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1. Interpretation of double taxation relief under the Income-tax (Double Taxation Relief) (United Kingdom) Rules, 1948. Detailed Analysis: The judgment delivered by the High Court of Bombay pertains to a reference under section 66(1) of the Indian Income Tax Act, 1922, initiated by the Commissioner of Income-tax concerning the assessment year 1948-49. The primary issue revolves around determining the applicability of double taxation relief under the Income-tax (Double Taxation Relief) (United Kingdom) Rules, 1948, on either Rs. 15,93,557 or Rs. 18,06,813. The case involves an assessee, a UK-based company, deriving income from business activities in India, Pakistan, and the UK during the relevant period. The total Indian income assessed in the UK was Rs. 18,06,813, including an amount also assessed in Pakistan. The Income Tax Officer (ITO) initially allowed relief on the Indian income reduced by the amount assessed in Pakistan, leading to a lower relief amount. However, the Appellate Assistant Commissioner (AAC) and the Income-tax Appellate Tribunal supported the assessee's claim for relief based on the entire Indian income assessed in the UK, resulting in a higher relief amount. The judgment delves into the legal framework governing double taxation relief, citing Section 49A of the Income Tax Act, 1922, which empowers the Central Government to enter agreements for relief from double taxation. The Double Taxation Relief Rules, 1948, were framed under this provision. Notably, an agreement between India and Pakistan in 1947 provided relief for income assessed to double taxation in both countries. Rule 3 of the Double Taxation Relief Rules, crucial to the case, outlines the conditions for claiming relief based on taxes paid in India and the UK on the same income. The crux of the legal debate lies in the interpretation of Rule 3 and the phrase "any part of his income." The Revenue contended that the assessee, having received tax abatement on a portion of the income assessed in both India and Pakistan, should not be entitled to further relief under the Rules. Conversely, the assessee's counsel argued that the language of Rule 3 entitles the assessee to relief on the entire income assessed in both jurisdictions. The Court agreed with the assessee's interpretation, emphasizing that the Indian income assessed in the UK constitutes a part of the assessee's income subject to double taxation, warranting relief regardless of previous abatements. Consequently, the Court upheld the Tribunal's decision to calculate relief based on the higher income of Rs. 18,06,813, ruling in favor of the assessee. In conclusion, the Court determined that the double taxation relief under the Income-tax (Double Taxation Relief) (United Kingdom) Rules, 1948, should be calculated based on the amount of Rs. 18,06,813. The judgment favored the assessee, with the Commissioner directed to bear the costs of the reference.
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