1971 (8) TMI 24 - SC - Income Tax

Appellant is a resident in India but he is carrying on business in Ceylon - appellant cannot claim abatement of tax that he would have had to pay before deduction of the allowance given by s. 45(2) of Ceylon Income-tax Ordinance 1932

Summary

Issues:
1. Jurisdiction of High Court under article 226 of the Constitution to quash tax assessment orders.
2. Interpretation of the "Agreement for Relief from or Avoidance of Double Taxation in India and Ceylon."
3. Tax liability of a resident carrying on business in another country.
4. Proper abatement calculation under the tax laws of India and Ceylon.

Analysis:

The Supreme Court judgment dealt with appeals arising from the High Court of Madras regarding tax assessment orders. The petitioner sought to quash the orders denying abatement in assessment years 1959-60 and 1960-61 under article 226 of the Constitution. The High Court concluded that the petitioner was not entitled to more abatement than what was provided in the "Agreement for Relief from or Avoidance of Double Taxation in India and Ceylon." The High Court dismissed the writ petitions but granted a certificate for appeal to the Supreme Court under article 133(1)(c) of the Constitution.

The appellant, a resident in India conducting business in Ceylon, contested his tax liability in India for the mentioned assessment years. The appellant's entire assessable income was earned in Ceylon, and he was taxed in both countries. The appellant argued that under the agreement between India and Ceylon, he was not liable to be taxed in India or should receive a proper abatement based on the agreement's terms.

The main contention raised by the appellant was that he should not be taxed in India based on the agreement's provisions. Alternatively, he argued that the tax payable in Ceylon should be deducted from his Indian tax liability. The Supreme Court analyzed the relevant provisions of the agreement, emphasizing the requirement for each country to assess the taxpayer under its laws. The Court interpreted the agreement's language and determined the method for calculating the proper abatement under Indian and Ceylonese tax laws.

The Court rejected the appellant's argument that only the tax leviable in Ceylon on a non-resident should be considered for abatement calculation. The judgment referred to a similar agreement with Pakistan and a previous court decision to support its interpretation of the agreement's provisions. The Court held that the appellant should be treated similarly to other taxpayers in India and dismissed the appeals, affirming the tax liability and abatement calculation.