TMI Blog1965 (1) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... essment years, with which we are concerned, the assessee had made profits in its banking business in its branches in the three Indian States of Miraj, Sangli and Kolhapur. It had sustained losses in its Bombay business and the business in the branches in British India, and, even after the inclusion of the profits of the business in the States, the resultant figure was a loss. The assessee had income from interest and securities, and its total income was computed after setting off the loss under the head of business against its income under the head of Investments and securities , and the assessee paid a tax on the said computed income. Now, on its income from business , in the native States of Miraj, Sangli and Kolhapur, the assessee had paid the State income-tax according to the income-tax law prevailing in the States. The assessee, therefore, claimed double income-tax relief under section 49A of the Indian Income-tax Act, in respect of the income on which tax had been paid by it in the Indian States. The Income-tax Officer disallowed the claim on the ground that the State income-tax paid by the assessee was on its income from business while the Indian income-tax paid by it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal on 21st November, 1960, and the copy of the order was served on the Commissioner on 1st December, 1960. The application for reference under section 66(1) was filed by the Commissioner on 30th January, 1961. Mr. Kolah's argument is that under section 66(1), an application for reference is required to be made within 60 days of the date upon which a notice of the order of the Tribunal made under sub-section (4) of section 33 is served on the Commissioner. In the present case, the order was served on 1st December, 1960, and the period, which is within 60 days of that date, expires on 29th January, 1961. The application, therefore, which is filed by the Commissioner on 30th January, 1961, is beyond time by one day, and was not capable of being entertained by the Tribunal. Mr. Joshi, learned counsel for the department, has raised an objection to the preliminary point itself, his argument being that the question whether the application before the Tribunal was within limitation or not, or the question whether the Tribunal was right or wrong in entertaining the said application, are not questions which arise on this reference. Mr. Joshi argues that if the assessee wanted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner must be understood as including the date on which the order is served as the first day in the computation of the said period. Mr. Kolah has argued that the expression within 60 days of the date of the service of the order would be 60 days inclusive of the day on which the order is served, and will not be 60 clear days after the service of the order, and in support of his submission, he has relied on the decision in Commissioner of Income-tax v. Ekbal Co. [1945] 13 I.T.R. 154. Now, although the Limitation Act does not prescribe the period of limitation for an application under section 66(1), and the said period is provided by the special Act, viz., the Income-tax Act itself, under section 29 of the Indian Limitation Act, the provisions contained in sections 4, 9 to 18 and 22 of the Limitation Act will apply though, of course, the application will be only to the extent to which it is not expressly excluded by the special law. There is no section in the Income-tax Act, which expressly excludes the operation of section 12 of the Indian Limitation Act. Mr. Kolah has argued that the effect of section 67A is that except for the purpose of getting an exclusion of time re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e period which the court was considering was not the period prescribed by a statute and neither section 12 of the Limitation Act nor section 9 of the General Clauses Act could be considered in computing that period. Coming now to the merits of the question, it may be desirable first to reproduce the provisions of section 49A as they were at the relevant time: 49A. (1) The Central Government may, by notification in the official Gazette, make provision for the granting of relief in respect of income on which have been paid both income-tax (including super-tax) under this Act and either Dominion income-tax in one or more countries or Burma income-tax. (2) For the purposes of this section 'Dominion income-tax' means any income-tax or super-tax charged under any law in force in any Indian State or in any part of His Majesty's Dominions (including the United Kingdom) where the laws of that State or part provide for relief in respect of tax charged on income both in that State or part and in the taxable territories which appears to the Central Board of Revenue to correspond to the relief which may be granted by this section. The material rule in the Rules cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead of income as well as the numerical identity of the income. It is argued that in order that this identity with regard to the source as well as to the quantum of the income should be established, it must be shown that tax has been paid on the income from the identical source, that is, the head of income both under the Indian Income-tax Act as well as the State Income-tax Act, and in respect of the same identical amount. It is not enough, it is stated, that the State income on which the State income-tax has been paid has entered to the extent of the whole of it in the computation of the total income under the Indian Income-tax Act and it is also not enough that the total income on which Indian income-tax has been paid exceeds the amount on which the State income-tax is paid; what is further necessary to see is whether the total income on which the Indian income-tax is paid contains as a positive part of it an income which is under the same head or heads and of the same numerical identity as the income on which the State income-tax is paid. It is contended by the assessee, on the other hand, that if any part of the income of the assessee has borne tax on the computation of the tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax was paid contained no income from business. The assessee's income from business even after the inclusion of the profit from the States was a resultant loss which was set off against income from the other heads. The total income of ₹ 28,458 was made up entirely of the income from investments and securities and that too after it was reduced by being set off against the losses from business. No part of the income on which Indian income-tax was paid was capable of being identified as that part on which the State income-tax was paid and the assessee, therefore, was not entitled to the relief claimed by it. It is argued by the department that the language used in section 49A and in the relevant rule made thereunder and particularly the use of the words any part and that part in the rule involve both identity as to the source and numerical identity of the two incomes and in order to be entitled to the relief granted by the said provisions it must be shown in the first place that a part of the income on which Indian income-tax is paid comes from the same source from which the State income arises and if that condition is satisfied the relief will be obtained only in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e both under the Indian Income-tax Act and under the law in force in the State, the income referred to is the income on which tax is charged, namely, the total income. Similarly, under the relevant rule, with which we are concerned, the expression part of the income as used there would again have reference to the income which is the subject-matter of the tax, namely, the total income. In order to see, therefore, whether the assessee will be entitled to double taxation relief in respect of any income, what will have to be seen is whether the same income has gone to make up