JUDGMENT (Per Sugla, J.) The assessee is a non-resident company incorporated in West Germany. The assessee company, Shah Construction Co. (P) Ltd. and Jolly Brothers (P) Ltd. entered into a collaboration agreement on April 12, 1956 and formed a company by the name M/s. Shah, Salzgitter and Jolly (P) Ltd. in India in the year 1956, with the object of executing the contract work for Koyana Dam in Maharashtra. The assessee held 49% of the equity shares, while the two Indian companies held 51% between themselves. The assessee was to render technical assistance including supply of knowhow to the newly formed Indian company (for short Indian company). The terms as regards the ownership of plants, machinery and other equipment inter alia were that the three companies would continue as the owners thereof in their share holding ratio. For the purpose of enabling the contract work to be carried on smoothly and efficiently, the assessee opened a branch and a bank account India in or about December, 1965. Plant, machinery and other equipment needed for the purpose were of highly specialised nature. They had to be imported from U.K., U.S.A. and West Germany. The understanding originally was that the assessee would arrange for the purpose of necessary equipment for and on behalf of the Indian company and the Indian company would open a letter of credit therefore Subsequently, it was found that it was difficult for the Indian company to immediately arrange for the necessary exchange. At the same time it was realised that the delay in the purchase of plant, machinery and other equipment necessary for executing the contract work would adversely affect the interest of the Indian company. In the circumstances, an arrangement was reached whereby the assessee company agreed to advance and/or make payment for the purchase of the plant, machinery and other equipment to be purchased by or on behalf of the Indian company to the foreign suppliers as and when necessary and charge interest on such payments at the rate of 9% per annum from the dates of the payments upto the dates of realisation. The assessee followed cash system of accountancy with regard to its income by way of interest from the Indian company. During the previous year relevant for the assessment year 1966-67, it received a sum equivalent of Rs. 25,56,289/-. The assessee followed cash system of accountancy with regard to its income by way of interest from the Indian company. During the previous year relevant for the assessment year 1966-67, it received a sum equivalent of Rs. 25,56,289/-. While the assessee claimed that the amount was not taxable on the ground that income had not accrued in India, the Income-tax Officer held that the amount received by the assessee by way of interest was taxable in its hands under section 9(1)(i) of the Income-tax Act, 1961. The assessee's appeal was allowed by the Appellate Assistant Commissioner but the Tribunal set aside the order of the Appellate Assistant Commissioner and confirmed that of the Income-tax Officer. In so doing the Tribunal agreed with the assessee that its alternative contention was not considered by the Appellate Assistant Commissioner as being unnecessary in view of his decision on the main issue in favour of the assessee company. Accordingly it was considered appropriate to direct the Appellate Assistant Commissioner to consider the assessee's alternative claim for deduction of interest in regard to payments by way of interest correspondingly made by it in Germany. The department's appeal was, thus, allowed subject to the aforesaid direction to the Appellate Assistant Commissioner. At the instance of the assessee company the Tribunal referred only one question as a question of law to this Court for opinion. The Tribunal noted that the assessee had suggested as many as 9 questions as questions of law, though in its view only one question needed to be referred as a question of law. The Tribunal also noted that the question of law framed by it covered question Nos. 5 and 8 as suggested by the assessee. The question of law referred to by the Tribunal and the question Nos. 5 and 8 suggested by the assessee in its reference application read as under : "The Question referred by the Tribunal. "Whether, on the facts and in the circumstances of the case, the interest of Rs. 25,56,287/- received by the assessee company was income from 'moneys lent at interest and brought into India in cash or in kind', taxable under section 9(1)(i) of the Income-tax Act, 1961 ?" Question Nos. 5 and 8 as suggested by the assessee : 5. "Whether, on the facts and in the circumstances of the case, the interest of Rs. 25,56,287/- received by the assessee company was income from 'moneys lent at interest and brought into India in cash or in kind', taxable under section 9(1)(i) of the Income-tax Act, 1961 ?" Question Nos. 5 and 8 as suggested by the assessee : 5. Whether even if the Tribunal's conclusion that the sums on which interest payments were made by SSJ were advances made by the assessee on behalf of SSJ is correct, did the Tribunal erred in law in not even considering whether such advances could be treated as 'loans' so as to be comprised in the term 'money lent at interest' in section 9(1)(i) of the Income-tax Act ? 8. Whether the Tribunal's conclusion in its order dated 22nd November, 1974 in respect of the appeal heard in February 1974, that the interest paid by SSJ is assessable as income from money lent at interest and brought into India u/s. 9(1)(i) is based on surmises and conjectures and without consideration of the crucial issues which required determination ?" Initially Shri Dastur, the learned counsel for the assessee company sought to challenge the Tribunal's finding on the lines indicated in question No. 8 suggested by the assessee. However, after arguing at some length he contended that this Court could proceed on the basis of the finding given by the Tribunal and he no longer proposed to challenge the finding. The findings given by the Tribunal as found in the statement of the case are as under : "...... The real nature of the transactions would appear to be that the assessee with its well established position and reputation and technical expertise arranged as a shareholder of the Indian company for the purchase of machinery from abroad and made advance payments to the suppliers on which S.S.J. Ltd. was made liable to pay interest at 9% as on advances and loans. In formulating these transactions, even if the assessee was shown as the immediate supplier of the machinery to S.S.J. Ltd. this could not, in the opinion of the Tribunal, make any difference to the real issue under consideration." "In these circumstances, the Tribunal was of the view that the sums on which interest payments were made were really advances by the assessee on behalf of the S.S.J. Ltd. to make the payments to the suppliers, the transactions of supply of machinery being effected through the assessee as an intermediary which initially arranged the purchases from the suppliers." The finding in substance is that the assessee made payments to foreign suppliers at the request and on behalf of the Indian company. The amounts paid were debited in the account of Indian