1969 (4) TMI 8 - HC - Income Tax

Agreement for relief from or Avoidance of Double Taxation in India and Ceylon - entitlement to double tax relief

Summary

Issues:
1. Calculation of relief under Double Taxation Avoidance Agreement with Ceylon.
2. Validity of initiation of proceedings under section 147 of the Income-tax Act, 1961.

Analysis:
1. Calculation of Relief under Double Taxation Avoidance Agreement with Ceylon:
The case involved the assessment of an assessee who was granted relief under the Double Taxation Avoidance Agreement with Ceylon. Initially, the Income-tax Officer calculated the relief based on the total income and rates of tax in both India and Ceylon. However, the Officer later recalculated the relief, resulting in a reduced amount granted to the assessee. The main issue was whether the relief should be based on the rates of tax or the actual amounts of tax paid in each country. The Tribunal held that the relief should be based on the amounts of tax paid, not the rates of tax, as per the agreement. The court agreed with the Tribunal's interpretation of the agreement, stating that the relief should be granted based on the lower of the amounts of tax attributable to the excess income in either country. Therefore, the assessee was entitled to the relief in the sum of Rs. 8,269.11, as originally calculated.

2. Validity of Initiation of Proceedings under Section 147:
The second issue raised was regarding the validity of the initiation of proceedings under section 147 of the Income-tax Act, 1961. However, the court did not delve into this issue as it was not properly referred by the Tribunal. The court upheld the preliminary objection raised by the revenue that the procedure for reference had not been followed by the assessee as required by statute. Citing a previous decision, the court emphasized that the right to request a reference to the High Court must be done through the prescribed procedure under the law. As the second question was not properly referred, the court did not provide an answer to this issue.

In conclusion, the court upheld the assessee's entitlement to relief under the Double Taxation Avoidance Agreement with Ceylon based on the actual amounts of tax paid in each country. However, the court did not address the issue of the validity of the proceedings under section 147 due to procedural irregularities in the reference process.