Strict application of interest deduction proviso: principal assessability cannot replace the statutory requirement of an assessable agent.

Interest paid to a creditor outside British India was deductible under Section 10(2)(iii) of the Income-tax Act, 1922 only if the statutory proviso was satisfied. The court distinguished between an agent in British India being assessable under Section 43 and the mere assessability of the principal, and treated the former as the controlling condition for the exception. It further noted that where the same creditor had already been assessed on the relevant item, the proper remedy for the assessee was a departmental refund claim, because the same sum could not be assessed twice. The proviso was therefore to be applied strictly.

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Issues: Whether interest paid to a creditor outside British India was deductible under Section 10(2)(iii) of the Income-tax Act, 1922, and whether the exception for an agent assessable under Section 43 could be satisfied merely because the principal was assessable.

Analysis: The proviso to Section 10(2)(iii) allows deduction only in the specified exceptions, including where there is an agent in British India who may be assessed under Section 43. The Court held that the Legislature drew a clear distinction between the existence of an assessable agent and the mere assessability of the principal. Assessability of the principal, without the statutory condition of an agent being assessable under Section 43, was insufficient to bring the case within the exception. The Court also noted that if the creditor had in fact been assessed on the same item, the assessee's proper remedy would be to seek refund from the department, since the same sum could not be assessed twice.

Conclusion: The assessee was not entitled to the writ sought, and the applications were dismissed.

Final Conclusion: The decision confirms that the proviso to Section 10(2)(iii) must be applied strictly and that a claim to avoid double assessment lies through the departmental refund process rather than by compelling a reference on facts not satisfying the statutory exception.

Ratio Decidendi: A statutory exception to disallowance of interest paid outside British India cannot be invoked by substituting the principal's assessability for the express requirement that an agent in British India be assessable under Section 43.

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