company and carried interest at 9% per annum. The amounts were payable by the Indian company in convenient installments. The applicability of the provisions of section 9(1)(i) has been considered in paragraphs 30 and 31 of the Tribunal's appellate order. The Tribunal has not as much considered whether payments made by the assessee on behalf of the Indian company to the foreign suppliers of plant, machinery and other equipment amounted to "moneys lent" within the meaning of that clause. But it proceeded on that assumption. It is for this reason that the Tribunal mainly applied its mind to the second limb of the provision, viz., whether the moneys lent were brought into India in cash or in kind and considered at length the Calcutta High Court decision in the case of C.I.T. v. National and Grindlays Bank Limited, 72 ITR 121 and distinguished it. Shri Dastur, in the circumstances mentioned in paragraph 5, having not challenged the Tribunal's findings, strictly speaking, it is not necessary to refer to his claim that the assessee had merely sold the machinery and plant to the Indian company and that interest was charged on the outstanding sale price of the machinery and plant so sold, the claim being based on the statement of invoices of sale of plant and machinery at pages 213 to 221 of the paper book. However, it is considered desirable to refer to the assessee's letters dated 27th February, 1957 and 3rd June, 1957 to the Indian company, copy of the debit note 2-a of the assessee and the assessee's letter dated 23rd October, 1968 to the Income-tax Officer forwarding an extract from the Indian company's board's resolution dated 4th February, 1957 which was stated to be an agreement regarding interest payments. In our judgment, the aforesaid material fully justifies the Tribunal's conclusion that the assessee had not sold any machinery or plant to the Indian company as such. Further, it leads to an inevitable conclusion that the assessee had not merely arranged and/or facilitated the purchase of machinery and plant by the Indian company but had in fact made all payments to the foreign suppliers for the purchase of the machinery and plant and the payments or advances so made were treated as loans to the Indian company on which interest was agreed to be charged at the rate of 9% per annum. One of the two letters is the assessee's short letter dated 27th February, 1957 to the Indian company. So is the relevant portion of the assessee's letter dated 23rd October, 1968 to the Income-tax Officer. The letter dated 27th February, 1957 and the extract from letter dated 23rd October, 1968 read as under : Letter dated February 27, 1957 "Messrs Shah, Salzgitter & Jolly Private Limited, 198, Churchagate Reclamation, Jamshedji Tata Road, Bombay - 1. 2545 RW/Dr. Ot/Hlg GM/PV February 27th, 1957 Re. : Payment of interest on our advances for purchase of machinery. Dear Sirs, Please refer to our letter Sch/Mb of the last inst. and find below a calculation of the interest due December 31, 1956. To begin with, we have charged interest only on the advance payments made by us for purchases of machinery. We reserve to ourselves to charge interest also on our other advances after clarification of all questions. ----------------------------------------------------------------------- Date of Supplier. Amount Days 9% interest Payment DM Dm ----------------------------------------------------------------------- 21.7.56 Gutehoffnun gshutte Double cable crane. 3,16,000 163 12,700.60 ----------------------------------------------------------------------- 28.7.56 Jacks & Co. Winget plant 91,816.20 156 3,531.78 ----------------------------------------------------------------------- 30.7.56 Pegson Ltd. Crushing and grinding plant. 2,87,581.40 154 10,920.21 ----------------------------------------------------------------------- 12.12.56 Held KG. Conveyors 30,800 19 ----------------------------------------------------------------------- 21.12.56 Held KG. Conveyors 75,600 10 ----------------------------------------------------------------------- 8,01,797.60 27,483.30 ----------------------------------------------------------------------- Rs. Amount Days 9% interest Payment DM Dm ----------------------------------------------------------------------- 21.7.56 Gutehoffnun gshutte Double cable crane. 3,16,000 163 12,700.60 ----------------------------------------------------------------------- 28.7.56 Jacks & Co. Winget plant 91,816.20 156 3,531.78 ----------------------------------------------------------------------- 30.7.56 Pegson Ltd. Crushing and grinding plant. 2,87,581.40 154 10,920.21 ----------------------------------------------------------------------- 12.12.56 Held KG. Conveyors 30,800 19 ----------------------------------------------------------------------- 21.12.56 Held KG. Conveyors 75,600 10 ----------------------------------------------------------------------- 8,01,797.60 27,483.30 ----------------------------------------------------------------------- Rs. 31,160.28 ----------------------------------------------------------------------- Yours faithfully, SALZGITTER INDUSTRIEBAU G-esellschaft mbH." Extract from the assessee's letter dated 23rd October, 1968 to the I.T.O. "(i) An agreement S.I.G. with S.S.J. regarding interest payment is enclosed as an extract of Board Meeting Resolution dated 4th February, 1957." Extract from the resolution dated 4th February, 1957. "The Managing Director informed the Board that we have to decide the rate of interest on the contributed amounts by the participants in this company by way of loans/and/or deposits. RESOLVED that interest the rate of 9% per annum on loans or advances taken and/or advanced by the Company from/to Messrs Shah Construction Co. Private Ltd., to be paid with the retrospective effect from the date as the loans or advances are received/or paid by the company." The letter clearly shows that interest is charged on the advance payments made by the assessee for the purchase of machinery and not for the delay in payment of sale price of the machinery. The letter discloses the name of the suppliers of the machinery and the dates on which the payments were made to them. If the assessee had, in fact, sold the machinery to the Indian company, there would have been no necessity of its giving the names of the suppliers and the dates of its payment to them. Again the resolution of the board of the Indian company dated 4th February, 1957 also authorises payment of interest on the amounts contributed to the Indian company by way of loans and/or deposits. Assuming for the sake of argument that the interest was received on outstanding sale price of plant and machinery, such outstanding amounts could not certainly be deposits. The inevitable conclusion can only be that the advance or sale price paid by the assessee to the foreign suppliers for facilitating purchase of machinery by the Indian company were treated, by mutual arrangement, as loan and that is how interest was charged and paid. The inevitable conclusion can only be that the advance or sale price paid by the assessee to the foreign suppliers for facilitating purchase of machinery by the Indian company were treated, by mutual arrangement, as loan and