judgment was delivered by HASAN J.}.-The registered office of the applicant is situated at 22, Canning Street, Calcutta. The applicant has two mills owned by it, one of which is situated at Kushtia in Pakistan known as Mill No. 1, the other is in India known as Mill No. 2. In the 7 assessment years commencing from 1950-51 to 1956-57 the Company claimed exclusion from taxation the interest alleged to have been paid on certain sum of money alleged to have been borrowed in Calcutta before Partition and utilised in the Mills situated in Pakistan. The Income-tax Officer directed the Company to intimate the officer to whom and when interest was paid in Calcutta. No reply was received nor any statement to that effect was filed by the Company before the Income-tax Officer. On the facts the Income-tax Officer concluded that there was no material before the Income-tax Officer that any interest had ever been paid in India. He also opined that in view of the proviso (iii) to Section 10(2) the Company was not entitled to the exclusion of this interest and accordingly he rejected the prayer of the Company. The order of the Income-tax Officer was maintained on appeals before the Appellate Assistant Commissioner as well as before the Tribunal. The assessee filed 7 applications for referring the matter under Section 66(1) of the Income-tax Act to this Court and the Tribunal after consideration of the matter referred the following question to the High Court…

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