Commissioner of Income-tax, W.B. I Vs. National and Grindlays Bank Ltd., Calcutta - Court Judgment

P.B. Mukharji, J.

1. This reference under Section 66 (1) of the Indian Income-tax raises the following questions for an answer:--

'(1) Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the provisions of Section 42 (1) of the Indian Income-Tax Act, 1922, had no application to the assessee's case in respect of the interest received on overdraft granted to the Calcutta Electric Supply Corporation Ltd.?

(2) Whether the computation of the amounts of taxable interest in the case of the tea company as made by the Appellate Assistant Commissioner and confirmed by the Tribunal, was in accordance with law?'

2. The facts giving rise to these questions are briefly as follows:

The assessment years are 1953-54 and 1954-55 for which the previous years are the calendar years 1952 and 1953 respectively. The assessee is a sterling banking company and has been assessed as a non-resident in both the years in question. During the relevant years interests amounting to 35,576.94 and 42,638.23 were received by the assessee in the United Kingdom from Messrs. Calcutta Electric Supply Corporation, which is a company incorporated in England with its head office in London and was during relevant periods carrying on business of supplying electricity in the city of Calcutta and certain other places in India. The Corporation maintained a current bank account with the assessee's head office in London at 26, Bishops Gate, London, E. C. 2.

3. On the 24th May 1950 the Corporation applied to the assessee bank for grant of temporary financial accommodation to the extent of 1 million. The reason for seeking the financial accommodation as given in the application was that according to the balance-sheet on the 31st December 1949 there was a contingent liability of 2.4 millions in respect of contracts for capital expenditure already placed at that date. It was stated in that application that such liability would mature progressively during the course of the next eighteen months and that the same had been incurred in connection with the building of the Corporation's new Cossipore Generating Station and extension to Mulajore station. On the 31st May 1950 the assessee sanctioned the overdraft facility of 1 million in the Corporation's said current account with it. This facility was later extended by increasing the limit of the overdraft to further amounts. The Corporation having utilised the overdraft facility, its aforesaid current account remained overdrawn throughout the relevant previous years 1952 and 1953 on which the sterling interests were paid by the Corporation to the assessee in England.

4. The assessee's case before the Income-tax Officer was that the money lent by it to the Corporation had not at all been brought into India. As such no interest accrued to the assessee on money lent and paid within the taxable territories under Section 42 (1) of the Income-tax Act. The same contention was repeated in respect of interests received from the tea companies. The assessee also received interest during the said years from the two tea companies doing business in India and the assessee claimed that no portion of the interest was taxable under the Income-tax Act.

5. The Income-tax Officer's decision Ss based on the fact which he held that the Corporation while carrying out capital expansion in India utilised the overdraft granted by the assessee in purchasing machinery in England and bringing the same for installation in India. He, therefore, came to the conclusion that inasmuch as the interest on the overdraft was deemed to accrue on money brought Into India 'in kind', the assessee came within Section 42 (1) of the Act. The basis of his decision was that the expression 'money in kind' in Section 42 (1) of the Income-tax Act included anything into which the money had been converted. The Income-tax Officer held that the money was brought into India in the form of electrical machinery and generators with the full knowledge of the assessee that while granting the overdraft that the facility would be utilised in India. This is why he held that even though the overdraft was granted to meet the contractual liability in respect of the capital expenditure already Incurred, it was obvious that all these transactions, namely, the purchase of the capital machinery, the contractual liability to pay those bills and the overdrafts were integral parts of one complete transaction.

6. The assessee appealed to the Appellate Assistant Commissioner from the judgment of the Income-tax Officer. The Appellant Assistant Commissioner confirmed the Income-Tax Officer's order but modified the quantum. He called upon the assessee to furnish figures of interest accruing on the daily balance of the overdraft specifically utilised for the purpose of purchasing plants and machinery which came to India. The assessee furnished those figures and data. The quantum of the taxable interest received from the Corporation was reduced to 16,297 and 6,225 for these two years respectively. In respect of the interest chargeable to tax received from the tea companies it was reduced to 2,612 for the assessment year 1953-54.