that is how interest was charged and paid. Shri Dastur's legal submission is that clause (i) of sub-section (1) of section 9 is a part of the taxing Statute. It creates a legal fiction whereby income actually earned outside India is deemed to accrue or arise in India in the circumstances at mentioned in that clause and therefore, the clause requires to be construed strictly so as to give benefit of doubt to the assessee. His further submission is that even though the Tribunal did not as such consider the question whether the assessee company had or could be said to have lent money to the Indian company within the meaning of the clause, he was entitled to argue it before this Court. The submission are well founded and have not been seriously disputed by Shri Jetley for the department. Since, however, this aspect of the question is a mixed question of fact and law, the contention will naturally have to be considered on the basis of facts found by the Tribunal and the documents annexed to the statement of the case in the light of legal submissions that will be made by the parties. Reference to the relevant material has already been made in the earlier paragraphs. In this context it may not be out of place to mention that the exact terms of the arrangement (whether formal or informal) between the assessee and the Indian company are not available. Neither the books of account of the assessee nor of the Indian company are available to this Court. The invoices under which plant, machinery and other equipment were imported by the Indian company are also not on record. Such material could have thrown some light as to the nature of the transactions. Clause (i) of sub-section (1) of section 9 of the Income-tax Act, 1961 reads as under : "9. Income deemed to accrue or arise in India. The invoices under which plant, machinery and other equipment were imported by the Indian company are also not on record. Such material could have thrown some light as to the nature of the transactions. Clause (i) of sub-section (1) of section 9 of the Income-tax Act, 1961 reads as under : "9. Income deemed to accrue or arise in India. - (1) The following income shall be deemed to accrue or arise in India - (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through or from any money lent at interest and brought into India in cash or in kind or through the transfer of a capital asset situate in India; Explanation - For the purpose of this clause - (a) .............. (b) .............. This clause brings within the ambit of charging section income accruing or arising whether directly or indirectly in five situations. One such situation involved in this reference is "where income is accruing or arising, whether directly or indirectly, through or from any money lent at interest and brought into the taxable territories in cash or in kind". Admittedly, the situation contemplated herein is that the income arises outside India but by the Statute, it is deemed to accrue or arise within the taxable territory. However, the deeming provision is not absolute. It is applicable only if the conditions laid down therein are satisfied." On the face of it this part of the clause can conveniently be divided into three parts, namely : (i) income accrues or arises, whether directly or indirectly; (ii) through or from any money lent at interest; and (iii) brought into India in cash or in kind. The dispute herein is as regards interpretation of the second and third parts only. However, in view of the Federal Court decision in the case of A. H. Wadia v. C.I.T. 17 ITR 63 and the Supreme Court decision in C.I.T. v. Sri Meenakshi Mills Ltd., 63 ITR 609 it is not possible to accept Shri Dastur's submission that the two parts are independent of each other. However, in view of the Federal Court decision in the case of A. H. Wadia v. C.I.T. 17 ITR 63 and the Supreme Court decision in C.I.T. v. Sri Meenakshi Mills Ltd., 63 ITR 609 it is not possible to accept Shri Dastur's submission that the two parts are independent of each other. Assuming for the present that Shri Dastur is right, the controversy then is about the expression "through or from any money lent at interest", which, it is agreed, can be further narrowed down to the two words used therein namely, 'money lent'. The expression 'money lent' is admittedly defined in the Income-tax Act, 1961. Therefore, we have to first ascertain the plain dictionary meaning of the words 'money' and 'lent' to understand the purport and scope of the expression 'money lent'. According to Shorter Oxford English Dictionary, money means - current coin, promissory documents as are currently accepted as medium of exchange. This meaning does not present any difficulty. The word 'lent', according to the same dictionary means - the act of lending, the word 'lend' in turn, meaning to grant temporary possession of a thing on condition of return of the same or equivalent, to let out money at interest etc. Section 42(1) of 1922 Act was almost in identical terms. While considering the provisions of section 42(1) the Federal Court in the context of its validity etc. through the Chief Justice Kanie in 17 ITR 63 at page 73 observed : "... 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 in that way the incident of bringing the money into British India in cash or in kind to the knowledge of the lender or borrower is an integral part of the 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 in that way the incident of bringing the money into British India in cash or in kind to the knowledge of the lender or borrower is an integral part of the transaction. After the money is brought into India, how is it used by the borrower, to my mind, is an irrelevant question." Thus, according to the Federal Court this part of the clause should be read as one head indicating one complete transaction and knowledge of the borrower and the lender about the incident of bringing the money into India is an integral part of the transaction. The Supreme Court in 63 ITR 609 at page 614 also understood the Federal Court to say : "..... But all the learned judges agreed 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 the ratio of the decision of the Federal Court with regard to the construction of section 42(1) of the Act." We will, therefore, proceed on the basis that the second and third parts of the clause are not really independent of each other. The first important judgment relied upon by Shri Dastur was of House of Lords in Potts, Executors v. Inland Revenue Commissioners, (1951) 1 All ELR 76. The question involved in that case was whether the trustees of the settlement had paid any capital sum to the settlor within the meaning of section 40 of the Finance Act, 1938, the capital sum under the section meaning any sum paid by way of loan or repayment of loan. On the answer to the question depended the assessability of the capital sum paid as income in the hands of the settlor. The facts were that the settlor was a governing director of the company both before and after he had made a settlement in favour of this grandchildren. The trustees of the settlement had invested the money in the purchase from him of all but one share of that company. The facts were that the