Interest on delayed sale proceeds in a pure sale transaction was not treated as taxable income in British India.

Interest on delayed payment of sale proceeds in a completed sale was treated as an incident of the sale price, not as interest on money lent or a loan transaction. Because no debtor-creditor relationship arose and there was no agreement converting the unpaid price into a repayable loan with interest, the amount could not be said to accrue or be deemed to accrue in British India under section 4 or section 42 of the Income-tax Act, 1922. The interest was therefore not taxable in India merely because the purchasers retained the sale proceeds for a time.

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Issues: Whether interest received on delayed payment of sale proceeds from purchasers in British India accrued or was deemed to accrue to the assessee in India under section 4 or section 42 of the Income-tax Act, 1922.

Analysis: The transaction was a pure sale of cloth and not a loan or advance of money or goods to the purchasers. There was no agreement treating the unpaid sale price as a loan repayable with interest, and therefore no debtor-creditor relationship arose in the sense required for interest on money lent. The source of the interest was not the purchasers' retention or use of the money, but the money payable to the assessee at Indore, and the interest represented an incident of the sale price rather than income arising in British India.

Conclusion: The amount of Rs. 12,261 could not be treated as income accrued or deemed to have accrued to the assessee in British India under section 4 or section 42 of the Income-tax Act, 1922, and the answer was in favour of the assessee.

Final Conclusion: Interest charged on delayed remittance of sale proceeds in a completed sale transaction was not taxable in India merely because the purchasers retained the money for some time.

Ratio Decidendi: Interest on delayed payment of sale price arising from a pure sale transaction is not interest on money lent and does not accrue in the taxable territory merely because the purchaser retains the sale proceeds.

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