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TMI Blog1979 (9) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... esident in India having its registered office in Calcutta. The concerned assessment year is 1956-57. The corresponding previous year of the company ended on June 30, 1955. During the relevant period the sources of income of the respondent-company were from, (a) business in India and interest earned in India on securities; (b) manufacturing business in Pakistan; and (c) agricultural properties in Pakistan. For the relevant year the assessee's Indian income as computed by the ITO was Rs. 2,01,329 from business and Rs. 373 from interest on securities. The total of the two items was Rs. 2,01,702. The profit from the assessee's manufacturing business in Pakistan was computed at Rs. 3,26,368. In respect of the agricultural property, however, there was loss and it was determined at Rs. 3,20,839. The ITO deducted by way of set off the agricultural loss of Rs. 3,20,839 against the profit of the manufacturing business amounting to Rs. 3,26,368. The net profit of the assessee thus determined in respect of the two sources in Pakistan was Rs. 5,529. Deducting the statutory figure of Rs. 4,500 from the above net profit of Rs. 5,529, he gave the company relief against double taxation on the figur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion between the Governments of India and Pakistan without setting off against it the loss in agricultural operations in Pakistan ? " In agreement with the conclusions arrived at by the Appellate Tribunal, the High Court answered the references in favour of the assessee. Hence, this appeal by the department. It could not be and was not disputed that while computing the total income of the assessee, the income or the loss, as the case may be, from agricultural property in a foreign country had to be added to or adjusted in the assessee's total income. Obviously it will be an income from other sources within the meaning of cl. (v) of s. 6 of the Act. So also the assessee's income from business in Pakistan had to be added to the figure of his profits and gains of business in India. The statutory deduction of Rs. 4,500 had to be granted under the third proviso to s. 4(1) of the Act. The exclusion of agricultural income as mentioned in cl. (viii) of sub.s. (3) was to be granted only if it was an agricultural income as defined in s. 2(1). Otherwise not The Calcutta High Court in the case of Kumar Jagadish Chandra Sinha v. CIT [1955] 28 ITR 732 had rightly held that income from agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax under this Act also; or (b) of a sum calculated on that income at the Indian rate of tax; whichever is less. " It should be noticed that if the assessee's agricultural income in Pakistan was chargeable to tax there, then relief in respect of such income could be granted to the assessee only in accordance with sub-s (3). Such a case would not be covered by any of the articles of the Agreement. Since in the relevant year no amount of tax was charged or paid in Pakistan by the assessee, either because such income was not chargeable there or because the net figure was a figure of loss, in the matter of calculation of relief against double taxation sub-s. (3) of s. 49D was not attracted at all. The loss had simply to be allowed in India while computing the assessee's total income, because, if there were any figure of profit from agricultural lands in Pakistan the same could have been added in the total income of the assessee. Section 49D(1) is attracted for giving relief against double taxation only if the income derived by the assessee is from a foreign country with which there is no reciprocal arrangement between that country and India for relief or for avoidance of doub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ison of similar incomes but it is the total income which is computed and assessed as such, in respect of which tax relief is given for the inclusion of the foreign income on which tax had been paid according to the law in force in that country. The scheme of the Act is that although income is classified under different heads and the income under each head is separately computed in accordance with the provisions dealing with that particular head of income, the income which is the subject-matter of tax under the Act is one income which is the total income. The income-tax is only one tax levied on the aggregate of the income classified and chargeable under the different heads; it is not a collection of distinct taxes levied separately on each head of income. In other words, assessment to income-tax is one whole and not group of assessments for different heads or items of income. " Learned counsel for the revenue heavily relied upon this decision to assail the correctness of the High Court judgment [1973] 87 ITR 459 under appeal. In Ramanathan Chettiar's case [1973] 88 ITR 169, the assessee, a resident in India, was doing money-lending business in Malaya as well as in India. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of giving double taxation relief in case of agricultural income in Pakistan could only be dealt with under sub-s. (3) of s. 49D of the Act and not under the Agreement. It is significant to note that in art. IV the wordings are " where either Dominion under the operation of its laws charges any income from sources or categories of transactions specified in col. 1 of the Schedule to this Agreement ". (Emphasis supplied). It would be seen further that the various items in the Schedule clearly indicate that if the sources or categories of transactions are to be clubbed together and not treated separately, then it will be difficult, almost impossible, to give effect to the Agreement with reference to the Schedule. To illustrate my view point, I may take cl. (g) of item 7 providing that in the case of metal ores, minerals, etc., extracted in one Dominion and sold in the other without any further manufacturing process and without selling establishment or a regular agency 75 per cent. of the profits is to be charged by the Dominion in which minerals are extracted and 25% by the Dominion in which goods are sold. Although in the Dominion in which the goods are sold it would be the assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case, which relates to an assessment in India under the Indian I.T. Act for the assessment year 1956-57, it is not disputed that in respect of that assessment year agricultural income arising in Pakistan was not liable to tax in Pakistan under the Indian I.T. Act as applied in that country. Consequently, any agricultural income arising or accruing in Pakistan cannot be considered for the purpose of abatement under the Agreement for the Avoidance of Double Taxation. For a period of time, there was no provision of law which gave to an assessee, resident in India, relief against double taxation if he was assessed to tax in Pakistan on his agricultural income accruing or arising there. In India that income would be liable to tax under the Indian I.T. Act, which did not exempt, under s. 4(3)(viii) read with s. 2(1), agricultural income from land situated outside India. In Pakistan it would be liable to tax under a law other than the Indian I.T. Act as applied there. The Agreement for the Avoidance of Double Taxation did not provide for such relief. It was apparently for that reason that Parliament made provision in India by enacting s. 49D(3) in the Indian I.T. Act for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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