RAJENDRA BABU, J. ( 1 ) IN these references under Section 256 (2) of the Income-tax Act, 1961 (hereinafter referred to as the Act), the question of law referred for our opinions is as follows: "whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was not entitled to the deduction claimed u/s. 57 (iii) of the Act of the sum of Rs. 2,38,430/- for the assessment year 1972-73 and rs. 2,06395/- for the assessment year 1973-74 by virtue of Section 58 (1) (a) (ii) of the act? ( 2 ) THE circumstances in which these references a rose are as follow:- The asscssec, whichis a non-resident Company, has its registered office in Switzerland, entered into a collaboration agreement with M/s. Widia (India) Limited, Bangalore. The assessee having borrowed money in switzerland, from Swiss Bank Corporation of switzerland, purchased some machinery and sent them to India to its collaborator for installation of the same in its factory premises. In settlement of this liability, the assessee was allowed certain shares in M/s, Widia (India) Limited, for a sum of Rs. 24 lakhs and the balance was treated by widia (India) Limited as loan from the assessee. The assessee claimed a deduction of a sum of rs. 2,38,430/- as interest paid on borrowings made for making investment in the shares in widia (India) Limited. ( 3 ) THE Income-tax officer rejected the claimas he was of the view that interest can be allowed if there was some income under the head 'dividend' but there was no such income in the assessee's case. He further held that the expenses could be allowed only if the income in respect of which such expenditure had been incurred was liable to tax. He found that the dividend receivable from the Indian Company was exempt u/s. 80k of the Act and it was not liable to tax and therefore interest paid on investment in shares could not be allowed as an expenditure for the purpose of computing assessee's income. So he disallowed the interest on Rs, 2,38,430/- for the assessment year 1972-73 and allowed Rs. 2,06,395/- for the assessment year 1973-74. So he disallowed the interest on Rs, 2,38,430/- for the assessment year 1972-73 and allowed Rs. 2,06,395/- for the assessment year 1973-74. ( 4 ) WHEN the matter was taken up in appeal for both the years to the Appellate Assistant commissioner (AAC in short) he disagreed with the findings of the Income-tax officer that there should be taxable income or income at all, for allowance of permissible expenditure and held that the absence of any amount in the credit side would not make the expenditure disallowablc and on that ground the interest payable to the swiss Bank Corporation could not be disallowed. Relying upon a letter dated 19-2-1974 sent from the Swiss Bank Corporation addressed to the assessee, he held that the assessee borrowed a sum of Rs. 24 lakhs from the Swiss Bank Corporation at different points of time and the credit line granted by the Swiss Bank Corporation was to pany the assessee to invest in the Indian Comand the lender being aware of the bord money being brought into India for the purpose of investment as aforesaid, the whole activity was integral part of one composite transaction and on the basis of the material before him concluded that the transaction would come within the ratio of the decision of the Federal court in Wadla's case (17 ITR 63), and therefore the provisions of Section 9 of the Act would be applicable. He took the view that interest amount was taxable in the hands of the assessee since no tax had been deducted. The Income-tax officer was justified in applying the provisions of section 58 of the Act, He upheld the disallowance of interest amounting to Rs. 2,38, 430/- for the assessment year 1972-73 and he enhanced the assessment for the year 1973-74 and disallowed a sum of Rs. 2,06,395/- which had been allowed by the Income-tax Officer. ( 5 ) THE assessee preferred second appeals before the Income-tax Appellate Tribunal The tribunal agreed with the view expressed by the aac and dismissed the appeals and at the instance of the assessee these references have been made to this Court on the question of law referred to above. ( 6 ) THE question referred for our opinion is only whether the deduction claimed by the assessee was hit by Section 58 (1) (a) (ii) of the Act the assessee claimed deduction u/s. 57 (iii) of the act. ( 6 ) THE question referred for our opinion is only whether the deduction claimed by the assessee was hit by Section 58 (1) (a) (ii) of the Act the assessee claimed deduction u/s. 57 (iii) of the act. That section provides for deduction of any expenditure laid out or expended wholly or exclusively for the purpose of mating or earning such income. . Section 58 overrides Section 57 and declares that certain amounts shall not be deductible in computing the income chargeable under the head 'income from other sources', namely, any interest on moneys borrowed for investment when such interest is payable outside india to anon-resident and the deduction would not be permitted unless