PARRY CONFECTIONERY LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee-company, Parrys Confectionery Limited, Madras, got permission from the Government of India and from the Reserve bank of India to participate in the equity capital of a Malay-sian company to the tune of Rs. 5,00,000. THE name of the Malaysian company is Parrys Confectionery (Malaysia) Sendrian, Berhad (abbreviated as SDN BHD in Malaysia, the meaning being company limited). THE assessee-company also agreed to supply technical know-how in the manufacture of sweets and confectionery to the Malaysian company.

(2.) THE assessee-company raised equity capital of Rs. 5,00,000 in foreign exchange from an Indian Bank situate at Kuala Lumpur, viz., United Commercial Bank. However, the assessee-company was required by the Government of India to repay the loan raised from the United Commercial Bank from the earnings out of the Malaysian company. If the assessee-company is unable to repay the loan out of its foreign earnings to the Commercial Bank within five years and if the assessee-company is forced to remit repayment from India after five years, then the assessee-company should pay a penalty, which is equal to such repayment to the Reserve Bank of India. On these terms and conditions, the assessee acquired shares in the Malaysian company in 1970.

(3.) THE Commissioner of Income-tax (Appeals) also concurred with the disallowance made by the Income-tax Officer as relatable to preliminary expenses, differences in exchange rates the amount payable to the United India Fire and General Insurance Company and royalty written off.