BESTOBELL INDIA LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The facts found and/or admitted in these proceedings are shortly as follows : Bestobell (India) Ltd., Calcutta, is the Indian subsidiary of M/s. Bells' Asbestos & Engineering (Holdings) Ltd., a non-resident company incorporated in the United Kingdom. At the material period the assesses was engaged in executing a contract awarded by Barauni Oil Refinery, a Government of India undertaking. In executing the said contract the funds of the assessee to the extent of over Rs. 24 lakhs became blocked. In the circumstances, the assessee approached its parent company for a loan of 37,500 being about Rs. 5 lakhs in Indian currency at that time. The foreign principal company agreed to advance the amount to the assessee and in its letter dated the 14th January, 1965, wrote to the assessee as follows :

(2.) Thereupon, the assessee by its letter dated the 18th January, 1965, sought the approval of the Reserve Bank of India for the said loan of Rs. 5 lakhs ( 37,500) from the parent company with permission to repatriate the amount when required after one year or earlier if funds would become available.

(3.) Necessary permission was granted by the Reserve Bank for the aforesaid loan and the assessee received the loan on the 25th February, 1965, The loan was not repaid at the expiry of one year and remained outstanding in the books of the assessee up to the 6th Jane, 1966, on which date the Indian rupee was devalued. As a result of such devaluation the asses-see found that it had to arrange for a sum of Rs. 7,87,692 to repay the original loan of 37,500, and consequently an extra amount of Rs. 2,87,692 was necessary to repay the original loan of Rs. 5 lakhs.