TMI Blog1927 (5) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 4 read with Sections 6, 10 and 13 of the Act. 2. The assessee has a business of his own in Rangoon carried on by an agent and is interested with another or others in a money-lending business in Penang in which he is the chief partner. From the Rangoon business under his orders a sum of ₹ 78,768-7-3 was transferred in cash to the Penang business. In the books of the Rangoon business a sum of ₹ 12,174 is entered as interest on that money from Penang and the assessee has in respect of that interest been assessed under Section 4, Subsection 1 of the Indian Income-tax Act as income accruing, arising or received in British India. The assessee contends that interest so credited in the Rangoon books is interest earned outsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mercantile basis is that the debit entries made on account of interest due by the assessee to his creditors in foreign places are treated as payments of interest though interest has not actually been paid and such debits are allowed as an expenditure in computing the profits of the assessee's business in British India. Similarly credit entries made on account of interest due by creditors in foreign places to the assessee are treated as payments of interest though that interest has not actually been paid and admittedly in this case this basis has been adopted and no question as to whether or not interest has actually been received or has actually been paid can under this basis possibly arise. What the assessee seeks to do is, whilst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same way as all other interest is treated as interest on loans made to others. Not only that, interest chittas were actually sent to Penang in respect of this interest. The case of The Gresham Life Assurance Satiety v. Bishop (1902) AC 287 was referred to by the assessee as a case in support of his contention. But that case has no application to this case as that was a case of a foreign income whereas in this case on the facts, that is to say the mercantile basis of accountancy voluntarily adopted by the assessee, the interest is income which properly arises under Section 4, Sub-section 1 of the Indian Income-tax Act. Our answer to the first question referred to us is in the affirmative and in view of this answer the second questio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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