the total income, on which tax has been paid by the assessee in India and in the State. If the identity of the income on which tax has been paid in the State is capable of being established with any part of the total income on which tax is paid under the Indian Income- tax Act, the assessee, in our opinion, will be entitled to obtain double taxation relief. Now, in the present case, the assessee had paid tax on the total income of ₹ 20,512 in the States. In the computation of its income under the Indian Income-tax Act, the same identical amount has been included and the resultant total income of ₹ 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is entitled to the double taxation relief in respect of that amount. In Assam Railways Trading Co. Ltd. v. Commissioners of Inland Revenue [1934] 18 Tax Cas. 509, the appellant-company, which was incorporated and controlled in the United Kingdom, carried on the business of running a railway, working coal mines, etc., in Assam in India. The whole of its income, with the exception of a small amount arising from investments in England, arose in India, and the Indian income, after computation under the Income-tax Act, was brought to tax in India. The computation of the income under the Indian Income-tax Act was 129,365. The income was taken over to England by the assessee, and was computed for the purposes of the United Kingdom income-tax at 186,750, the difference between the two figures arising because of the fact that in the computation in India certain debenture interest was allowed as a deduction from the gross profit, and the profits from certain tea gardens were excluded from the account, while that course was not allowed in England. The assessee claimed double taxation relief in respect of the entire income of 186,750 on the ground that the whole of its income had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meaning of the section, and hence that is only on that sum that relief is claimable. Proceeding to deal with these contentions, he observed [1934] 18 Tax Cas. 509, 536, 538: The section requires that the taxpayer should prove (1) that he has paid tax in the United Kingdom for any year on a certain sum which is part of his income; in this connection, I do not think that the word 'part' is used to exclude the whole but merely to point to an ascertainable sum of income which is brought into question; (2) that he has paid tax in the Dominion 'in respect of' the same part of his income for that year: here the words 'in respect of' as contrasted with 'on' do not, I think, involve any latent distinction, since the word 'on' would be inapplicable to the 'same income' which becomes a separate taxable subject in the Dominion. The taxpayer then becomes entitled to relief. It seems clear that there must be a definite part of income brought into question, and that can only be expressed in a sum of money. As income ex vi termini must be expressed in a sum of money, the words 'the same part of his income' must involve a compariso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is taxed in the United Kingdom with what was taxed in the Dominion or as denoting a compartment of the total income of the assessee which was the same as the Dominion income on which he had paid the Dominion tax. It may be seen that there was no difficulty as to the identity of source in that case. The Dominion income in its entirety was taken into account in the computation of the total income of the assessee in the United Kingdom on which the United Kingdom tax was charged. The argument was that the use of the words part and the same part in the relevant section of the English statute required only the identity of source to be established so that when that was done the entire income from that source which had gone to make up the total income of the assessee in the United Kingdom would be entitled to double tax relief irrespective of whether the same numerically identical amount or less than that had paid the Dominion tax. That argument was negatived and it was held that identity of source having been established the assessee would be entitled to obtain double tax relief but the amount in respect of which the relief would be obtained would be that amount of his total in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the true meaning and intent of the section. The words any part of his income and that part of his income used in the rule are crucial and important words and when understood in their proper import and significance lead to the conclusion that in order to obtain double income-tax relief in respect of any part of the Indian income on which Indian income-tax is paid that part must consist of income arising under the same head and of the same numerical identity as the State income on which the State income-tax is paid for the corresponding year. Apart from the question whether the rule yields to the conclusion such as is claimed for it by Mr. Joshi, the course which he suggested, namely, to construe section 49A, in the light of the rule made thereunder is the reverse of the usual and normal course. It is the section which must control and govern the rule and the rule must be construed in the light of the section and not vice versa. Secondly, we do not think that the rule on its proper construction leads to the conclusion suggested by Mr. Joshi. Section 49A intends to give double tax relief in respect of the income on which both Indian income-tax and State tax have been paid. What i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had paid tax as computed under the Indian Income-tax Act in India. The income was taken over to England, but in the computation of the income under the English Income Tax Act, it did not survive as income, because the method of computation was on the average of last three years, and since for the previous years, the business in India had suffered loss, the average was a loss even for the corresponding assessment year in England. No part of the assessee's income in India, therefore, went into the computation of the total income in England. On the other hand, it being a loss under the rules of computation in England, it reduced the other income. The claim of the assessee for double taxation relief was negatived by the court. Pollock M.R. observed [1925] 10 Tax Cas. 59, 70: The sum on which tax was paid did not contain any Indian profits, but was reduced by deduction from it of losses in India. He also observed [1925] 10 Tax Cas. 59, 70: The basic condition is that a person has paid tax on his income over here--then, if some part of that income so charged and assessed to tax in the United Kingdom can be identified and proved to have paid Dominion tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dom income tax have the appellants paid in respect of the Indian profit of 4,120 in the year of assessment 1921, and in respect of the Indian profit of 14,543 in the year 1922. The answer is nothing, for owing to the operation of the three years' average computation the sum paid or payable in the United Kingdom for the years in question in respect of the Indian profits was nothing. The amount of relief must be quantified and can only be ascertained by computing how much of the whole of the United Kingdom income tax is to be attributed to the income in respect of which Dominion tax has been paid. It appears to us that applying the test laid down by Lord Justice Atkin to the facts of the case before us, there is no doubt that the part of the Indian income-tax paid by the assessee which corresponds to the tax on the amount of ₹ 20,512 is attributable to the income in respect of which the State income-tax has been paid. The cases referred to by Mr. Joshi, therefore, do not support the contentions which he has raised. The result, therefore, is that our answer to the question which has been referred to us is in the affirmative. The Commissioner will pay the costs of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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