settlor was a governing director of the company both before and after he had made a settlement in favour of this grandchildren. The trustees of the settlement had invested the money in the purchase from him of all but one share of that company. The settlor had for many years prior to the settlement, and continued to have after the date of the settlement, an arrangement with the company whereby the company paid various accounts on his behalf such as charitable subscriptions and taxes, debiting his account in the company's books with the sums so paid and crediting his account with receipts such as director's fees and expenses due to him and payments which he made to the company in discharge of his indebtedness. In the relevant years the company made payments at the request of the settlor exceeding the available income of the settlement. It was held that the company did not make payments in question to the settlor by way of loan. The Special Commissioners had held : "The payments by the company direct to (for example) the Inland Revenue Commissioners for surtax are in substance merely a convenient method which avoided the necessity of the company paying to Mr. Potts and Mr. Potts then paying the Inland Revenue Commissioners." This judgment is not unanimous. One of the five judges constituting the Bench dissented from the majority view. Some observations made by one or two of the judges go even to the extent of suggesting that if A pays money to C at the request and on behalf of B, A has not lent money to B or that if A deposits money direct to B's bank account wherefrom B had borrowed money at the request and on behalf of B, then also A cannot be said to have lent money to B. However, on going through the majority judgments carefully, it cannot be held that, that is the majority view. The majority view is correctly stated : "...... The majority view is correctly stated : "...... On the true construction of s. 40(5)(a)(i), the company did not make the payments in question "by way of loan" to P, and they did not, therefore, constitute a "capital sum" within s. 40(3), and, although the words "directly or indirectly" were to be read into s. 40(3), the words "paid to the settlor" were not thereby so enlarged as to include payment to some person other than the settlor for that person's own use and benefit." The payments in question, it may be again stated, were made under an arrangement which existed prior to the date of settlement and continued after the settlement between the company and settlor. The nature of the arrangement had already been referred to in the earlier paragraph. The facts in the Chancery Division judgment in the case of Champagne Perrier-Jouet SA v. H.H. Finch Ltd. and others, (1982) 3 All ELR 713 were a life director of the company, J held about 10% of the equity shares of the company. He became greatly indebted to the company as a result of the payment by the company of his numerous bills on his behalf and also on account of supply of wine to a company controlled by him. It was held : "The defendant company had at no stage made a 'loan' to J within the meaning of reg 10 of part 1 of Table A in the 1948 Act since he had not been lent a sum of money but was simple indebted to the company in respect of the bills paid on his behalf and the stock of wine passed over to a third party, I Ltd. Therefore, by virtue of reg 11 the company had at all material times a lien over his shares, and that lien took priority over the plaintiff's equitable charge. Furthermore, the lien conferred on the defendant company the right to sell a sufficient number of J's shares, through the machinery of art. 7 of its articles of association, to discharge J's liability to the company and all incidental costs and expenses of the sale. The sale could only be effected through the machinery prescribed by art. 7 because, on the true construction of the company's articles, the provisions of regs 12 to 14 of Table A did not override the scheme laid down in art. The sale could only be effected through the machinery prescribed by art. 7 because, on the true construction of the company's articles, the provisions of regs 12 to 14 of Table A did not override the scheme laid down in art. 7 for the sale of shares. Declaration to that effect would be made accordingly. ......" That had happened in the Chancery Division judgment in Re H.P.C. Productions Ltd., (1962) 1 All ELR 37 was that at the request of K, who was resident in the United Kingdom, T.V., a Swisas' finance corporation, bought in 1953 for dollars some bills, which were delivered in New York to K's direction, and made payments in 1955 in Parts in French francs for or towards the purchase of a villa. At his death in 1956 K was owed a substantial sum of money by H.P.C. Productions Ltd., an English company, for money lent by him. In 1956, after K's death, the indebtedness of K to T.V. in respect of the transactions previously mentioned, was assigned to H.P.C. Productions Ltd. In the voluntary liquidation of this company in 1960 K's executors proved for K's debt. The liquidator rejected the proof, claiming to set off in respect of it the indebtedness assigned to the company, the amount of which exceeded the amount of the proof. By s. 1(1) of the Exchange Control Act, 1947, a person resident in the United Kingdom, other than an authorised dealer, was forbidden, outside the United Kingdom, to borrow foreign currency from or lend foreign currency to any person other than an authorised dealer. Neither K nor T.V. were authorised dealers, and the dollars and francs were foreign currency for the purposes of s. 1(1). Neither K nor T.V. were authorised dealers, and the dollars and francs were foreign currency for the purposes of s. 1(1). On the question whether the transaction giving rise to K's indebtedness to T.V. were illegal, and therefore could not be made the subject of set-off, it was held : "The payments made by T.V. were not payments made by way of a loan nor were they made to K or to persons accountable to him, but were such as would give rise to a claim for money paid at K's request, which was a claim generally different from that of money lent, and, therefore, there had not been a borrowing by K; nor had there been a sale of foreign currency to K, and therefore the assigned indebtedness of K to T.V. was not affected by illegality under s. 1(1) of the Exchange Control Act, 1947, nor prevented thereby from being the subject of set-off." Next judgment of Court of Appeal in Inland Revenue Commissioners v. Rowntree & Co. Ltd. (1948) 1 All ELR 482. The facts in that case were in pursuance of arrangements covering a period of years a company raised money for the purposes of its business by drawing sight bills, payable at four and six months, on an acceptance house, who accepted the bills in consideration of a commission paid to them by the company, and then as agents for the company, discounted them on the market and remitted the proceeds to the company. Under the arrangement the company was bound to put the acceptance house in funds shortly before the maturity dates of the respective bills. Money was raised in this way during the company's standard period. The Special Commissioners were of the