7. Both the assessee and the Revenue Authorities preferred appeals to the Tribunal against such finding and decision of the Appellate Assistant Commissioner. The assessee in its appeal challenged the validity of the assessment of tax of interest received by it from the Corporation. But with regard to the Interest received from Tea Companies the assessee accepted the order of the Appellate Assistant Commissioner. The Department, however, challenged the method in which the Appellate Assistant Commissioner computed the taxable amount of interest.

8. There were, therefore, altogether four appeals, two by the Department and two by the assessee for the two respective assessment years. All these four appeals were heard together by the Tribunal and a consolidated order was passed in respect of them. The major decision of the Tribunal may now be noticed,

9. The Tribunal found that Section 42 (1) of the Income-Tax Act had no application to the assessee's case in respect of interest received by it from the Corporation. The Tribunal gave two reasons, namely, first that the money lent by the assessee was neither brought in cash nor in kind in the taxable territories. The Tribunal developed its reason by saying that admittedly no money was brought in cash and it was neither brought in kind in view of the fact that what was brought to India was only electric generators and plants purchased in the United Kingdom from the money received from the assessee in London on the overdraft. In other words, the Tribunal construed the expression 'money in kind' in Section 42 (1) of the Income-Tax Act not to mean money converted in kind. According to the Tribunal electric generators and plants did not satisfy the criterion of Section 42 (1) and money meant a medium of exchange and anything to be called money must retain the character of money or its equivalent in drafts, cheques etc., which were really acceptable in the commercial world for money. Electric generators and plants did not satisfy that criterion. Secondly, the Tribunal came to the conclusion that Section 42 (1) of the Act was attracted only to a case where the lending and borrowing were an integral part of the scheme to bring money into taxable territory following the Federal Court decision in A. H. Wadia v. Commissioner of Income-tax . On reading the correspondence on this point, the Tribunal also came to the conclusion that there was no composite arrangement between the Corporation and the assessee for bringing money into India in the shape of electrical generators and plants. The Tribunal also observed that a transaction, in order to be an integrated composite whole, the transference of money to India, even if the machinery could be described to be money in kind, it must be as a result of conscious definite arrangement between the assessee and the Corporation and not simply an act of the Corporation without any reference to the assessee. The Tribunal found that the transference of the machinery to India was the sole concern and responsibility of the Corporation alone with which the assessee was completely unconcerned. The Tribunal accordingly allowed the assessee's appeals and dismissed the appeals of the Revenue Department. The Department has now come with the above questions in this Reference.

10. The crucial question on this Reference is the interpretation of Section 42 (1) of the Income-Tax Act and particularly the expression 'in cash or in kind' occurring in Sub-section (1) thereof. Broadly analysed Section 42 (1) covers five different classes of income which are said to be income deemed to accrue or arise within the taxable territories. Paraphrasing Section 42 (1) and leaving aside matters not relevant for the purposes of this reference, it reads as follows:--

'All income accruing or arising whether directly or indirectly--

(1) through or from any business connection in the taxable territories or

(2) through or from any property In the taxable territories or

(3) through or from any asset or source of income in the taxable territories or

(4) through or from any money lent at interest and brought into the taxable territories in cash or in kind or

(5) through or from sale, exchange or transfer of a capital asset in the taxable territories,

shall be deemed to be income accruing or arising within the taxable territories-- and where the person entitled to the income, profits or gains is not resident in the taxable territories shall be chargeable to income-tax either in his name or in the name of his agent and in the latter case such agent shall be deemed to be for all the purposes of this Act, the assessee in respect of such income-tax.'

