The expression “money in kind” in Section 42 (1) of the Income-tax Act means that which retains its character or quality or its kind as money, namely in commercial forms recognized in the commercial world such as bills of exchange, I. O. Us, or even gold and silver bars or ingots.

( 1 ) THIS reference under Section 66 (1) of the Indian Income-tax Act raises the following questions for an answer - (1) Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the provisions of Section 42 (1) of the Indian Income-tax Act. 1922. had no application to the assessee's case in respect of the interest received on overdraft granted to the Calcutta Electric Supply Corporation Ltd. (2) Whether the computation of the amounts of taxable interest in the case of the tea company as made by the Appellate Assistant Commissioner and confirmed by the Tribunal. was in accordance with law

( 2 ) THE facts giving rise to these questions are briefly as follows:the assessment years are 1953-54 and 1954-55 for which the previous years are the calendar years 1952 and 1953 respectively. The assessee is a sterling banking company and has been assessed as a non-resident in both the years in question. During the relevant years in question. During the relevant years interests amounting to ?35. 576. 94 and ?42. 638. 23 were received by the assessee in the United Kingdom from Messrs. Calcutta Electric Supply Corporation. which is a company incorporated in England with its head office in London and was during relevant periods carrying on business of supplying electricity in the City of Cal. and certain other places in India. The Corporation maintained a current bank account with the assessee's head office in London at 26. Bishops Gate. London. E. C. 2.

( 3 ) ON the 24th May 1950 the Corporation applied to the assessee bank for grant of temporary financial accommodation to the extent of ?1 million. The reason for seeking the financial accommodation as given in the application was that according to the balance-sheet on the 31st December 1949 there was a contingent liability of ?2. 4 millions in respect of contracts for capital expenditure already placed at that date. It was stated in that application that such liability would mature progressively during the course of the next eighteen months and that the same had been incurred in connection with the building of the Corporation's new Cossipore Generating Station. On the 31st May 1950 the assessee sanctioned the overdraft facility of ?1 million in the Corporation's said current account with it. This facility was later extended by increasing the limit of the overdraft to further amounts. The Corporation having utilized the overdraft facility. its aforesaid current account remained overdrawn throughout the relevant previous years 1952 and 1953 on which the sterling interests were paid by the Corporation to the assessee in England.

( 4 ) THE assessee's case before the Income-tax Officer was that the money lent by it to the Corporation had not at all been brought into India. As such no interest accrued to the assessee on money lent and paid within the taxable territories under Section 42 (1) of the Income-tax Act. The same contention was repeated in respect of interests received from tea companies. The assessee also received interest during the said years from the two tea companies doing business in India and the assessee claimed that no portion of the interest was taxable under the Income-tax Act.

( 5 ) THE Income-tax Officer's decision is based on the fact which he held that the Corporation while carrying out capital expansion in India utilized the overdraft granted by the assessee in purchasing machinery in England and bringing the same for installation in India. He. therefore. came to the conclusion that inasmuch as the interest on the overdraft was deemed to accrue on money brought into India ?in kind?. the assessee came within Section 42 (1) of the Act. The basis of his decision was that the expression ?money in kind? in Section 42 (1) of the Income-tax Act included anything into which the money had been converted. The Income-tax Officer held that the money was brought into India in the form of electrical machinery and generators