opinion that the words "borrowed money" in para 2(1) should not be given a strained meaning and that in ordinary commercial usage the relationship between the company, the acceptance house, and the holders of the bills was not that of borrower and lender nor were the transactions ones of loan. They, therefore, held the money so raised was not "borrowed money" within the meaning of para 2(1). They, therefore, held the money so raised was not "borrowed money" within the meaning of para 2(1). On these facts, it was held : "The words "borrowed money" in para 2(1) in law required the relationship of a borrower and lender, a relationship which did not exist in this case, but, even if the words were to be given some wider interpretation, the finding of the commissioners that in ordinary commercial usage the relationship between the parties was not that of borrower and lender ought not to be disturbed." Commissioners of Inland Revenue v. G. B. Bates, 44 Tax Cases 225 is a judgment of the House of Lords delivered in the year 1966. One of the questions involved was the same as in Potts' case, viz., whether 9100 paid by the company to the settlor's bank account in which he had an overdraft was a loan by the company to the settlor. Observing that despite the Court's observations in Pott's case, nothing was done to amend the section, it was held that such a payment did not amount to loan. Superficially looked at all these decisions particularly the decision of the House of Lords in 44 Tax Cases 225 and of Chancery Division in (1962) All ELR 37, give the impression that unless money is actually given by A to B, there can be no loan from A to B. On careful examination, however, it would appear that the decisions were rendered in the context of their own facts and different statutory provisions. Besides, according to the theory of precedents so long as the Supreme Court does not take a different view from the view taken by the Privy Council, the decision of the Privy Council is still binding upon the High Courts. The position regarding a Federal Court judgment cannot be different. Therefore, while the decisions referred to herein-above deserve full respect and have great persuasive value, the Privy Council decision in the case of Beninson and others v. Shiber, AIR 1946 PC 145 relied upon by Dr. Balsubramanian will be binding on this Court unless the Supreme Court is shown to have taken a contrary view. In the privy council decision a building owner had entered into a building contract with a building contractor. Balsubramanian will be binding on this Court unless the Supreme Court is shown to have taken a contrary view. In the privy council decision a building owner had entered into a building contract with a building contractor. In terms of the agreement the building contractor was to find money for the building and charge the building owner for the same interest at the rate of 9% per annum on the total amount discounted in advance. The question arose whether the money paid by the building contractor for the construction of the building was a loan by him to the building owner. Rejecting the argument that unless the money was given by the building contractor to the building owner as such it could not be loan, it was held that physical transfer of money was not necessary to constitute loan. The relevant observations as found in the headnote are : "Ordinarily in a building contract the relationship of lender and borrower does not exist between the builder and the building owner. The parties to the contract may, however, so frame it as to create that relationship, e.g., where the builder agrees to find the money for the building and the building owner agrees to pay him interest on the money so found. If a man finds money for another and expends it in that other's behalf and in accordance with his request, he is lending it although he never physically transfers it to the borrower. This may be true even where some of the money is due to the lender himself for his services. It is not necessary in such a case, in order to constitute a loan money should be handed over by the lender to the borrower and by him returned to the lender as the reward for his services. The same result is arrived at if the parties, by the terms of their contract and by their course of dealing, have shown an intention that the money payable by the debtor should be provided or found by the creditor and treated as having been advanced by him." It is true that the Privy Council in this case was considering the provisions of Usurious Loans Act and not of a taxing statute and that interest was to be charged in advance. However, the decision does not appear to have rested on these facts. However, the decision does not appear to have rested on these facts. The Privy Council, it appears, held that ordinarily when a contractor puts his own money in a building contract to be executed by him, there will be no relationship of a borrower and lender between the building owner and the building contractor, but a contract of the type involved in the at case would create and had created such a relationship. In other words, according to the Privy Council it is not always necessary to constitute a loan that money must be paid by A to B physically. To that extent, therefore, the Privy Council has taken a view different from the judgment relies upon by Shri Dastur. Accordingly, following the Privy Council decision (Supra), as no decision of the Supreme Court taking a contrary view was brought to our notice, we will proceed on the basis that it is not always necessary to constitute a loan transaction between A and B that A should pay money direct to B. Depending upon the facts and circumstances of a case there can be an arrangement whereby A discharges the obligations of B and A is treated to have lent money to B. As regards Supreme Court decisions cited, viz., - (i) Shree Ram Mills Ltd. Bombay v. Commissioner of Excess Profits Tax, Central Bombay, 23 ITR 120; (ii) Bombay Steam Navigation Co. Pvt. Ltd. v. Commissioner of Income-tax, Bombay, 56 ITR 52; and (iii) Commissioner of Income-tax Madras v. Sri Meenakshi Mills Ltd. 63 ITR 609, we find that the second decision does not have any direct bearing on the question before us. In this case as a result of scheme of amalgamation the value of assets of the amalgamated company was partly paid by the issue of shares and partly by treating it as a loan. The question arose whether interest paid thereon was allowable as deduction under section 10(2)(iii) or under section 10(2)(xv) of the old Act. Holding that it was not a case of capital borrowed, interest was held allowable under section 10(2)(xv). The Court observed that an agreement cannot convert a transaction into loan, if factually it is not so. The decision in Shree Ram Mills Ltd.'s case on the other hand, suggested that by a proper agreement managing commission unrealised can be converted into a loan. The Court observed that an agreement cannot convert a transaction into loan, if factually it is not so. The decision in Shree Ram Mills Ltd.'s case on the other hand, suggested that by a proper agreement managing commission unrealised can be converted into a loan. In that case, the managing