KAYCEE BERMUDA LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under S. 256(1) of the IT Act, 1961 made at the instance of the assessee the Tribunal, had referred the following questions of law to this Court for opinion :

(2.) 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 Govt. of India, entered into an agreement with M/s Pilky Footwear Co. Pvt. Ltd. (hereinafter referred to as the 'Indian company') for the supply of machinery to it. It also obtained permission from the Govt. of India to utilise a part of the sale proceeds of the machinery for subscribing to the share capital of the Indian company.

(3.) WE have heard the counsel for the assessee. The submission of the learned counsel is that money paid as calls in advance cannot be equated with payments made by way of call money. In respect of such amount, the relationship between the company and the shareholder is different. Such amount remains with the company not as money paid by the shareholder but by a creditor. In support of this contention, reliance is placed on a decision of the House of Lords and on the provisions of ss. 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 a debt due to the assessee by the company, it does not help in any way in resolving the controversy before us because that by itself is not enough to bring the interest income within the purview of S. 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 provisions of S. 10(15)(iv)(c) of the Act as it stood at the relevant time :