11. The whole contention of the Revenue Authorities in this reference is on the fourth class of income shown on the above analysis. In other words, it is the contention of the Revenue in this reference that the interest on the loan granted on the overdraft by the assessee company to the Corporation is 'income accruing or arising, whether directly or indirectly through or from any money lent at interest and brought into taxable territories in cash or in kind'. Now it is common ground that no money as such was brought into the taxable territory of India in this case. Neither the principal amount nor the interest as such is brought into India in this case. Nevertheless, the Revenue Authorities contend that the following facts bring it within the particular statutory provision in Section 42 (1) of the Act and within the meaning of the expression 'in cash or in kind'. The facts on which the Revenue relies are, the money which the Corporation borrowed from the assessee in this case was used and purchasing plant and machinery which were ultimately imported to India and installed hi Calcutta for the generating stations at Cossipore and Mulajore, within the taxable territory of India. The Revenue contends that the interest which the Corporation is paying on the loan is really earned by the Corporation's business of supplying electrical energy and paid out of the profits thereof. Therefore it is contended that this interest is 'money in cash or in kind' within the meaning of Section 42 (1) of the Income-Tax Act and must be deemed to accrue or arise within the taxable territory.

12. In our opinion, the contention of the Revenue on this point suffers from a number of fallacies. Section 42 (1) of the Income-Tax Act as its language reads is income which is deemed to accrue or arise within the taxable territories although which is not so in fact. It is an income which is arising outside but which by the statute is deemed to accrue or arise within the taxable territory. But then this deeming provision is careful to describe the connection or the nexus between such income and the taxable territory. That will be plain from the five different classes of income stated on the analysis of the section itself. The nexus in the first class is the business connection in the taxable territory. The nexus in the second class is the property in the taxable territory. The nexus in the third class is the asset in the taxable territory. The nexus in the fourth class is the money lent at interest but brought into the taxable territory in cash or in kind meaning thereby that that money or the interest must be brought into the taxable territory, no doubt either in cash or in kind. The nexus in the fifth class is the capital asset in the taxable territory. It is also essential to bear in mind in order to appreciate this nexus or the axis on which the income is deemed to arise within the taxable territory that it is the assessee who is the objective or the target for the Revenue and where the assessee is non-resident, his agent is necessarily the target or objective and as such is deemed to be the assessee in respect of the Income-Tax Act under Section 42 (1) of the Act. The Revenue Authorities in their contention appear to miss both the nexus as well as the concept of the assessee under Section 42 (1) of the Income-Tax Act. The picture or consideration would have varied materially if the assessee in this case, whom we are considering, was not the Bank but the Corporation. But here the assessee is the National and Grindlays Bank Ltd., Calcutta who is the lender and it is the Bank's income that we are considering in this assessment

13. In interpreting Section 42 (1) of the Income-Tax Act, the following considerations should, in our opinion, guide the conclusion. In the first place, it is income which is being taxed under this section. Therefore, the main question is what is the income in this case which is being taxed? The Revenue contends that it is the income in the shape of interest which is being taxed. The assessee contends that the interest does not arise, nor is it brought in the taxable territory, either in cash or in kind. What then is the meaning of the expression 'money in cash or in kind'? In the broadest concept and in some schools of economists money is a medium of exchange and money includes whatever is obtained by money. In other words, goods or plant or machinery bought with money are the equivalent of money and should be regarded as money. Does that broad meaning apply in a taxing and fiscal statute like the Income-tax Act in construing the expression 'any money lent at interest and brought into taxable territories in cash or in kind?' A tax must be clearly brought home without equivocation to the assessee. A tax by implication is not encouraged by interpretation, unless such implication is necessary and compelling. That is a well-settled principle of construction.

14. Money has been known to be a cause of trouble and anxiety not only morally and materially but also fiscally and legally under the Income-tax Act and other taxing statutes. Judicial interpretation of 'money', by Judges and Courts, have added fuel to the fire. For instance, interpretation of 'money' in a will or a testament construed by Judges has almost caused intellectual uproars throughout the world. Money when used in a will has been construed by Courts in its strictest sense unless there was a context which permitted a wider interpretation. In that strict and rigorous sense money has been held to mean not only cash and in kind but also all forms of money due, such as cash at the bank, dividends due, bills, drafts and similar choses in action. Meredith, J., In re, Jennings; Coldbeck v. Stafford, 1930 In Rule 196 made the following celebrated observation:--

'The judiciary has waged a long fight to teach testators that 'money' means cash, but as the ordinary testator who makes his own will does not study the law reports, he proceeds in constantly using the word in a wider sense and it is time that in such cases the popular meaning prevailed over the legal one.'

