1980 (9) TMI 31 - HC - Income Tax

Summary

Issues Involved:
1. Recovery of tax on Pakistan income
2. Applicability of the Agreement for Avoidance of Double Taxation between India and Pakistan
3. Validity of the writ petition due to delay
4. Jurisdiction and assessment under the Indian Income-tax Act, 1922
5. Reliefs sought by the petitioner

Detailed Analysis:

1. Recovery of Tax on Pakistan Income:
The firm, M/s. Bansi Dhar Kapur and Sons, was assessed for the years 1947-48 and 1948-49, and the ITO included income from branches in what later became Pakistan. The firm contended that Rs. 74,899-6-0 was wrongly collected as tax on Pakistan income and sought a refund, arguing that the tax should have been held in abeyance as per the Agreement for Avoidance of Double Taxation between India and Pakistan. However, the court found that the tax collection was not illegal, as the firm had not demonstrated that any tax was paid in Pakistan.

2. Applicability of the Agreement for Avoidance of Double Taxation between India and Pakistan:
The court examined the agreement and concluded that it was intended to prevent double taxation in cases where income was taxed in both India and Pakistan. However, the income in question was earned before the formation of Pakistan, and the firm was assessed in Amritsar, British India. The court noted that the firm had not been doubly taxed, as there was no evidence of any tax assessment in Pakistan. The agreement did not apply because the income was not subject to double taxation.

3. Validity of the Writ Petition Due to Delay:
The court held that the writ petition, filed in December 1960, was "hopelessly belated" as the tax was collected in May 1950. The petitioner provided no explanation for the delay, and the court emphasized that alternative remedies, such as filing a suit, were available and should have been pursued within the statutory period. The delay alone was sufficient to dismiss the petition.

4. Jurisdiction and Assessment under the Indian Income-tax Act, 1922:
The court clarified that under the Indian Income-tax Act, 1922, the firm was to be assessed at its principal place of business, which was Amritsar. The assessment included income from all branches, including those in territories that later became Pakistan. The court found that the income for the relevant periods was earned while these territories were still part of British India, and thus, the firm was correctly assessed in Amritsar. The court also noted that the Agreement for Avoidance of Double Taxation did not apply as the income was not subject to tax in Pakistan.

5. Reliefs Sought by the Petitioner:
The petitioner sought a writ to quash the tax recovery and refund the amount collected. The court, however, found no merit in these claims. The firm had not demonstrated any double taxation or the possibility thereof, and the tax collection was deemed legal. Furthermore, the court noted that the firm itself had no grievance as it was a registered firm and not liable to pay tax directly; the grievance, if any, would be of the individual partners in their personal assessments.

Conclusion:
The appeal was dismissed with costs. The court upheld the single judge's decision, emphasizing the lack of double taxation, the correctness of the tax assessment under the Indian Income-tax Act, 1922, and the inordinate delay in filing the writ petition. The firm had no standing to seek relief as the grievance pertained to the individual partners, not the firm itself.