Unpaid price cannot be said to be a loan advanced

Amount of the unpaid price cannot be said to be a loan advanced by the non-resident company to the assessee-company nor can be the non-resident company be said to be a lender to the assesse-company so far as that amount was concerned. Since the non-resident company cannot be said to have lent the amount of the unpaid purchase price to the assessee-company either in cash or in kind, there is no question of the interest payable by the assessee-company to the non-resident company being deemed to be “income” accruing or arising from any money lent at interest and brought into India in kind. Hence, the alternative argument urged on behalf of the revenue must be rejected since there was no money lent by the non-resident company to the assessee-company though the amount of the unpaid price was undoubtedly a liability which the assessee-company owed to the non-resident company. Since the alternative contention on behalf of the revenue is being rejected, we have not thought it proper to frame an additional question to cover that aspect.

Under these circumstance it must be held that the amount payable by the assessee to Messrs. Ansaldo by way of interest on the unpaid purchase price so far as the amounts represented by the bills of exchange were concerned, was not taxable in the hands of the assessee as agent of the non-resident company under section 9(1)(i) of the Income-tax Act, 1961. We, therefore, answer the question referred to us in the negative and in favour of the assessee. The Commissioner will pay the costs of this reference to the assessee.