TMI Blog1974 (9) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... k Company) of Genoa, Italy. The agreement provided for various matters including the payment of price for the entire plant and equipment aggregating to Rs. 7,53,345. Under the terms of the agreement plant and machinery were to be delivered by Messrs. Ansaldo at one of the European ports. 35 per cent. of the price was to be paid on the date of the agreement; 15 per cent. on supply of certain machinery and the remaining 50 per cent. of the price was to be paid in five annual instalments of 10 per cent. each. 30 per cent. of the price was to be paid by the assessee against three bills of exchange to be drawn by the non-resident company on the assessee and to be accepted by the assessee. The assessee was to pay six per cent. interest on the three bills of exchange on the expiry of six months from the date of issue of the above bills till their maturity and the interest was to be paid by means of other bills accepted at the same time and falling due at same maturities as the corresponding main bills of exchange. The assessee was to be entitled to pay the bills of exchange even before their maturity but if that was done, the payment of the interest was to be waived by the non. resident c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract were most densely grouped and with which factually the contract was most closely connected. Applying this test the Tribunal found that according to the terms of the contract payments were made in foreign country ; the non-resident company was not an usual supplier of plant and equipment I it had no sales office or any representative in India; and that being a non-resident company it agreed to sell the goods on payment in foreign currency. It was not a case of the non-resident company coming into India to erect the plant and the delivery was also effected f.o.b. European port. The non-resident company was nowhere near the territories of India in relation to the supply of plant and equipment except for the purpose of signing the agreement and no representative of the non-resident company was posted in India; the bills were drawn by the non-resident company in a foreign territory and were sent to the assessee for being accepted; and that the assessee having accepted the bills paid the moneys in foreign currency again. On facts, the Tribunal held that most of the elements in the contract were closely connected with the country in which the non-resident company was functioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is a chose-in-action and is heritable and assignable and it is treated as property under the Transfer of Property Act which calls it an " actionable claim ". Choses-in-action arising out of contract have two aspects : (1) as property, and (2) as involving a contractual obligation for performance. The property aspect is relevant for purposes of assignment, administration, taxation and the like; the contractual aspect for performance. It further held that debt, being intangible, cannot have location except notionally and in order to give it notional position rules have to be framed along arbitrary lines. Determination of the legal liabilities which arise out of the facts relating to a debt raises complex questions of private international law. Two distinct lines of thought emerge. One is that applied by the English courts, namely, the lex situs : the other is the one favoured by Cheshire in his book on Private Inter. national Low, namely, the " proper law of the contract ". Bose J., deliver. ing the judgment of the Supreme Court, has pointed out that the English approach is to treat the debt as property and determine its " situs " and then, in general, to apply the law that obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned, all that the company did was to send a representative when the contract was signed in India. Barring that action, so far as the performance of the contract was concerned, the non-resident company nowhere came near the shores of India or territories of India. It puts the goods on board the ship concerned at a port in Europe. It received all the price in Europe and that too in terms of foreign currency. The plant was not to be erected or put up by the non-resident company but the assessee-company was to set up the plant in India. Even the instalments were to be paid in foreign currency. So far as the unpaid price was concerned, the amount was to be paid by bills of exchange drawn in a foreign country and accepted by the assessee-company in India. Thus, most of the elements of this contract are found to be most densely grouped with the country, namely, Italy, where the non-resident company, Messrs. Ansaldo, is carrying on its business of supplying plant and machinery and hence the debt which the assessee-company owed to the non-resident company was not an asset held by the non-resident company in India. Therefore, the interest which was payable in respect of this debt was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dias. Out of that consideration Rs. 29,99,000 were paid by the assessee-company and the balance remained unpaid. For agreeing to deferred payment of a part of the consideration, the Scindias were to be paid interest. An agreement to pay the balance of consideration due by the purchaser does not in truth give rise to a loan. A loan of money undoubtedly results in a debt, but every debt does not involve a loan. Liability to pay a debt may arise from diverse sources, and a loan is only one of such sources. Every creditor who is entitled to receive a debt cannot be regarded as a lender. In view of this clear-cut pronouncement of the Supreme Court, it is obvious that the amount of the unpaid price cannot be said to be a loan advanced by the non-resident company to the assessee-company nor can the non-resident company be said to be a lender to the assessee-company so far as that amount was concerned. Since the non-resident company cannot be said to have lent the amount of the unpaid purchase price to the assessee-company either in cash or in kind, there is no question of the interest payable by the assessee-company to the non-resident company being deemed to be " income " accruing or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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