TMI Blog1982 (6) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... whole and that in the instant case the assessee having challenged the assessment order as whole, was entitled in law to challenge the levy of interest on the ground of the same being bad in law ? " The facts relevant for an appreciation of the controversy raised in the reference and the relevant background are as follows : The assessment year with which we are concerned is the assessment year 1963-64. The assessee was a resident of Daman, which was earlier a Portugese territory, and was dealing in foreign goods. In the assessment proceedings, the ITO held that in the books of account of the assessee, the sales to Daman merchants amounted to Rs. 5,12,042 and the sales to Bombay merchants amounted to Rs. 3,39,020. There were other sales amounting to Rs. 6,90,533, for which no details were given and it was held by the ITO that they were also effected in Bombay. The ITO applied the proviso to s. 145 of the said Act and proceeded to work out the gross profit. It is not necessary to set out how that gross profit was worked out. It is sufficient to point out that in respect of the sales of Rs. 3,32,798, the gross profit disclosed by the assessee, ranging between 41% to 61% was acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said Act with effect from 1 st April, 1963, whereby, inter alia, " India " was deemed to include the Union territory of Daman in respect of any period for the purpose of s. 6 of the said Act and in respect of any period included in the previous year for the purposes of making any assessment for the assessment year commencing on 1st April, 1963, or for any subsequent year. A combined reading of s. 2(25A) and ss. 5 and 6 of the said Act would show that from the assessment year 1963-64, all persons ordinarily resident in Daman became liable to tax as residents under the said Act for the said assessment year and subsequent years in respect of the income earned in India, including the Union territory of Daman, in the previous year relevant to the assessment year 1963-64 and subsequent years as any other resident in India. As, before the liberation, the local taxes levied and collected by the Portuguese Govt. were at lower rates, and as a result of the extension of the said Act to Daman a higher liability to pay tax under the said Act arose on the income of the previous year, certain hardships and double taxation resulted. In order to remove these hardships or alleviate the same, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Goa, Daman and Diu immediately before the 1st day of April, 1963. " Clause (e) of the said sub-paragraph runs thus: " ' Local rate of tax ' means the rate determined by dividing the amount of income-tax and super-tax payable on the total income (including agricultural income) under the local law according to the rates of tax in force in Dadra and Nagar Haveli or Goa, Daman and Diu, as the case may be, immediately before the 1st day of April, 1963, by the amount of such total income. " Clause (f) runs thus: " 'Indian rate of tax means the rate determined by dividing the amount of income-tax and super-tax payable in India, on the total income in respect of the relevant previous year under the provisions of the Income-tax Act, 1961, by the amount of such total income." Under cl. (g) of the said sub-paragraph, Daman is included in the definition of " Union Territories ". Sub-clause (ii) of sub-para. (1) of para. 3 of the said Taxation Concessions Order, 1964, read with the opening portion of sub-para. (1) read thus : "Subject to the provisions of sub-paragraph (2)-... (ii) the provisions of paragraphs 5 and 6 of this Order shall apply in the case of every assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63, the assessee became a resident of India and under s. 5 of the said Act he was liable to the charge of income-tax on all his income from whatever sources derived, including the income which accrued or arose to him outside India during such period. It was submitted by him that the concession granted under sub-para. (1) of para. 5 of the Taxation Concessions Order, 1964, only shows that the assessee was not liable to pay any actual tax on the income, which accrued to him or which was earned by him in Daman in the previous year ending on 31st December, 1962, but the said income was liable to be included in the total income of the assessee for the purpose of determination of rate of tax payable by him. It was submitted by him that the said income earned by the assessee in Daman should be included in the total income of the assessee and thereafter tax should be calculated as provided in s. 110 of the said Act which deals with the determination of tax where total income includes income on which no tax is paid. In support of this contention, he strongly relied on the provisions of cl. (ii) of sub-para. (1) of para. 3 of the Taxation Concessions Order, 1964. We have set out earlier the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are unable to accept the submission of Mr. Joshi. The question set out earlier can be looked at even from a different angle and yet the result would be the same. On a plain reading of sub para. (1) of para. 5 of the said Taxation Concessions Order, 1964, it is clear that what has been granted thereunder is in the nature of an exemption and it exempts the income of the assessee of the previous year ending on 31st December, 1962, which was chargeable to tax under the local law and assessed under the local law from being assessed under the said Act, viz., the I.T. Act, 1961. As held by a Division Bench of this court in CIT v. N. M. Raiji [1949] 17 ITR 180, the sums which are exempted from the payment of tax under the various provisions of the Indian I.T. Act of 1922, and are not included in the total income of an assessee by s. 16 of that Act should be excluded in computing the total income of the assessee for ascertaining the rate of tax. It is beyond dispute that this principle, which was laid down in connection with the Indian I.T. Act, 1922, would also apply to the said Act. This decision also supports the contention of Mr. Mehta, which we have set out above. In view of the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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