the payer of interest deducts tax thereof at the time of payment or, secondly, the tax is paid by the non-resident, or, thirdly, there 45 some person in India who may be treated as a statutory agent of such non-resident, the only exception being hi respect of loans issued for public subscription before the 1st of april, 1938, It is dear from a perusal of the provisions that deduction of tax is required only with a view to charging interest in India, not otherwise. Where the loan is transacted outside india and the borrower brings the money into india with the knowledge of the lender the lender is chargeable to tax in respect of interest he receives by reason of Section 9 (l) (i) of the Act in that event interest paid by the borrower is not allowable as a deduction eventhough the tax has not been deducted therefor. However, Shri sarangan, learned counsel for the assessee relying upon a decision of the Supreme Court in C/t v sree Minakshi Mills, (63 ITR 699) contended that in order to attract tax on interest paid on a borrowing effected in a foreign Country the following circumstances must be present They are: (i) Money had been lent at interest outside India; (ii) Income should accrue or arise directly through or such money so lent at interest; and (iii) Money should be brought into India in cash or kind. It was submitted that unless all these conditions are fulfilled, interest cannot be deemed to be income accruing or arising in India. It was submitted that unless all these conditions are fulfilled, interest cannot be deemed to be income accruing or arising in India. ( 7 ) NOW, on an examination of the facts of the instant case it is clear that the assessee had borrowed money at interest outside India and income had accrued or arisen from such money so lent at interest. But the only question that needs to be examined here is whether the money had been brought into India in cash or kind. The learned counsel for the assessee contended that the Tribunal had recorded that the assessee after taking the loan from the Swiss Bank Corporation purchased some machinery and sent them to India and it is only in settlement of the liability the assessee was allowed certain shares in Widia (India) Limited and therefore the investment in w1l was only the balance of the sale price on the machinery and not the amount borrowed by the assessee from the Swiss Bank Corporation and hence money had not been brought into India either in cash or in kind. Elaborating his submission and relying on a decision in C1t v National Grindlays Bank, (72 ITR 121), the learned counsel submitted that "money that was brought into India in the form of cash or kind" only meant which retained its character of money, which meant money in recognised commercial form like Bills of Exchange, IOUs and even gold and silver but not goods or machinery. He also submitted that the letter dated 19-2-1974 written by the Swiss Bank Corporation to the assessee did not indicate any arrangement of scheme as referred to in the decision of the Federal Court (17 ITR 63) and the decision of the Supreme court in Sree Minakshi Mills' case (63 ITR 699), or even in the decision of the Calcutta High Court in Sutlej Cotton Mills Ltd. v CIT, (81 ITR 641) and it simply indicated that the lending bank was aware of the investment made by the assessee company in the shares of Widia (India) Ltd. , and that could be construed as establishing an arrangement which must be an obligation on the assessee to invest in the shares of Widia (India) ltd. and in the absence of such arrangement or device adopted by the assessee and the Swiss bank Corporation the provisions of Section 9 (1) were not attracted and consequently the interest in question should not be disallowed on the basis of Section 58 (1) (a) (ii) of the Act. ( 8 ) THE two questions that emerge for consideration are, firstly, what is the effect of theletter dated 19-2-1974 written by the Swiss Bank corporation to the assessee and, secondly, whether the importation of the money borrowed in cash or kind is confined to currency alone in the light of the provisions of Section 9 (1) of the Act. ( 9 ) FOR a proper appreciation of the first limb of the problem we will set out the letter sent by the Swiss Bank Corporation: "swiss Bank Corporation m/s. Meturit AG seefeldstrasse 7 8008 Zurich our Dept /ref Credits 2501 Bienne, feb. 19th, 1974 we have granted to you credit line utilised on 3-5-1966 with Swiss Francs 547,586. 15 10-6-1966 with 284,802. 25 8-8-1966 with 623,904. 55 19-9-1966 with 117,348. 