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TMI Blog1992 (11) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany out of the foreign exchange loan as 'calls received in advance' changed the character of the foreign loan ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the interest of Rs. 10,800 which accrued to the assessee on the amount of Rs. 1,80,000 adjusted by the Indian company as 'calls received in advance' out of the foreign exchange loan could not enjoy the exemption under section 10(15)(iv)(c) of the Income-tax Act, 1961 ? " The assessee is a non-resident company and the assessment years involved are 1968-69, 1969-70 and 1970-71. The assessee, with the approval and sanction of the Government of India, entered into an agreement with Messrs. Pilky Footwear Co. Pvt. Ltd. (here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian company into its share capital account. The balance Rs. 1,80,000 was also taken by the Indian company into its accounts as receipt from the assessee by way of calls in advance. It is the interest which accrued to the assessee during the three years on this amount of Rs. 1,80,000 credited by the Indian company in its accounts as calls in advance that formed the subject-matter of the controversy between the Department and the assessee. The assessee claimed that this interest income was not liable to be included in its income by virtue of the provisions contained in section 10(15)(iv)(c) of the Income-tax Act. The Income-tax Officer rejected the assessee's contention that the interest amount was exempt under section 10(15)(iv)(c) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey paid by the shareholder but by a creditor. In support of this contention, reliance is placed on decision of the House of Lords and on the provisions of sections 91 and 92 of the Companies Act, 1956. We do not propose to deal with this aspect of the matter at length as we find that even if it is accepted that it is debt due to the assessee by the company, it does not help in anyway in resolving the controversy before us because that by itself is not enough to bring the interest income within the purview of section 10(15)(iv)(c) of the Act as the further requirement that it must be a debt incurred in respect of purchase of raw materials or capital plant or machinery must also be fulfilled. At this stage, it may be expedient to refer to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute that originally the debt was incurred in a foreign country in respect of purchase outside India of capital plant and machinery. Thus both the conditions contained in this clause were fulfilled and there was no controversy between the assessee and the Revenue in regard to non-inclusion of the interest payable on this amount in the income of the assessee. The controversy arose only when a sum of Rs. 3,60,000 was transferred to another account termed as account No. 2, Rs. 1,80,000 out of it was straightaway paid as call money. In regard to that amount there is no dispute that it ceased to fall within this clause. The controversy arose only in respect of the balance amount of Rs. 1,80,000 which was paid by the assessee to the Indian company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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