agents had left their commission lying with the assessee. The question was whether the amount of commission so left was a loan. It was held that more in action on the part of the managing agents could not convert money due to them into loan. In the case of Sri Meenakshi Mills Ltd. the Supreme Court made certain observations which speak for themselves. The observations are : "It is well established that in a matter of this description the income-tax authorities are entitled to pierce the veil of corporate entity and to look at the reality of the transaction. It is true that from the juristic point of view the company is a legal personality entirely distinct from its members and the company is capable of enjoying rights and being subjected to duties which are not the same as those enjoyed or borne by its members. But in certain exceptional leases the Court is entitled to lift the veil of corporate entity and to pay regard to the realities behind the legal facade. For example, the Court has power to disregard the corporate entity if it is used for tax evasion or to circumvent tax obligation." Further the Court analysed section 42(1) of the 1922 Act corresponding to section 9(1)(i) of this Act and drew the ratio of the Federal Court judgment in 17 ITR 63 to be which has already been quoted in paragraph 10 of this judgment. The nexus was stated to be the knowledge to be attributed to the lender that the borrower had borrowed money for the purpose of taking it to British India and earning income on that money. This Court's judgment in Pennwalt India Ltd. and others v. Registrar of Companies, Maharashtra and others, 62 Company Cases, 112, notices distinction between a deposit and a loan. It was observed that though the dividing line between loan and deposit was thin, the two were not synonymous. This Court's judgment in Pennwalt India Ltd. and others v. Registrar of Companies, Maharashtra and others, 62 Company Cases, 112, notices distinction between a deposit and a loan. It was observed that though the dividing line between loan and deposit was thin, the two were not synonymous. Gujarat High Court, of course, held in Commissioner of Income-tax, Gujarat v. Saurashtra Cement & Chemical Industries Ltd. 101 ITR 502 that unpaid price in respect of sale of goods could never be said to be a loan advanced by the non-resident company to the assessee company. Since the non-resident company could not be said to have lent the amount of unpaid purchase price to the assessee company either in cash or in kind, there was 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. The Supreme Court, on the other hand in the case of Radha Kissen Chamria v. Keshardeo Chamria AIR 1957 (SC) 743 while holding a part of unpaid purchase price agreed to be paid in installments on interest in that case did not amount to loan, observed at page 745 : "But looking at its terms we are unable to hold, as the High Court was unable to do, that it shows that the price due was by agreement treated as a loan by the vendor to the purchasers. Mr. Chatterjee was unable to contend that in every case where an unpaid vendor leaves the purchase money outstanding and agrees to accept it later with interest, the transaction amounts in substance to a loan. He said that the facts of each agreement had to be looked at to find out whether the agreement amounted in substance to a loan. Here we have no other facts than those appearing on the face of the compromise decree and these facts do not, in our view, amount to an agreement to convert the outstanding purchase money into a loan by the vendor to the purchasers. Here we have no other facts than those appearing on the face of the compromise decree and these facts do not, in our view, amount to an agreement to convert the outstanding purchase money into a loan by the vendor to the purchasers. All that we have here is an agreement by the vendor to accept payment of a portion of the moneys payable under the agreement for sale immediately and the balance in certain installments and to be paid interest on the purchase money at the same rate which was provided in the agreement for sale." In view of the Privy Council decision in AIR 1946 (PC) 145 and the Supreme Court decision in ATR 1957 (SC) 743 (supra) it appears clear to us that it is not always necessary that in order to constitute "money lent", money must actually pass from the lender to the borrower. Depending upon the circumstances in each case money paid by the payer to a third party at the request of the payee under an arrangement that the money so paid would constitute loan at interest, can be treated as a case of money lent by the payer as lender to the one who so requested as borrower within the meaning of the clause. This is which has happened in this case. The amounts were advanced and paid by the assessee company for and on behalf of the Indian company for the purchase of plant, machinery and other equipment from foreign suppliers. To borrow money abroad and then to make payment to foreign suppliers of plant, machinery and other equipment might have resulted in the violation of foreign exchange regulation. If on the other hand, instead of borrowing money as such and making payments abroad to foreign suppliers, borrowed money was brought into India and then the payments were made to the foreign suppliers of plant and machinery, the process, to say the least, would have been cumbersome. All these aspects have to be appreciated in the background of the fact that the assessee company not only holds 49% equity shares of the Indian company and has supplied knowhow, but is also the owner of the plant, machinery and other equipment in the ratio of its shareholding. All these aspects have to be appreciated in the background of the fact that the assessee company not only holds 49% equity shares of the Indian company and has supplied knowhow, but is also the owner of the plant, machinery and other equipment in the ratio of its shareholding. In the circumstances, it is only reasonable, having regard to the resolution dated 13th February, 1957 which was described by the assessee itself to the Income-tax Officer as the agreement under which the amounts were advanced by the assessee company to the Indian company at interest, that the assessee company had lent money to the Indian company within the meaning of section 9(1)(i) of the Income-tax Act. Shri Dastur's submission that the department's case, as noted by the Tribunal at page 115 of the paper book, merely was : ".... The purchases of the machinery were in effect made on S.S.J.'s behalf by the assessee as a part of arrangement between them to finance the purchases and S.S.J. Ltd., paid the assessee in deferred installments with interest and the basis of interest at 9% was the resolution dt. 4.2.1957, there being no documentary evidence of any subsequent as claimed by the assessee; the Revenue's second contention is that such interest received by the assessee was chargeable under sec. 9(1)(i)." Viewed in this context will also justify the conclusion arrived at by us above. Before proceeding to consider the next contention, it may be desirable to briefly refer to other decisions relied upon by Dr. Balsubramanian which are not germane