1961 (9) TMI 77 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to deductions of allowances under section 9 for income from Bombay properties.
2. Deduction of tax paid to the Uganda Government from the assessee's world income.
3. Exemption from tax for life insurance premiums under section 15(1).

Detailed Analysis:

1. Entitlement to Deductions of Allowances under Section 9:
The assessee claimed deductions permissible under section 9 of the Income-tax Act for his Bombay properties, which were not allowed in the initial assessment made against his statutory agent, Jeevansingh Grewal. The revenue resisted this claim, arguing that the initial assessment had become final and could not be reopened under section 34. The Tribunal upheld the revenue's stance, citing the finality of the initial assessment.

In the judgment, it was clarified that the first assessment was indeed final and binding on the assessee, even though it was made against his statutory agent. The court emphasized that the scope of reassessment under section 34 is limited to income that has escaped assessment and does not extend to reopening final assessments. The court cited several precedents supporting this principle, including *Commissioner of Income-tax v. A.D. Shroff* and *Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax (No. 4)*.

2. Deduction of Tax Paid to the Uganda Government:
The assessee contended that the tax paid to the Uganda Government on his foreign income should be deducted when computing his total world income. The Tribunal rejected this contention, stating that there is no commercial practice or principle that allows for such a deduction in determining one's income for taxation purposes.

The court agreed with the Tribunal, noting that no legal provision or commercial principle supports the deduction of foreign taxes paid from the total world income for Indian tax purposes. The court's decision was consistent with the Tribunal's reasoning and the lack of any supporting legal framework for the assessee's claim.

3. Exemption from Tax for Life Insurance Premiums under Section 15(1):
The assessee argued that he should be entitled to exemption under section 15(1) for life insurance premiums paid, even though the premiums were paid out of his foreign income. The Tribunal accepted this contention, interpreting section 15(1) as not requiring the premiums to be paid out of the total income.

However, the court disagreed with the Tribunal's interpretation. It held that the sums exempted under section 15(1) must bear the quality of being included in the total income of the assessee. The court cited *Commissioner of Income-tax v. Samnugger Jute Factory Co. Ltd.*, which established that exemptions apply to sums that would otherwise be taxable. The court concluded that since the foreign income of a non-resident does not enter the total income unless the assessee opts to include it, the life insurance premiums paid out of such income do not qualify for exemption under section 15(1).

Conclusion:
The court answered all three questions in the negative, ruling against the assessee on all counts. The assessee was not entitled to recomputation of income from Bombay properties, could not deduct taxes paid to the Uganda Government from his world income, and was not eligible for exemption under section 15(1) for life insurance premiums paid out of foreign income. The assessee was also ordered to pay the costs of the revenue for both references.