15. It has taken only about 13 or 14 years for the judicial mind to change. In the decision in Perrin v. Morgan, reported in 1943 AC 399, Viscount Simonds, Lord Chancellor, observes at p. 414:

'The present question is not. In my opinion, one in which this House is required on the ground of public interest to maintain a rule which has been constantly applied but which it is convinced is erroneous. It is far important to promote the correct construction of future wills in this respect than to preserve consistency in misinterpretation.'

16. But the principle of construction in a will is different from that in an Income-tax statute. In interpreting the will, what the Judge is supposed to do is to sit in the arm-chair of the testator and if not with the invalid outlook of the testator to construe the meaning of the words in the sense the testator understood and used, and therefore the popular meaning and popular connotation of a word, as normally understood by men or ordinary testators, is to be adopted. But in a statute like the Income-tax Act, the scope for this kind of construction is limited. It is limited for a variety of reasons. First, because it is a tax imposition and therefore must be in clear language and if not always explicit at least by necessary and compelling implication. Secondly, because a statute like a taxing statute is a legal document using legal words, expression and concepts and is not the naive and artless product of a legally inexperienced and ignorant testator. The expression 'money in cash or in kind' can lend itself to the popular meaning that money is not only technical money in the technical sense but also money in all kinds of converted forms including goods, plant or machinery purchased or sold, so that all worldly goods can be seen as the alter ego of money. For taxing purpose, we have not hesitation to come to the conclusion that that is not the meaning which can be adopted for the expression 'in cash or in kind', in Section 42 (1) of the Income-tax Act. Appeal, therefore, to the dictionary meaning of money or to economics cannot over-ride the context of the Income-tax Act, its purpose and its ambit and the actual language of Section 42 (1) of the Income-tax Act and its interpretation.

17. It would be necessary here perhaps to make an excursion into the area of authorities and judicial decisions. The classic and the leading case on the point is the one decided by the Privy Council in Commissioner of Income-tax, Bombay v. Ahmedabad Advance Mills Ltd., reported in . There the assessees were owners of sterling bonds of the Government of India, the interest on which was payable in England received in England and they invested that income in the purchase of certain mill stores and machinery in England and brought the articles purchased to India and employed them for the purposes of their mills. It was decided by the Privy Council there confirming the decision of the Bombay High Court that the income was not received in or brought into India within the meaning of Section 4 (2) of the Income-tax Act and the assessees were not accordingly liable to pay Income-tax on this amount. No doubt this decision must be read subject to the Explanation to Section 45 of the Act after the Amendment Act of 1939. But certain principles there discussed are of crucial importance for the purposes of this case. Lord Romer in delivering the judgment of the Privy Council approved the observation of Lord Lindley in Gresham Life Assurance Society, Ltd. v. Bishop, 1902 AC 287 where Lord Lindley had said 'a sum of money may be received in more ways than one e.g., by the transfer of coin or a negotiable instrument or other document which represents and produces coin, and is treated as such by businessman. Even a settlement in account may be equivalent to a receipt of a sum of money although no money may pass.' Lord Homer at page 98 of the report in makes the following significant observations:

'It is not and cannot be suggested in the present case that the mill stores and machinery were purchased in England and shipped out to India as a method of bringing over the sterling interest that had been received in this country. No one in his senses would think of employing such a method of transmitting money. But apart from the inherent improbability of the thing, it is found as a fact by the Commissioner that the mill stores and machinery were required by the respondents for their business in India, and it is not suggested that they will be sold or will be employed otherwise than in and for the purposes of the respondents' mills.'

