1979 (2) TMI 79 - HC - Income Tax

Summary

Issues:
- Appealability of orders passed by the Income-tax Officer determining the ultimate tax liability of the assessee after making adjustments for the proper amount of abatement under the Double Taxation Avoidance Agreement with Pakistan.

Analysis:
The judgment pertains to a reference made by the Commissioner under s. 66(1) of the Indian I.T. Act, 1922, regarding the appealability of orders passed by the Income-tax Officer (ITO) determining the ultimate tax liability of the assessee after adjusting for abatement under the Double Taxation Avoidance Agreement with Pakistan. The assessee, a cement manufacturing company with factories in Pakistan, sought relief under the agreement for avoidance of double taxation. Initially, the ITO kept the estimated tax amounts in abeyance until the final figures were settled based on the Pakistan assessments. Subsequently, the ITO determined the quantum of abatement due to the assessee and issued notices of demand. The assessee disputed the calculations and basis of computation made by the ITO, leading to an appeal before the Appellate Assistant Commissioner (AAC).

The AAC held that the orders passed by the ITO for providing relief under the agreement did not amount to assessments and were beyond the ITO's jurisdiction, concluding that no appeal lay from such orders. However, the Income-tax Appellate Tribunal disagreed, considering the orders as appealable under s. 30 of the Act when the assessee was dissatisfied with the tax amount determined by the ITO. The Tribunal rejected the contention that the ITO's actions were beyond jurisdiction and upheld the appealability of the orders.

In the subsequent legal arguments, the Commissioner's representative relied on precedents emphasizing the importance of claiming abatement at the time of the original assessment. The Tribunal's decision was supported by the assessee, citing relevant observations from a Supreme Court case. The High Court analyzed the orders passed by the ITO and concluded that the process of assessment was not completed at the initial stage when the abatement was estimated tentatively. The final determination of relief occurred after the production of the Pakistani assessments, making the subsequent orders appealable. The High Court concurred with the Tribunal's view on the appealability of the orders based on the clear phraseology used by the ITO at the initial stage.

In conclusion, the High Court answered the reference question affirmatively in favor of the assessee, emphasizing the appealability of the orders determining the ultimate tax liability after adjustments for abatement under the Double Taxation Avoidance Agreement. The Commissioner was directed to pay the costs of the reference to the assessee.