TMI Blog1949 (9) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... andar State Bank and it is assessed to income-tax under the provisions of the Government Trading Taxation Act, 1926. In the year of account, which is the 1st of November, 1940, to the 31st of October, 1941, the gross income of the Bank was ₹ 92,064 and it received in British India interest on securities amounting to ₹ 42,456 and dividends on shares amounting to ₹ 15,334, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the question that we have to consider is whether the interest that was paid by the assessee to its depositors in Porbandar was an interest which was liable to tax under the Income-tax Act. What was relied upon by the Tribunal which came to the conclusion that the Bank was not entitled to this deduction was Section 42 of the Act. Section 42 deals with notional income and one type of notional inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receives on the borrowed money. This is put on the principle that there must be some nexus between the taxing State and the assessee who is a foreigner, and the nexus which the Federal Court has suggested is that a knowledge must be attributed to the lender that the borrower has borrowed money for the purpose of taking it to British India and earning income on that money. That is the view taken b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 10(2)(iii) it must be found that the persons who deposited moneys with the assessee and earned interest on the deposits knew as a part of the integral transaction of the deposit that the Porbandar Bank would take this money to British India and utilise that money for the purpose of earning income on it. Now, on the facts of this case, it would be absurd to suggest that the several ..... X X X X Extracts X X X X X X X X Extracts X X X X
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