In rejecting the contention which the Revenue is making here before us in the present reference Lord Romer again at page 99 gave the following pertinent illustration:

'Their Lordships are not prepared to accept so extravagant a contention. To show how extravagant it is many illustrations might be given. A resident in British India when on a visit to this country receives here the sum of 500 sterling as interest on British Government Stock. He expends it here in replenshing his wardrobe and in purchasing a motor car. At the end of two years he returns to British India taking with him the garments and the motor car. The garments have been worn for two years and the car in that time may have been driven 40,000 miles or more. Yet if the appellant is right the person in question will on his return to India be deemed to have brought with him 500 interest that he received in this country. The truth of the matter is that in such a case he does not bring back into India a penny of the 500. He has spent it all in England. If upon his return to India the question was put to him 'How much have you left of the 500'?, his answer would be 'none', and the answer would be a true one whether addressed to a casual enquirer or to the Income-tax Officer. What he has taken back to India are some much worn clothes and a car which depreciated in value. But these things can in no sense be described as income; and it is only income that can be taxed under the Indian Income-tax Act'.

18. The last observation of Lord Romer in that above passage still remains true. Applying that principle contained in those observations the plant or the machinery in this case is not income and it is only income that can be taxed under Section 42 (1) of the Income-tax Act and nothing else.

19. The next landmark in judicial decisions is to be found in , a decision of the then Federal Court of India. Three of the learned Judges Kania, C. J., Mahajan, J, and Mukherjea, J., came to the conclusion in that case that the provision in Section 42 (1) of the Indian Income-tax Act was not ultra vires on the ground that it was extra-territorial in operation for the nexus, according to the three learned Judges was the bringing of the money into India with the knowledge of the lender and borrower giving the real territorial connection. Patanjali, J., disagreed with that view that bringing of money by the borrower could not constitute a sufficient territorial connection. Kania, C. J., at page 71 of the report analysed Section 42 (1) of the Income-tax Act and showed the nexus or the connection in each case on the lines which we have already indicated above. Interpreting Section 42 (1) on the point which is present before us Kania, C. J., observed at page 73 of the report as follows:

'The exact words used in the Section are, arising from any money lent at interest and brought into British India in cash or in kind. In my opinion it is proper to read this as one head and as indicating one composite transaction. The interest must be the result of the loan of money and the money must be brought into British India in cash or in kind. Reading it in that way the incident of bringing the money into British India in cash or in kind to the knowledge of the lender and borrower is an integral part of the transaction. After the money is brought into India, how it is used by the borrower, to my mind, is an irrelevant question.'

20. Exposition of this principle under Section 42 (1) of the Income-tax Act is to be found from a few more decisions. In the Commissioner of Income-tax, Madras v. Sri Meenakshi Mills Ltd. : [1967]63ITR609(SC) the Supreme Court drew the ratio of the decision in in the following words of Ramaswami, J., at page 614 'but all the learned Judges agree that the knowledge of the lender and the borrower that the money is to be taken into British India must be an integral part of the transaction. That is a ratio of the decision of the Federal Court with regard to the construction of Section 42 (1) of the Act'. The Supreme Court in the case of Sri Meenakshi Mills came to the conclusion that the principle laid down in Wadia's case was specified and that the Income-tax authorities there were right in holding that the entire interest earned on fixed deposit was taxable.