05 total 1,573,641 to enable you to invest in the shares of messrs Widia (India) Ltd. of a value of Rs. 24 lacs. . . . . " this letter dated 19-2-1974 indicates that the swiss Bank Corporation, Switzerland, have granted to the assessee credit line to enable it to invest in the shares of M/s, Widia (India) limited of value of Rs. 24 lakhs. The assessee is claiming a deduction in respect of interest on the borrowed Company's advance to it by the lending foreigh Bank. The contention advanced on behalf of the assessee is that after having borrowed the money, machinery was purchased which was installed in the factory premises of m/s. Widia (India) Limited and the shares were granted to the assessee in lieu of payment of part of sale price on the machinery. Whatever may be the explanation offered by the Assessee it is clear from the letter dated 19-2-1974 that the money was advanced to the assessee by way of loan on interest for the purpose of investing in the shares of M/s. Widia (India) Ltd. Whether the assessee converted that money into machinery and imported that machinery into india and thereafter part of the sale price had been issued in shares would be irrelevant for the purpose of our consideration. From the letter quoted above it is clear that right from inception the idea was to give credit line to the assessee to enable it to invest in shares of Widia (India) ltd. The letter not merely states so, but refers to the various dates on which money had been given for the said purpose. Hence, the inference is irresistible that the object was to lend money to M/s. Widia (India) Ltd. for the purpose of investment in shares of it. Therefore, the contention advanced on behalf of the assessee that there was no arrangement between the Bank and the assessee and M/s. Widia (India) Ltd. , as to investment in shares falls to the ground. ( 10 ) NOW we shall consider the effect of the expression 'bringing borrowed money into India in cash or kind'. In order to appreciate this limb of the argument the ratio of the decision in Notional Grindlays Bank case is necessary to be borne in mind. The expression used in that context are: money, currency or money in cash or kind. Money is generally accepted as a medium of exchange, a measure of value or means of payment (see: Webster's Third New International dictionary, Vol. II - 1976 Edition ). 'currency' is understood to include all coins, notes, bank notes, postal notes, money orders, cheques, bank drafts, travellers cheques, letters of Credit exchange, bill of exchange, promissory notes as per section 2 (f) of the Foreign Exchange Regulations. Cash is understood to be ready money such as coin, public money or instrument as token of money like a cheque or draft. The expression 'in kind' is defined in most of the dictionaries as goods or commodities as distinguished from money, that is, an economic measure which is other than cash. The Calcutta High Court's view confines the concept of money only to currency. When the section specifically states that importation of borrowed money in cash or kind, the idea is that there should have been a lending of money as a loan and not mere debt arising out of a transaction such as balance of an unpaid price of a goods on sale. Money in the broadest sense would mean currency. Cash arid kind are always understood to mean one as ready money and the other as not merely other types of currency but as goods or commodities as distinguished from money. Money in the broadest sense would mean currency. Cash arid kind are always understood to mean one as ready money and the other as not merely other types of currency but as goods or commodities as distinguished from money. To accept the view expressed by the Calcutta High Court as aforesaid would only mean that money in kind has to be brought into the Country only in other forms of currency which would, in our opinion, be a contradiction in terms for the economic concept of 'in kind' as distinct from 'in cash' is understood as goods or commodities as distinct from money. To say again, the expression money referred to in the earlier part of the section would also mean cash, that is, money in cash, would be tautological in effect and suffers from redundance. No such fallacy could be attributed to the legislature. Therefore, with great respect to the learned Judges of the Calcutta High Court we cannot subscribe to their view that the expression money lent on interest and brought into india in cash or kind would only mean currency in various forms. To say so would unnecessarily scuttle down the true effect of the provision. ( 11 ) THE learned counsel relied upon adecision of this Court in CIT v Bharat Fritz Wemer Ltd. , 118 ITR 1018 as also a decision of the gujarat High Court in CIT v. Saurashtra Cement and Chemical Industries Ltd. , 101 ITR 502. But in our opinion neither of these decisions has any application to the facts of the present case for in the former this Court was not concerned with the controversy with which we are concerned presently. In that case there was no business connection and the question of borrowed money being imported into India never fell for consideration. In the Gujarat decision what was considered was only a transaction of debt and not a case of borrowing as is the case here. In that view of the matter, we find no grounds to disturb the findings recorded by the Tribunal in this case. We answer the question referred to us in the affirmative and against the assessee. --- *** --- .