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TMI Blog1983 (8) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Shree Bijay Cotton Mills Ltd. and Rs. 12,776 from Shree Bijay Sugar Mills Ltd. The ITO by his assessment order dated November 29, 1952, held that the amount of interest accrued to the assessee in a Part 'C' State and as such no rebate is admissible according to the Part 'B' States (Taxation Concessions) Order. The assessee went in appeal before the AAC of Income-tax, 'B' Range, Delhi, who by his order dated April 23, 1954, while dismissing the appeal of the assessee, found that both the interest items in question accrued to and were really earned by the appellant at Bijainagar and not at Bhilwara. The assessee further went in appeal before the Income-tax Appellate Tribunal, Delhi Bench, which by its order dated April 11, 1955, accepted the contention of the assessee and held that the income from interest on the loan was received by the assessee in a Part `B' State. However, on, rectification application, that order was set aside by the Tribunal by its order dated March 14, 1956, and the appeal was reheard and on August 11, 1958, the order of the AAC was set aside and the case was sent back to the AAC to make further inquiries on the lines directed by the Tribunal and to dispose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or-companies. On the other hand, position of accounts maintained by the head offices of the debtor-companies and their purchasing agents belies the position that these purchasing agents acted on behalf of the head offices of the debtor-companies to take loans at Bhilwara. " The Tribunal then considered as to when and how the debtor-companies would be responsible for making payments to the assessee and where the cause of action against them would arise. It considered the provision of s. 20 of the Code of Civil Procedure and further observed that the debtor-companies had no subordinate office and they had no branch offices at Bhilwara and as such it cannot be stated that the debtor-companies carried on business at Bhilwara. So the Tribunal held that the cause of action in the instant case cannot arise in a Part 'B' State, and, it also found that the debtor-companies cannot be said to reside in a Part 'B', State and carried on business at that place. It also recorded a finding that no contract for taking loan was made in a Part 'B' State. It further observed that in the instant case there was no written agreement between the assessee and debtor-companies regarding taking of loan by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace where the money was lent, and (2) what was the place where the money lent, including interest, was to be repaid ? On behalf of the assessee, Shri H. N. Calla urged that in the present case the money was actually lent at Bhilwara, as the same was received by the purchasing agents on behalf of the debtor-companies and there was no written or verbal stipulation between the parties regarding the place of repayment. But in the instant case the general principle should be found to have application that the debtor should seek the creditor and the debtor is under an obligation to repay the loan, including interest, at the place where the creditor resides, unless the creditor changes its place of residence after advancement of loan. Such a change of place of residence, in certain circumstances, may be considered in the manner that the debtor may be under no obligation whatsoever to find out the creditor as to where he resides and approach him to make payment of the loan at that changed place. Mr. Calla urged that a cause of action accrues to the creditor also at the place where the loan is payable and applying the above principle, it can be, said that the money was payable at Bhilwara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of determination of that question, the principle that the debtor should find the creditor should not be made applicable. We have carefully considered the rival submissions advanced by the learned counsel for both the sides. We may first consider as to whether the question of situs of accrual of interest can be examined in the light of the principle that the debtor should find the creditor. In our opinion, it cannot be denied that the place of repayment has a material bearing on the question, for, it can be said that the place where the right to recover the principal amount of loan arises, income from interest would also accrue or arise at the place where the amount of loan is required to be repaid. There may be a stipulation between the creditor and the debtor with regard to the place of repayment. Where there is no agreement, verbal or written, then in such cases, the principle that the debtor should find the creditor has also been found applicable in India. Of course there may be facts and circumstances where this principle may not be made applicable. Such a situation may be where the creditor had left his original place and had migrated to some other place beyond the nation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs should be considered along with this rule for determining the Place of performance, as the rule implies clear Presumption in the absence of a contract to the contrary". In C. G. Krishnaswami Naidu's case [1966] 62 ITR 686 (Mad), it was also observed as under (p. 692): " These provisions clearly proceed on the assumption that the income, profits and gains have a situs. How the situs has to be determined, the section does not indicate. Where profits or income accrue or arise will, therefore, have to be determined according to the general principles of law and in the light of the particular facts. It has been held that 'accrue or arise ' in section 4 have more or less a synonymous Sense and income or profits are said to accrue or arise where the right to receive them comes into existence with a corresponding liability to pay the same. Where and when such a right or liability comes into existence is a question of fact-perhaps a mixed question of fact and law". It would appear from the above observations that the place of accrual of income is the place where the right to receive that income arises, with the corresponding liability to make payment of the same there. In the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to borrow loan, but has nowhere reversed the finding recorded by the AAC that the moneys were actually lent to the debtor-companies at Bhilwara, as the same were received by the debtor-companies through the hands of the purchasing agents at Bhilwara. Mr. J. P. Joshi pointed out that the Tribunal observed that the position of accounts maintained by the head offices of the debtor-companies and their purchasing agents belies the position that these purchasing agents acted on behalf of the head offices of the debtor-companies to take loans at Bhilwara. From this observation it should be taken that the moneys were not received by the debtor-companies as loans from the assessee at Bhilwara. We are unable to agree with the above submission of Shri Joshi. We are required to answer the question on the basis of the facts and circumstances appearing in the case. It may be that the purchasing agents might not have been invested with the power to borrow loan, as observed by the Tribunal. But it appears that the moneys were received by the debtor-companies at Bhilwara through their purchasing agents. In the statement of the case as well, the Tribunal, while stating the view of the AAC, clearly m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concerned Mysore authorities. It was also provided in the agreements that the assessee should have the right to inspect and look into the accounts of Krishna Ayyar to ascertain, check or verify the bills finally passed from time to time as payable to Krishna Ayyar, in respect of the work specified under the agreements. The accounts of Krishna Ayyar in relation to the commission payable to the assessee were looked into and settled at Madras and the same adjusted in his books. Though the terms of the agreement did not specify where the advances were to be made, actually the assessee and Krishna Ayyar opened a joint current account in the Bangalore City Branch of the Bank of Mysore Ltd., with Rs. 20,000 sent by a bank draft from Madras out of the assessee's Madras funds. The assessee made all the advances of money to Krishna Ayyar under the two agreements in the Mysore State. The assessee maintained that the ten per cent. commission under the two financing agreements amounting to Rs. 1,24,004 accrued to him in the State of Mysore. The ITO did not agree with the assessee, but the AAC took contrary view and directed its exclusion from the taxable income. The Tribunal, in the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by him at Mysore and the final bills were all submitted, passed and accepted at Mysore by the authorities there, resulting in the accrual of commission to the assessee, we come to the conclusion that the situs of accrual of the commission was at Mysore. " In C. G. Krishnaswami Naidu's case [1962] 62 ITR 686 (Mad), instead of the place of agreements, the place of advancement of loans has been considered to be the place of accrual of commission on the basis that the loans were advanced in Mysore State and were to be repaid out of the bills in Mysore and there was a check on the debtor not to utilise the moneys of the bills except in repayment of the loans including interest save with the consent of the assessee. Thus, this authority, in our opinion, throws some light, if the facts and circumstances of the present case are examined in the light of the view taken in that case. There were substantial territorial links relating to accrual of commission in the State of Mysore ; so in the present case as well, we find that there are substantial territorial links with regard to accrual of interest at Bhilwara. The territorial links relate to advancement of loans at Bhilwara and furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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