21. In a recent decision of the House of Lords in Tomson v. Moyse, 1961 AC 967 the House of Lords considered the question of a taxpayer domiciled in the United States of America, but at all material times a British subject resident in the United Kingdom, who was entitled to income from the estates of his mother and father, both estates being situate in the United States. In that case payments of income from the estates were actually made by the trustees into an account in the taxpayer's name in the Bank at New York. The taxpayer drew cheques in dollars on the Bank of New York in favour of one or other of his bankers in the United Kingdom and requested them to purchase the cheques. The taxpayer's English bankers sold the amount of dollars specified in the respective cheques to the Bank of England and credited to the taxpayer's account in England an amount in sterling equivalent at the then rate of exchange to the amount of dollars specified in the cheques. Then the English bankers, by registered mail, presented the taxpayer's cheques to the Bank of New York, which honoured those cheques and on the instruction of the English bankers, transferred the amount of dollars in question in each case to the account of the Bank of England with the Federal Reserve Bank of the United States. The taxpayer was assessed to income-tax. The House of Lords held that the sterling credits were sums received by the taxpayer in the United Kingdom out of his American income which had pro tanto been used to acquire them and that in this sense he had brought forward his American income to the United Kingdom. It is pointed out in this decision by the House of Lords that for the purposes of Rules 2 of Case IV and Case V of Schedule D of the British Income-tax, the bringing in of a person's income meant nothing more than the effecting of its transmission from one country to the other by whatever means, the agencies of commerce or finance might make available for that purpose. If that transmission took place it was immaterial whether any thing, items of property or instrument of transfer, had actually been brought into the country or not. Nor was it said to be relevant to ascertain what had happened to the taxpayer's money in the country where the income arose. The language of the Act and the rules there construed by the House of Lords is different from what we have here for construction under the Indian Income-tax Act.

22. Viscount Simonds in 1961 AC 967 at pages 987-88 distinguished and noted the difference between 1902 AC 287 and these classes of cases. His Lordship observed as follows;--

'With such a case in mind I turn to the authorities. The first which I need consider is 1902 AC 287. There no sum had in fact been received by the Society in the United Kingdom. The argument for the Crown was that 'received in the United Kingdom' is not confined to physical receipt, and that it was enough that the Society's foreign income had been used to pay foreign debts which would otherwise have had to be paid out of money here. No one appears to have had in mind a case where a sum was in fact received in this country although nothing had been brought into this country: it seems to have been assumed that if a sum being or representing foreign income is received in this country it must have been brought in, but any such assumption was quite unnecessary for the decision at which this House arrived * * * but I cannot infer from that that, if a method had been pointed out to him by which a sum of income could be received in the United Kingdom without anything being brought in, he would have held that the sum so received was not taxable, I think that the same applies to the other noble and learned Lords whose speeches are reported. The subsequent application of what was said in the Gresham's case seems to me a good example of the danger of applying judicial pronouncements literally to situations which cannot have been in mind when they were made.'

The same principle of distinction is noticeable here. No money or no interest was brought into India, nor was it payable in India in the facts of this reference.

23. The Supreme Court decision In Commissioner of Income-tax, Bombay v. Tata Locomotive and Engineering Co., Ltd. : [1966]60ITR405(SC) considered the question where the Indian assessee repatriated his dollars from the United States. It was held there that the act of retaining the money in the United States for capital purposes after obtaining the sanction of the Reserve Bank was not a trading transaction in the business of manufacture of locomotive boilers and locomotives and it was clearly a transaction of accumulating dollars to pay for capital goods, the first step to the acquisition of capital goods. Therefore, the surplus attributable was capital accretion and not profit taxable in the hands of the assessee. See the observations of the Supreme Court particularly at page 410 of that report. This question of capital assets has come up in the matter of interpretation in other decisions. We shall notice one decision of the Madras High Court in Lakshmanan v. Commissioner of Income-tax, Madras : [1964]53ITR780(Mad) . It was held there on the facts of that case that the assessee had capitalized whatever surplus income was in his hands in the foreign country and there was no material upon which the Tribunal could reach the conclusion that the capitalization was not effected. The Court came to the conclusion that the amounts received were capital in nature and hence not assessable. But these decisions really turn on the question whether an amount is capital or income, a point with which we are not concerned in this reference.

