1972 (10) TMI 6 - SC - Income Tax

Whether Tribunal is right in its view that the CIT had jurisdiction to revise the order of refund - Whether Tribunal is right in its view that the order of refund under s. 48 read with s. 49D is independent and distinct from the assessment order - Whether Tribunal is right in confirming the computation of relief as modified by the Commissioner- Whether Tribunal is right in modifying the order of the Appellate Assistant Commissioner - Whether Tribunal is right in its interpretation of s. 49D

Issues Involved:
1. Jurisdiction of the Commissioner to revise the order of refund.
2. Independence of the refund order under section 48 read with section 49D from the assessment order.
3. Correctness of the computation of double taxation relief by the Commissioner.
4. Interpretation of section 49D of the Indian Income-tax Act, 1922.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner to Revise the Order of Refund:
The first issue examined whether the Commissioner of Income-tax had the jurisdiction to revise the order of refund. This issue was not pressed before the High Court and was answered against the assessee, thereby affirming the Commissioner's jurisdiction.

2. Independence of the Refund Order under Section 48 Read with Section 49D from the Assessment Order:
The second issue was whether the refund order under section 48 read with section 49D is independent and distinct from the assessment order. This issue was also not pressed before the Supreme Court, thus, it was not considered further.

3. Correctness of the Computation of Double Taxation Relief by the Commissioner:
The third issue involved the correctness of the computation of double taxation relief as modified by the Commissioner. The Commissioner had revised the Income-tax Officer's computation, holding that the business loss incurred in India should be set off against the business profits earned abroad, resulting in a reduced amount of income considered for double taxation relief. The Tribunal and the High Court upheld this view, emphasizing that only the income which has been subjected to tax twice over qualifies for relief under section 49D.

4. Interpretation of Section 49D of the Indian Income-tax Act, 1922:
The primary issue revolved around the interpretation of section 49D, which provides relief for income doubly taxed in India and a foreign country. The Supreme Court examined whether the term "such doubly taxed income" referred to the same income under identical heads or simply the inclusion of foreign income in the total income taxed under the Act.

Analysis by Hegde J.:
Hegde J. disagreed with the majority view, emphasizing that the relief should be calculated only on the income that has been doubly taxed, i.e., subjected to tax both in India and the foreign country. He argued that the business loss in India should not affect the computation of doubly taxed income. He concluded that the Commissioner's and Tribunal's interpretation was correct, as it aligned with the principle that only the income subjected to double taxation qualifies for relief.

Analysis by Jaganmohan Reddy J. (Majority Judgment):
Jaganmohan Reddy J., delivering the majority judgment, focused on the legislative intent behind section 49D, which was to encourage Indian residents to establish businesses abroad by providing relief from double taxation. He argued that the phrase "such doubly taxed income" should be interpreted to mean the foreign income included in the total income taxed under the Act, without requiring it to be under the same head. He emphasized that the relief should be calculated on the total income, including foreign income, subjected to tax under the Act, thereby rejecting the narrower interpretation that required identical heads of income.

The majority judgment concluded that the relief under section 49D should be granted based on the total income, including the foreign income subjected to tax in India, without restricting it to the same head of income. This interpretation aligns with the legislative intent to provide broader relief to encourage foreign business ventures by Indian residents.

Conclusion:
The Supreme Court allowed the appeals, holding that the relief under section 49D should be calculated on the total income, including foreign income, subjected to tax in India, thereby providing a broader scope of relief for double taxation. The decisions of the High Court were set aside, and the questions were answered in favor of the assessee.

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