1966 (6) TMI 5 - HC - Income Tax

Income from business in Ceylon - Whether, on the facts and in the circumstances of the case, the abatement of Rs. 704 only allowed to the assessee under article III of the agreement for relief from or avoidance of double taxation in India and Ceylon (in Notification S.R.O. 456 dated February 6, 1957), is correct in law - Held, yes

Summary

Issues:
Interpretation of agreement for relief from double taxation between India and Ceylon.

Analysis:
The judgment concerns a reference made by the Income-tax Appellate Tribunal regarding the correctness of allowing an abatement of Rs. 704 to the assessee under an agreement for relief from double taxation between India and Ceylon. The relevant assessment year is 1960-61, and the dispute revolves around the interpretation of Article III of the agreement. This article specifies the procedure to be followed when income is assessed in both countries and charges exceed the agreed percentages. In this case, the income in question is Rs. 18,765, assessed under both the Ceylon Income-tax Ordinance and the Indian Income-tax Act. The abatement to be allowed is determined by calculating the tax payable on the excess income under both jurisdictions and allowing the lower amount as abatement. Here, the Ceylon tax is Rs. 704, while the Indian tax is Rs. 1,876.50, leading to the correct abatement amount of Rs. 704.

The judgment emphasizes the importance of adhering to the provisions of the agreement for relief from double taxation between India and Ceylon. It outlines a clear procedure to determine the abatement to be allowed in cases where income is assessed in both countries. The court's decision to answer the question referred in the affirmative, in favor of the department and against the assessee, is based on a thorough analysis of the agreement's provisions and the specific circumstances of the case. The judgment concludes by stating that a copy of the decision will be sent to the Appellate Tribunal as required by law, with no order as to costs.