24. A point was made by Mr, Pal appearing for the Revenue that the lender, the assessee in this case, knew from the correspondence disclosed that the whole object of obtaining this loan and paying interest for it, was to buy capital goods in England such as plant and machinery, bring them to Calcutta and instal them here within the taxable territory. We are not impressed by this line of argument for the purpose of this reference. The assessee in this case was lending money. How the borrower would use the money after obtaining it was not a matter of concern for the lender, the assessee. That a case was made to represent to the lender that the real reason for borrowing the money was to buy goods which were ultimately to be brought to India did not really make it a part of the loan or an obligation of the loan or a part of the legal arrangement in respect of this overdraft for a loan, for it must be emphasised that the statement of case and facts in this Reference make it abundantly and expressly clear that the debts for which the overdraft loan was taken, had already been incurred. Supposing the Corporation after obtaining the money from the assessee bank did not buy the goods and did not instal them; even then the loan was good enough and the lender could insist that you repay the loan and also in the meantime pay the interest due on the loan,

25. It is possible to imagine a case where the lender and the borrower come into a kind of agreement for the loan and its repayment which clearly stipulates a legal obligation on the borrower about a particular use of the money in buying goods and a particular obligation to pay back to the lender after installing a kind of floating or other charge upon the assets of the Company and a further obligation to pay the interest out of the profits earned by the use of such goods, then in such cases of facts a nexus may be built up which will change the picture and bring the assessee within the meaning of Section 42 (1) of the Income-tax Act. But then these are not the facts in this case. It was a loan simpliciter, a bank giving a loan to an old customer. The whole transaction of the loan was in England. The Head Office and the Registered Office of the lender and the borrower were both in London. The money was advanced in London. The interest was payable in London. There was nothing else left of this money or interest which can connect it with the taxable territory in India. We are unable to hold that in this case the electrical generator plant is 'money in kind' within the meaning of Section 42 (1) of the Income-tax Act. The 'money in kind' in Section 42 (1) of the Income-tax Act means that which retains its character or quality or its kind as money, namely in commercial forms recognised in the commercial world such as bills of exchange, I. O. Us. or even gold and silver bars or ingots. It will be illegal and unjustified in our view to extend the meaning of the expression 'money in kind' in Section 42 (1) of the Income-tax Act beyond these accredited uses of money accepted, used and recognised as such in the commercial world and in the usual transactions. We, therefore, hold on the interpretation of Section 42 (1) of the Income-tax Act that the plant, goods, machinery or the generator brought in this case was neither money in cash not money in kind nor income within the meaning Section 42 (1) of the Income-tax Act and it does not mean any and every article into which the money had been converted. It has still to be money 'in kind' and not money converted into goods, without anything more.

26. For these reasons and on these authorities, we answer the first question in the affirmative holding that the Tribunal was right in coming to the conclusion that Section 42 (1) of the Income-tax Act 1922 had no application to the assessee's case in respect of the interest received on the overdraft granted by the assessee to the Calcutta Electric Supply Corporation Limited.

27. The other question relates to the computation of the amount of taxable interest in the case of the Tea Co., repay. It was contended that this computation was not in accordance with the law. It is conceded that on principle it is taxable under Section 42 (1). The only objection of the Revenue Authorities is with regard to the computation of it. It is admitted that the money is borrowed from the Bank and by this Tea Company was brought to India and not in the shape of goods and machinery. That concession is given by Mr. Pal on behalf of the Revenue Authority. In respect of the Darjeeling Tea Co. Ltd., the Appellate Assistant Commissioner finds the fact that a part of the interest charged on these accounts were chargeable to Income-tax. But he could not accept the estimate made by the Income-tax Officer that such income would come to 3000. Therefore, the Appellate Assistant Commissioner on the basis of the figures of the net interest which the appellant furnished came to the conclusion that the amount was 2162 and in respect of the two other Companies the figures of gross interest on the amount borrowed and brought into India were respectively 600 and 252. Therefore, the question of allowance of the proportionate cost to the Head Office of earning the interest is to be deducted. The gross interest was 852. On the facts supplied before the authorities regarding the Head Office cost, such cost with respect to this gross interest would come to 400. Therefore, the Appellate Assistant Commissioner found that the net interest income chargeable was 400 and the total income chargeable would thus come to 2612 ( 2162 plus 450} as against 3000 estimated by the Income-tax Officer. In those circumstances, he restricted the amount chargeable to 2612 which means deduction of 388.

