Law:

Section:

Section 9 of the Income-tax Act, 1961 [Corresponding to section 42(1) of the Indian Income-tax Act, 1922] - Income - Deemed to accrue or arise in India - Assessment years 1953-54 and 1954-55 - Assessee, a non-resident banking company received interest in United Kingdom from a corporation incorporated in England having head office in Lodnon on account of overdraft facility utilised by said corporation - ITO was of view that inasmuch as interest on overdraft was deemed to accrue on money brought to India 'in kind' assessee came within section 42(1) of 1922 Act - Whether since money was advanced in London and interest was payable in London, there was nothing else left of this money/interest which could connect it with taxable territory in India - Held, yes - Whether therefore, Tribunal was right in holding that section 42(1) had no application to assessee's case - Held, yes FACTS The assessee was sterling banking company and had been assessed as a non-resident in both the years in question. During the relevant years interest amounting to £35,576.94 and £42,638.23 were received by the assessee in the United Kingdom from a corporation incorporated in England with its head office in London and was during the relevant periods carrying on business of supplying electricity in the city of Calcutta and certain other places in India. The corporation maintained a current bank account with the assessee's head office in London. On 24-5-1950, the corporation applied to the assessee-bank for grant of temporary financial accommodation to the extent of £1 million. The reason for seeking the financial accommodation as given in the application was that, according to the balance-sheet on 31-12-1949, there was a contingent liability of £2.4 millions in respect of contracts for capital expenditure already placed at that date. It was stated in that application that such liability would mature progressively during the course of the next eighteen months and that the same had been incurred in connection with the building of the corporation's new Cossipore Generating Station and extension to Mulajore Station. On the 31-5-1950, the assessee sanctioned the overdraft facility of £1 million in…

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