TMI Blog1995 (4) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... ement with Singapore Rs. 3,79,459 ------------- Gross tax payable Rs. 51,21,811 ------------- Now, under Rule 2 of the said Schedule the amount of income-tax payable by the company in respect of its total income under the provisions of the Income-tax Act is to be deducted from the total income as determined under the Income-tax Act. Accordingly the Assessing Officer gave a reduction in the said sum of Rs. 51,21,811. 5. In the appeal filed by it before the Commissioner (Appeals), the assessee filed additional ground contending that the method of computation adopted by the Assessing Officer was not in accordance with law. According to the assessee, under the Double Taxation Agreement it is entitled to relief in relation to surtax also. The Commissioner (Appeals) rejected this contention of the assessee on the ground that " this point does not emerge from the assessment order; nor was raised before the Assessing Officer ". 6. Before us, Shri Vijayaraghavan, the learned counsel for the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50% 55,01,270 55,01,270 Less : DTA relief 3,79,459 - --------------------------------------- 51,21,811 55,01,270 III. Computation of chargeable profits (Sch. I of CPST Act) Total income as per Income Tax Assessment. 1,10,02,540 1,10,02,540 Less : Donation 2,50,000 2,50,000 Profit u/s 41(2) 27,886 27,886 --------------------------------------- 1,07,24,654 1,07,24,654 Less : Taxes 51,21,811 55,01,270 --------------------------------------- 56,02,843 52,23,384 IV. Less : Statutory deduction 19,86,797 19,86,797 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Double Taxation Avoidance Agreement in question. 10. Before examining the validity of the method of calculation adopted by the assessee, we may notice the statutory genesis of and the plane on which Double Taxation Agreements operate and their effect on the assessment under Indian-tax Laws. 11. First, we have provisions such as those contained in section 90 of the Income-tax Act, 1961, section 24A of the C.P.S.T. Act, 1964, section 44A of the Wealth-tax Act, 1957 and section 44 of the Gift-tax Act, 1958. These are enabling provisions and the various Double Taxation Agreements (to use a generic term) concluded by the Government of India and the Governments of other countries owe their origin to one or the other of the said sections. 12. Secondly, for determining the tax payable by an assessee under the Indian Tax Laws, one has to look only to those laws. In other words, the tax payable under the Indian Tax Laws must be determined in the ordinary way applying the provisions of the Indian laws. This is the first stage. In the second stage, the Double Taxation Agreements come into play. It is at this stage that the contents of the Agreements must be looked into with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (ii) the surtax imposed under the Companies (Profits) Surtax Act, 1964 both of which are called "Indian tax". In the case of Singapore, the Agreement applies to income-tax levied there, which is referred to as "Singapore tax". We then have Article 24 which occurs under Chapter IV --- " Method for Elimination of Double Taxation". Paragraph (1) of the said Article stipulates that the laws in force in either of the Contracting States will continue to govern the taxation of income in the respective Contracting States except where provisions to the contrary are made in this Agreement. Where income is subject to tax in both Contracting States, relief from double taxation shall be given in accordance with paragraphs (2) and (3) of the said Article. Sub-paragraph (a) of paragraph (2) of Article 24 is relevant here and reads as follows : " (2)(a) The amount of Singapore tax payable, under the laws of Singapore, and in accordance with the provisions of this Agreement, whether directly or by deduction, by a resident of India, in respect of income from sources within Singapore which has been subjected to tax both in India and Singapore, shall be allowed as a credit against the Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,270 --------- --------- (iv) Chargeable profits 52,23,384 The surtax payable by the assessee would work out to Rs. 11,95,295 as detailed below : Rs. Chargeable profits : 52,23,384 Less : Statutory deduction 19,86,797 --------- Base for surtax 32,36,587 Surtax payable 11,95,295 --------- Now the Assessing Officer had computed chargeable profits of the assessee at Rs. 36,16,046 and has on that basis computed the surtax payable by the assessee at Rs. 13,47,079. In the process, as rightly contended by the learned counsel for the assessee, the Assessing Officer totally omitted to apply the provisions of Rule 2(ii) of the First Schedule of the C.P.S.T. Act. 18. The next issue relates to the quantum of DTA relief admissible to the assessee in the surtax proceedings. We have already reproduced on page 5 supra the calculations given by the assessee. It will be seen therefrom that according to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 295 Total "Indian tax" 66,96,565 Less : DTA relief 3,79,459 --------- Net tax payable 63,17,106 --------- Calculation No. II Income-tax net of DTA relief 51,21,811 Surtax 11,95,295 --------- Tax payable by the assessee net of DTA relief 63,17,106 --------- 20. It will be seen from the foregoing that the only distortion that had crept into the picture owes its origin to the failure on the part of the Assessing Officer to apply the provisions of Rule 2(ii) of the First Schedule of the C.P.S.T. Act. Once that distortion is rectified, the DTA relief available to the assessee under the Agreement in question is not in any way reduced. 21. In view of the foregoing, therefore, we hold first that the chargeable profits of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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