to the issue in this case. Madras High Court in Commissioner of Income Tax v. S. Ramsay Unger, 15 ITR 87 was dealing with the question whether the money remained as the testator's estate in the hands of the assessee as the executor, could be regarded as borrowed capital. It was held to be so without discussion. Madras High Court in Commissioner of Income Tax v. S. Ramsay Unger, 15 ITR 87 was dealing with the question whether the money remained as the testator's estate in the hands of the assessee as the executor, could be regarded as borrowed capital. It was held to be so without discussion. Privy Council decisions in The Commissioner of Income-tax, Bihar & Orissa v. Maharajadhiraja Kameshwar Singh of Darbhanga, 1 ITR 94 and Ragunandan Prasad Singh and another v. The Commissioner of Income-tax, Bihar and Orissa, 1 ITR 113, Rangoon High Court decision in the case of Commissioner of Income-tax, Burma v. P.L.S.M. Concern, Minhla, 2 ITR 417, Madras High Court decision in Chidambaram Chettiar v. Commissioner of Income-tax, Madras, 4 ITR 309 and the Allahabad High Court decision in Seth Kishori Lal Babulal v. Commissioner of Income-tax, U.P. 49 ITR 502 involved question as to the purport and scope of the word 'income' in the context of well-known dictum that income can be received in cash or in kind. It was held in all these cases that expression 'in kind' included received in money's worth. Madras High Court decision in K. SP. KT. Kalayappa Chettiar v. Commissioner of Income-tax, Madras, 51 ITR 51 involved a case of a money lender who had, in satisfaction of a decree, acquired a house. The question was whether the house was the assessee's stock-in-trade or a capital asset. Since the assessee was carrying on money lending business and the house was acquired in the course of money lending business, the house was hold to be a part of stock-in-trade. We do not think that any of the decisions hereinabove have any bearing on the question before us. Second condition, according to Shri Dastur, is that money lent must have been brought in India in cash or in kind. In support of his contention that even if it is assumed for the present that the money was lent by the assessee company to the Indian company, the money was not brought into India in cash or in kind; Shri Dastur strongly relied on the Calcutta High Court decision in the case of C.I.T., West Bengal I v. National and Grindlays Bank Ltd., 72 ITR 121 where it was stated to have been held that money meant a medium of exchange and must retain the character of money or its equivalent in drafts, cheques etc. which were really acceptable in the commercial world for money and electric generators and plants do not satisfy that criterion. In the present case, what was brought into India was the plant, machinery and other equipment and, therefore, the Calcutta High Court decision was squarely applicable. Fairly admitting that the Calcutta High Court decision was not binding on this Court, he invited our attention to this Court's judgment in C.I.T. v. Chimanlal J. Dalal & Company, 57 ITR 285 where it was held that even if this Court doubted a judgment, for the sake of uniformity among High Court in the matter of Income-tax Act, this Court would follow the other High Court's decision if there was no other High Court decision to the contrary. Dr. Balsubramanian, on the other hand, relied on the order of the Tribunal. In particular, he referred to the judgment delivered by Justice K. L. Roy in the Calcutta decision to show that electric generators and plant were brought into India long before the non-resident assessee had borrowed moneys. He contended that the Calcutta decision, thus, should not be applied in this case and the expression "in cash or in kind" should be understood as cash or anything worth cash or money or their worth including plant, machinery and other equipment. In reply, Shri Dastur stated that Justice Roy, as he then was, undoubtedly had referred to the factual aspect of the matter, but this he gave as an additional reason. The fact is that whatever observation he made, he made there while respectfully agreeing with the judgment delivered by Mukharji, J. Thus, the observations made in the course of judgment by Mukharji, J. were the observations of the Bench and not of Mukharji, J. alone. On going through the judgment carefully, it appears clear to us that the judgment delivered by Mukharji, J. is the judgment of the Bench as Roy, J. has prefixed his judgment with these words : "K. L. Roy, J. : 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." This being the only judgment cited having direct bearing on this aspect of the matter it is only reasonable that the judgment is properly appreciated. In the context of the meaning of the expression "money in cash or in kind" this is what the Court observed : "..... that 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 the taxable territories in cash or in kind" ? A tax must be clearly brought home without equivalention to the assessee. A tax by implication is necessary and compelling. That is a well-settled principle of construction." In the same context the Court further observed at page 134 : "...... 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, Lo. 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 accredited these 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 nor money in kind nor income within the meaning of 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." Rejecting the meaning that may be given to the expression elsewhere, the Court observed: ".... 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. 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 native 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 alter ago of money. For taxing purpose, we have no 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." However, the observations made in the Calcutta decision about the concept of "money brought into India in cash or in kind" are not independent of the facts of the case. In the first place, the Calcutta High Court noted that the Federal Court decision in National and Grindlays Bank Limited, 17 ITR 63 held section 42(1) of the 1922 Act to be as not ultra vires on the ground of extra territorial in operation for the reason that the nexus was the bringing of the money into India with the knowledge of the lender and borrower giving the real territorial connection. It further noted that referring to the aforesaid Federal Court judgment, the Supreme Court, in the case of Sri Meenakshi Mills Ltd., 63 ITR 609 had held that the expression "arising from money lent at interest and brought into British India in cash or in kind" meant one head indicating one composite transaction, the incident of bringing the money into British India in cash or in kind to the knowledge of the lender and the borrower as an integral part of the transaction. It is in this context that while rejecting Mr. It is in this context that while rejecting Mr. Pal's argument that the assessee knew that the object of the loan was to buy capital goods and to bring them into India, the Court observed : "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 install them; even then the loan was good enough and the