TMI Blog1975 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly to the assessee-company and it insisted that it can lend the money only to Atlanta. So Atlanta proposed to the assessee that it would take up the loan from its Swiss friends and in turn grant a loan to the assessee on the same terms and conditions agreed to by the Lada. This was agreed to by the assessee and the transaction was gone through. The loan amount was received in two instalments and was repayable also by instalments. Initially the appellant used to make payments towards interest and return of capital through the Chartered Bank Ltd., Cochin, to Atlanta, New or , directly. However, in November, 1963, Atlanta wrote to the assessee thus : " Our Swiss friends are complaining that funds paid by you on your obligation to them, take three weeks before they receive the funds in Switzerland, and a substantial part of the delay is caused by the banks remitting the money to New York, where it is considerably delayed before being forwarded to Switzerland. Could you please talk to your banks and see if arrangements can be made that when you pay them the funds should immediately be remitted directly from India to Switzerland preferably by banker's draft ? " The assessee-compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer had, treating the assessee as an agent of Atlanta, made a nil assessment. After the nil assessment, the Income-tax Officer passed a subsequent order under section 163 of the Act treating the assessee as an agent of Lada. There is only one difference for the assessment year 1969-70. There was no prior order under section 163 of the Act treating the assessee as an agent of Atlanta. These orders which are appealable under section 246 of the Act were challenged before the Appellate Assistant Commissioner. He took the view that there is no evidence on record to show that when Lada advanced the loan to Atlanta it knew that it was to be utilised for remittances to India by way of accommodating the appellant financially and that there is nothing on the evidence to show that any payment was made by the assessee directly or indirectly to Lada. Hence, the orders of the Income-tax Officer were set aside by the Appellate Assistant Commissioner. The matter was taken up in second appeal before the Tribunal. The Tribunal was of the view that the requirements of section 163(1)(d) have been satisfied to treat the assessee as an agent of the non-resident, Lada. The Tribunal was also, of the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncompass the correctness of our finding on the factual aspect also. To enable the High Court to examine the correctness of the finding of fact, necessary documents produced before the Tribunal are hereto annexed, marked annexures ' A-5 ', ' A-6 ', ' A-7 ' ' A-8 ', and form part of the statement of the case." It is better to consider the factual aspect first. That relates to the correctness of the finding that Lada was in receipt of income from or through the assessee directly or indirectly. That the assessee borrowed money from the non-resident and interest accrued and was paid to a non-resident are admitted. Therefore, income is deemed to accrue or arise in India for the purposes of income-tax as stated in section 9(1), clause (i) of the Act. The said clause is in the following terms: " 9. (1) Income deemed to accrue or arise in India.--The following incomes 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 br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s friends, Lada, paying interest at 9% per annum ", and found that connection is established. We feel that the Tribunal is correct in their conclusion. The letter of Atlanta Trading Corporation dated 13th November, 1963, quoted earlier clearly shows that the assessee and Atlanta were agreed that it is the obligation of the assessee to repay the loan advanced by the Lada Trading Corporation and that no difficulty should be caused to the latter in collecting the interest. There are enough materials in this case to show that Lada knew about the ultimate destination of this loan of 1,10,000 U.S. dollars to the assessee and the assesee's undertaking. They knew that their lending of money at interest and bringing of the money to India are integral parts of one composite transaction. If not, why should they complain about the assessee's banks remitting the money to New York where it was considerably delayed before being forwarded to Switzerland ? Why should the assessee take steps to send the remittances direct to Switzerland ? It is not necessary that there should be a direct acknowledgment from Lada of the receipt of the payment of interest. Section 163(1)(c) requires only that the non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the relevant assessment year but it is not clear who has received that income and, prima facie, it appears that the income may have been received either by A or B or by both together, it would be open to the relevant income-tax authorities to determine the said question by taking appropriate proceedings both against A and B..." This is quite sensible because the revenue has to be protected against bar of limitation. If the income-tax authorities are precluded from making a protective or an alternative assessment, then by the time the disputes are over the real assessment would be barred. But while a protective assessment is permissible, a protective recovery is not allowed. It is one thing to say that the authorities are merely making, in assessment and leaving it as a paper assessment until the matter is decided one way or the other and another thing to say that at one and the same time they could not only make two assessments in respect of one set of dues but proceed to realise both. This is the view held in Jagannath Hanumanbux v. Incone-tax Officer. This being the position the authorities could have made alternative assessments in respect of this income on Atlanta Tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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