9911796707
TMI Blog1973 (3) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessments for and from assessment years 1952-53 to 1958-59. In reply to a notice, the assessee put forward a claim for relief under the terms of the Agreement for Avoidance of Double Taxation between India and Ceylon, hereinafter referred to as the Ceylon Agreement. The Income-tax Officer finally determined the amount of abatement due to the assessee under the Ceylon Agreement for all the seven years under consideration, rejecting certain contentions of the assessee relating to the manner in which the abatement should be determined under article III of the Ceylon Agreement. In order to understand the contentions of the assessee, we feel it would be better to take the year 1955-56 as an illustrative case and consider the same. The assessment order for that year is as follows: Assessment made in made in India Ceylon ------------------ ------------------ Rs. Rs. 1. Income assessed 70,408 68,942 2. Less : Earned income relief ... ... 3. Total taxable income 70,408 68,942 4. Net tax payable 31,696 20,365 5. Add: Tax deducted at source temporary tax ... ... 6. Total 31,696 20,365 7. Rate of tax ... ... 8. Percentage of profits taxable in either country 100% Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under its own laws; and where either country under the operation of its laws charges any income from the sources or categories of transactions specified in column I of the Schedule to this Agreement (hereinafter referred to as the Schedule) in excess of the amount calculated according to the percentages specified in columns II and III thereof, that country shall allow an abatement equal to the lower of the amounts of tax attributable to such excess in either country.... SCHEDULE -------------------------------------------------------------------------------------------------------------------------------------------------- Source of income or nature Percentage of income which of transaction from which each country is entitled to Remarks income is derived charge under the Agreement ------------------------------------------------------------------------------------------------------------------------------------------------- I II III IV -------------------------------------------------------------------------------------------------------------------------------------------------- 8 Any income derived 100% by the from a source or category country in of transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om grocery business carried on by him in Ceylon. The income for the year 1959-50 was determined in both countries at Rs. 39,423 and for the next year at Rs. 39,047. The Ceylon authorities who assessed the petitioner, under the provisions of the Ceylon Income-tax Ordinance, certified the income-tax payable for the first year to be Rs. 5,919 and for the second year to be Rs. 5,249. This was arrived at after deducting reliefs permissible under section 45(2) of the Ceylon Income-tax Ordinance from the gross taxes of Rs. 9,889 and Rs. 9,718. Identical incomes for the two years which accrued to the petitioner in Ceylon were assessed to tax under the Indian Income-tax Act and for the first year the tax payable was Rs. 10,282 and for the second year, Rs. 9,521. The petitioner was allowed abatement in respect of the two years equivalent to the tax of Rs. 5,919 and Rs. 5,249, respectively, certified by the Ceylon authorities overruling the claim of the petitioner for abatement equivalent to the gross income-tax assessment in Ceylon for each of the years. The argument of the petitioner was that the amount of tax attributable to the excess assessed in either country within the meaning of artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be taxed in India at all in respect of the income accruing in Ceylon. This contention was overruled by the Supreme Court in the following words : " The first portion of article III says that each country shall make an assessment in the ordinary way under its own laws. This means, to begin with, both India and Ceylon were required to assess the assessee in accordance with the law prevailing in each of these countries. Thus for it is plain." The second contention of the assessee was that while determining the tax payable by him in India the department should have deducted the entire tax that he would have had to pay had he paid tax as a non-resident. This contention was also rejected by the Supreme Court. The Supreme Court observed: " The language employed in this part of the article is quite confusing. That part of the article has to be read with the Schedule. On a proper reading of that provision along with the Schedule which means, in the present case, item 8 of the Schedule, it appears to us that what it says is: From out of the amount ascertained under the first part of the article deduct the tax payable by the assessee in the other country in respect of the whole or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned counsel for the assessee strongly relied on the decision of the Supreme Court in Commissioner of Income-tax v. Bengal River Service Co. Ltd in support of his contention that the entire income accruing in Ceylon is not liable to be taxed in India. He pointed out that the question for consideration as posed by the Supreme Court in that judgment was : " Whether the receipt of Rs. 3,43,138 can be brought to tax in this country ", and the answer was in the negative. The submission of the assessee is based on a reading of the observations of the Supreme Court out of the context and without reference to the facts and contentions of the parties. The appeal was filed against the decision of the Calcutta High Court in Commissioner of Income-tax v. Bengal River Service Co. Ltd. The facts are fully stated in that judgment and they are as follows: The assessee was carrying on business of plying river boats. At a period of time when there had been no partition of India, certain vessels belonging to the assessee were requisitioned by the then Government of India on charter basis. During the assessment year 1947-48 corresponding to the calendar year 1946 which was the accounting year of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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