28. Mr. Pal for the Revenue has not been able to show us in what way this computation was against the provisions of any law. The Tribunal found as a fact that the Appellate Assistant Commissioner rightly computed the net interest in the amount of interest taxable. This being so, the answer to the second question is in the negative and we hold that the computation of the amounts of taxable interest in the case of the Tea Company as made by the Appellate Assistant Commissioner was in accordance with the law.

29. The Commissioner will pay the costs of this Reference. Certified for two Counsel.

K.L. Roy, J.

30. While respectfully agreeing with the judgment delivered and the answers given by My Lord to the questions referred I wish to add a few words of my own.

31. In support of his contention that the expression 'money in kind' in Section 42 (1) of the Act would include anything into which the money has been converted, Mr, Pal referred us to the meaning of the expression 'in kind' in Murray's Oxford Dictionary, 1901 Edn. Vol. V at p. 699 which is as follows:--

'Item 15: In kind: in the very kind of article or commodity in question; usually of payment; in goods or natural produce as opposed to money.'

32. In my opinion, the meaning attributed to the word 'in kind' in the Oxford Dictionary is that the article or commodity in question must be of the very kind or of the same kind. It is only in the case of payment in kind that goods or natural produce, as opposed to money, is implied.

33. Even assuming that the expression 'money in kind' includes also the articles into which the money has been converted, as contended by Mr. Pal and for which Mr. Pal relies on the observation of Mukherji, J., of the Federal Court in Wadia's case at p. 123 of the Report, 1949-17 ITR: fat p. 49 of AIR 1949 FC), in this case no goods or commodity into which the money, lent by the assessee to the Corporation is an overdraft account was converted could be said to have been brought into the taxable territory. The application by the Corporation to the assessee for the overdraft dated May 24, 1950 shows clearly that the plant and machinery required for the Corporation's power stations in the taxable territories had already been ordered for, despatched to and installed in India before the end of 1949. As on December 31, 1949 the liability of the Corporation was to the manufacturers of the machinery in the United Kingdom for the price of the machinery supplied and such liability was to mature within the course of the next 18 months from May, 1950. The overdraft accommodation obtained from the assessee was utilised by the Corporation to meet its liability to the manufacturers in England as and when such liability, matured. It has also been found by the Appellate Assistant Commissioner that a part of this overdraft was utilised by the Corporation for meeting its overhead charges in the United Kingdom. So, it could not be said that the amount of the overdraft granted by the assessee to the Corporation had been brought into the taxable territories in cash or in kind.

34. Further, the statements made by the assessee and the Corporation before the Income-tax Officer would show that not only had the plant and machinery arrived in India but they had been installed and was in most cases in operation on or before June 1950. The statement filed by the Corporation before the Income-tax Officer, which is included in the paper book, at p. 63-65, shows that during the accounting years 1952 and 1953 very substantial amounts were utilised out of the overdrafts for meeting the ordinary day to day expenditure of the Corporation in the U. K. It could not, therefore, be said that the overdraft accommodation granted by the assessee to the Corporation had been utilised solely for the purpose of bringing in plant and machinery into the taxable territories.

35. Mr. Pal was somewhat taken aback when we drew his attention to the fact that he had not advanced any arguments on the second question referred and though he made a valiant attempt to convince us that both the Appellate Assistant Commissioner and the Tribunal act-ed arbitrarily in deducting the proportionate costs of the Head Office from the amount of the income from interest on the overdrafts granted to the Tea Companies, he was not successful. Mr. Pal, some what hesitatingly, pointed out that this was not the question asked to be referred by the Commissioner in his application under Section 66 (1). The question that the Commissioner had asked for reference was that if the first question was answered in favour of the Department, then whether the computation of the income from interest on the overdrafts granted to the Corporation by the assessee was in accordance with law, and that through Inadvertence the Tribunal has referred the question of the propriety of the computation of such income in the case of the Tea Companies,

36. I, therefore, concur with the answers given by my Lord to the questions referred to this Court in this reference.