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Issues Involved:
1. Whether the claim for double taxation relief was properly made within the meaning of section 49A of the Income-tax Act, read with the Income-tax (Double Taxation Relief) (United Kingdom) Rules, 1948. 2. Whether the claim for double taxation relief was made within the period prescribed under the Indian Income-tax Act and the Rules. Issue-wise Detailed Analysis: Issue 1: Proper Claim for Double Taxation Relief The first issue revolves around the interpretation of section 49A of the Income-tax Act and whether the claim for double taxation relief was properly made. The relevant facts are that the assessee, a non-resident sterling company, had income from dividends in India and outside India. The assessments for the years 1940-41 to 1943-44 initially did not include income accruing outside India due to the then-prevailing decision in Raleigh Investment Co. Ltd. v. Governor-General in Council [1943] 11 I.T.R. 393. This decision was later reversed by the Federal Court, and the Privy Council dismissed the suit on technical grounds. During the pendency of the Raleigh Investments case, the assessee filed provisional claims for double taxation relief on 24th December 1943 and 25th January 1944. These claims were accepted as provisional by the income-tax department. However, when notices under section 34 were issued for escaped income, the assessee's claim for double taxation relief was refused on the grounds that no regular claim was submitted within the prescribed period, and the provisional claims did not include the dividends on which relief was now claimed. The Tribunal held that the rules requiring claims to be made in a prescribed form within a specific period were directory and not mandatory. They observed that the provisional claims should cover future claims related to escaped assessments. The Tribunal's decision was influenced by the practical difficulties faced by the assessee due to the delayed finalization of assessments. The court concluded that section 49A, as it stood before 15th August 1947, did not apply to the United Kingdom tax, and hence, the first question was answered in the negative. Issue 2: Period Prescribed for Making the Claim The second issue addresses whether the claim for double taxation relief was made within the prescribed period. Section 49 of the Income-tax Act (prior to its amendment in 1948) provided relief for United Kingdom income tax. Section 50 stipulated a four-year limitation period for making claims for refunds. The assessee's formal claims dated 24th December 1943 and 25th January 1944 were within this period, but they did not satisfy all the conditions of section 49 at that time. The court noted that a practice of accepting provisional claims had developed due to delays in settling assessments and claims in the United Kingdom. This practice was recognized in the Income-tax Manual and allowed claims to be treated as timely if the assessee undertook to produce proof of relief obtained in the UK. The court held that this practice was not ultra vires and was consistent with the statute's requirements. The court also addressed the argument that the claims made in 1943 and 1944 could not cover escaped income assessed later under section 34. It concluded that the original and escaped income assessments are essentially the same for the purpose of claiming refunds. The letters of 24th December 1943 and 25th January 1944, therefore, covered claims for both original and escaped assessments. The court held that the claims were made within the prescribed period and answered the second question in the affirmative. The Commissioner of Income-tax was directed to pay the costs of the reference to the assessee. Conclusion: The court concluded that the claim for double taxation relief was not properly made under section 49A as it did not apply to the United Kingdom tax at the relevant time. However, the claim was made within the prescribed period under the Indian Income-tax Act and the Rules, and the practice of accepting provisional claims was upheld. The reference was answered accordingly, with costs awarded to the assessee.
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