lender could insist that you repay the loan and also in the mean - time pay the interest due on the loan." It is significant to mention that the Court did not rule out a possibility in which Mr. Pal's submission could be accepted depending, of course, on the facts of each case. This is clear from the Court's further observations at page 134 : "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 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 charge the picture and bring the assessee within the meaning of section 42(1) of the Income-tax Act". Finding, however, that the facts in the case before it were different, the Court further observed at page 134 itself : "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." Shri Dastur is, thus, not quite correct in stating that the fact that plant and machinery in that case had been purchased and brought into India long before the money was borrowed was not a consideration that weighed with the Court in coming to its conclusion. Nor is Shri Dastur very correct in drawing from the Calcutta decision an absolute proposition that the expression "money brought to India in cash or in kind" can never be money converted into goods. Further, the Federal Court and the Supreme Court having held in so many words that it is only proper to read the expression "money lent at interest and brought into British India in cash or in kind" as one head and as indicating a composite transaction and that the knowledge of the lender and the borrower that money is to be taken into British India must be an integral part of the transaction, it is only fair and reasonable to take an overall view of the transaction rather than considering it in parts as suggested by Shri Dastur. In other words, the approach that the Revenue mush first prove that the assessee company lent money to the Indian Company and in the event of its successfully doing so, it must also further prove that money lent was brought into India in cash or in kind, is, to say the least, fallacious. To our mind, what requires to be appreciated is that the assessee company holds 49% of the equity capital of the Indian company. It has supplied the entire technical know-how to the Indian company for the contract work. To our mind, what requires to be appreciated is that the assessee company holds 49% of the equity capital of the Indian company. It has supplied the entire technical know-how to the Indian company for the contract work. The plant, machinery and other equipment of a highly specialised nature was required to be purchased in U.K., U.S.A. and Germany. The Indian company did not have necessary foreign exchange readily available. Delay in purchasing the plant and machinery would have jeopardized the interest of the Indian company. The Indian company approached the assessee company and the assessee company agreed to make payments to foreign suppliers of the plant, machinery and other equipment at the request of and on behalf of the Indian company on the condition that the amounts as and when paid will be debited to the account of Indian company and carry interest. The assessee company also agreed to receive payment with interest in deferred installments. This is how it was possible for the Indian company to import plant, machinery and other equipment into India. In our judgment, these facts squarely fit in the possibility visualised by the Calcutta High Court in its decision. It is particularly so as, for reasons best known to the assessee company, the actual arrangement between the assessee company and the Indian company, whether formal or informal, was not placed before the Department, the Tribunal or before this Court. Neither the books of the assessee company nor those of the Indian company nor even the copies of the originals of invoices which could have thrown some light as to the exact nature of the transactions were made available. The only relevant and important material available in the paper-book is the assessee company's letter dated 23rd October, 1968 to the Income-tax officer in which an extract of the Board's (Indian company) Resolution No. 6 dated 4th February, 1957 was referred to as an agreement between the parties. The said extract clearly and categorically refers to the Indian company's payment of interest on loan and advances by the assessee company. This is also the view of Kerala High Court in the case of Laxmi Lines Ltd. v. C.I.T., 102 ITR 196. In that case, an Indian company had purchased a ship from non-resident company and agreed to pay the purchase price in installments with interest on the unpaid purchase consideration. This is also the view of Kerala High Court in the case of Laxmi Lines Ltd. v. C.I.T., 102 ITR 196. In that case, an Indian company had purchased a ship from non-resident company and agreed to pay the purchase price in installments with interest on the unpaid purchase consideration. The Indian company had paid interest but had not deducted taxes under section 195 of the Income Tax Act, 1961. The claim for deduction in respect of interest was disallowed on the ground that the tax was not deducted from interest payments. The question that arose in the context was whether the payment of interest by the Indian company to the non-resident company was taxable under section 9(1)(i) in the hands of the non-resident company because it was only then that the Indian company's liability to deduct tax would arise, Kerala High Court held that the non-resident company was taxable in respect of interest income under section 9(1)(i). Therefore, the Indian company had an obligation to deduct tax under section 195 and that having not done so, the disallowance of its claim for deduction was justified. Apart from other reasons already given, this is one more reason why the decisions relied upon by Shri Dastur on the meaning of expression "money lent" will not apply in this case. Ordinarily, in the case of a borrower borrowing money form lender, the lender will not know except to the extent it is necessary for him to have a sense of security of receiving the money back to know the use to which the borrower was going the money lent to. As held by the Supreme Court in the case of Sri Meenakshi Mills Ltd., 63 ITR 609, for the purpose of this part of section 42(1) of 1922 Act corresponding to section 9(1)(i) of the 1961 Act, the knowledge of the fact that money lent is going to the brought into India in cash or in kind both to the lender and the borrower is and integral part of the transaction. This can happen only when the borrower and the lender are not merely borrower and lender in the strict sense of the term but are a little more involved with each other so as to form one transaction. This is what has happened in this case. This can happen only when the borrower and the lender are not merely borrower and lender in the strict sense of the term but are a little more involved with each other so as to form one transaction. This is what has happened in this case. Accordingly we are in agreement with the Tribunal that the provisions of section 9(1)(i) of the Income Tax Act, 1961 were attracted in this case. The question is, therefore, answered in the affirmative and in the favour of the Revenue. No order as to costs.