1950 (10) TMI 12 - HC - Income Tax

Summary

Issues:
1. Whether the assessee is entitled to a deduction for interest paid to a non-resident creditor under Section 10(2)(iii) of the Income Tax Act.
2. Whether the existence of an agent in British India who may be assessed under Section 43 is sufficient to qualify for an exception under the proviso to Section 10(2)(iii).
3. Whether the Income-tax department should refund the amount to the assessee if the non-resident creditor is assessed for the same income.

Analysis:

1. The assessee sought a writ of mandamus to the Income-tax Tribunal to state a case on a point of law regarding the deduction of interest paid to a non-resident creditor under Section 10(2)(iii) of the Income Tax Act. The proviso to Section 10(2)(iii) specifies exceptions to such deductions, including cases where interest is payable outside British India without certain conditions being met. The petitioner relied on the exception related to the existence of an agent in British India who may be assessed under Section 43. However, the court noted that the mere assessability of the principal under Section 42 is not sufficient, and it is essential that the principal or someone on his behalf is assessed to income tax for the interest received. The court declined to ask the Tribunal to state a case based on this argument.

2. The Tribunal observed that the non-resident creditor's business firm had submitted returns to the Income-tax department, including the interest received from the assessee. The Tribunal suggested that if the non-resident creditor is assessed for the same income, it would be appropriate for the Income-tax department to refund the money to the assessee. The court agreed with this view and emphasized that double assessment on the same income should be avoided. It was mentioned that the assessment of the non-resident creditor had been completed, and the assessee could seek a refund from the Income-tax department if necessary. The court dismissed the cases, indicating that the assessee's remedy lies elsewhere if the department fails to act accordingly.

3. Justice Narasimham concurred with the judgment, and the applications were dismissed. The court highlighted the need to avoid double assessment on the same income and directed the Income-tax department to refund the money to the assessee if the non-resident creditor had been assessed for the amount. The judgment emphasized that the assessee's grievance could be addressed through appropriate channels, and the court's role would be limited if the department fulfills its obligations.