2006 (1) TMI 88 - HC - Income Tax

Double taxation relief - Whether Tribunal is right in law in holding that the assessee is entitled for relief under section 91 of the Income-tax Act, 1961 without taking into account the weighted deduction allowed under section 35B of the Income-tax Act, in respect of the Iranian income? - double taxation relief has to be worked out on the Iranian income earned abroad - In the present case, that part of the income, viz., Iranian income, was actually included in the assessee s total income. Hence there was a doubly taxed income. When the income is doubly taxed, the assessee is entitled to the unilateral relief under section 91 of the Income-tax Act - In such circumstance, the above question referred to us is answered in favour of the assessee and against the Revenue

Summary

Issues:
1. Interpretation of section 91 of the Income-tax Act regarding double taxation relief.
2. Whether weighted deduction under section 35B should be deducted from Iranian income for computing double taxation relief.
3. Application of the decision in K.V.AL.M. Ramanathan Chettiar v. CIT [1973] 88 ITR 169.
4. Comparison with the Andhra Pradesh High Court judgment in CIT v. M.A. Mois [1994] 210 ITR 284.

Issue 1: Interpretation of section 91 of the Income-tax Act regarding double taxation relief:
The judgment dealt with the interpretation of section 91 of the Income-tax Act, which provides unilateral relief in cases where no agreement exists with a foreign country. The conditions for this relief include the assessee being an Indian resident, income accrued outside India, taxed in both India and the foreign country without an agreement for relief, and actual payment of tax in the foreign country. The court emphasized that the relief is granted for "doubly taxed income," based on the commercial business sense of income before adjustments under other sections.

Issue 2: Whether weighted deduction under section 35B should be deducted from Iranian income for computing double taxation relief:
The case involved a dispute over deducting the weighted deduction under section 35B from Iranian income for calculating double taxation relief. The Assessing Officer initially allowed the deduction, but later revised the assessment to deduct the amount, leading to a lower relief amount. The Commissioner of Income-tax (Appeals) disagreed, stating that the deduction under section 35B should not reduce the relief amount, a decision upheld by the Tribunal.

Issue 3: Application of the decision in K.V.AL.M. Ramanathan Chettiar v. CIT [1973] 88 ITR 169:
The Tribunal relied on the decision in K.V.AL.M. Ramanathan Chettiar v. CIT to support the Commissioner's decision regarding the treatment of Iranian income for double taxation relief. The court affirmed that the relief should be calculated based on the income earned abroad before adjustments under other sections, in line with the Supreme Court decision.

Issue 4: Comparison with the Andhra Pradesh High Court judgment in CIT v. M.A. Mois [1994] 210 ITR 284:
The Revenue attempted to rely on the Andhra Pradesh High Court judgment in CIT v. M.A. Mois [1994] 210 ITR 284 to argue for deducting the section 35B amount from the Iranian income. However, the court distinguished this case, emphasizing that the Iranian income in question was "doubly taxed," making the assessee eligible for unilateral relief under section 91, contrary to the Andhra Pradesh High Court's decision.

In conclusion, the court ruled in favor of the assessee, stating that the relief under section 91 should be based on the income earned abroad before adjustments under other sections, such as section 35B. The judgment highlighted the commercial sense of income for calculating double taxation relief and rejected the Revenue's argument to deduct the section 35B amount from the Iranian income. The decision aligned with the Supreme Court precedent and distinguished the Andhra Pradesh High Court judgment cited by the Revenue.