1981 (6) TMI 93 - AT - Income Tax

Summary

Issues:
- Dispute over allowance of double taxation relief under sections 90 & 91 of the IT Act for Ceylon and Singapore income.
- Whether foreign income should be computed before or after deduction of extra allowance under section 35-B of the Act for double income relief.

Analysis:
The appeals involved cross appeals by the assessee and the Revenue against the CIT (Appeals) order regarding double taxation relief under sections 90 & 91 of the IT Act for Ceylon and Singapore income. The dispute arose from the rejection of the assessee's claim by the ITO due to the exclusion of foreign income post deduction under section 35-B. The CIT (Appeals) held that the weighted deduction under section 35-B should be allocated proportionately between Indian and foreign business income, leading to a direction to modify the order for suitable relief. Both parties appealed to the Tribunal, which considered the contentions in light of a previous decision involving Indian Overseas Bank. The core issue revolved around computing foreign income for double income relief concerning the deduction under section 35-B.

The Tribunal's analysis focused on the purpose of section 35-B to encourage foreign exchange earnings and the nature of the extra allowance granted. It emphasized that the additional allowance under section 35-B is for the business as a whole, not specifically against foreign business income. The Tribunal clarified that for double income relief, the income should be understood in a commercial or business sense, irrespective of fiscal policies in different countries. The decision highlighted that deductions or allowances not typically deducted in arriving at commercial profit should be excluded. Referring to precedents, the Tribunal upheld the assessee's claim for relief on foreign income before the deduction of the extra allowance under section 35-B.

Ultimately, the Tribunal agreed with the 'B' Bench's reasoning and conclusion, affirming the assessee's entitlement to double income-tax relief on foreign income computed before the deduction of the extra allowance under section 35-B. Consequently, the assessee's appeals were allowed, and the Revenue's appeals were dismissed.