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TMI Blog1971 (7) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... he case, the Tribunal was right in holding that relief should be given to the assessee on its Pakistan business income in accordance with the provisions of the Agreement for Avoidance of Double Taxation between the Government of India and Pakistan without setting off against it the loss in agricultural operations in Pakistan ? " The assessment year is 1956-57 The financial year is the year ending on June 30, 1955. Messrs. Carew Co. Ltd., the respondent herein, is resident in India having its registered office in Calcutta. Its sources of income are 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 respondent's Indian income as computed by the Income-tax Officer 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 Pakistan income was computed by the Income-tax Officer in the assessment year as follows : Rs. (i) Profit from manufacturing business in Pakistan ... 3,26,368 (ii) Loss from agriculture in Pakistan ... 3,20,839 -------------- 5,529 -------------- The Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an was allowed by the Income-tax Officer. The Appellate Assistant Commissioner rejected the assessee's contentions. In the opinion of the Appellate Assistant Commissioner, article IV of the Agreement for Avoidance of Double Taxation in India and Pakistan lays down that the assessment in each Dominion shall be made according to its own laws and the abatement is limited to the income which is actually charged in the Dominion in which it becomes taxable under the Schedule. The Appellate Assistant Commissioner took the view that, as the assessment made by the Income-tax Officer was as per Indian law and Pakistan income which was actually charged under the Indian Income-tax Act was only Rs. 1,029, the Income-tax Officer was justified in allowing abatement on this amount only. The Appellate Assistant Commissioner has also made some comments with regard to requisite certificate necessary to obtain an abatement but in this reference we are not concerned with those comments. The Appellate Tribunal, however, has accepted the assessee's contention that the assessee was entitled to abatement of tax under the said Agreement on the entire manufacturing business income of Rs. 3,26,368 earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t us at the outset set out a few provisions of the Indian Income-tax Act, 1922, and the relevant portions of the Agreement for Avoidance of Double Taxation in India and Pakistan. Section 2(1) of the Act defines an agricultural income. Any income derived from land which is used for agricultural purposes by agriculture comes within the scope of this definition. Section 2(15) defines " total income ". It means total amount of income, profits and gains (referred to in section 4(1) ) computed in the manner laid down in the Act. The sub-section also indicates what is " total world income ". It includes, inter alia, all income profits, and gains wherever accruing or arising. Then section 49D deals with relief in respect of incomes accruing or arising outside the taxable territories. Sub-section (3) of this section is as follows : " If any person who is resident in the taxable territories in any year proves that in respect of his income which accrues or arises to him during that year in Pakistan he has paid in that country, by deduction or otherwise, tax payable to the Government under any law for the time being in force in that country relating to taxation of agricultural income, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the foregoing items of the Schedule ". Article VI(a) states : " For the purposes of the abatement to be allowed under article IV.....the tax payable in each Dominion on the excess or the doubly taxed income, as the case may be, shall be such proportion of the tax payable in each Dominion as the excess or the doubly taxed income bears to the total income of the assessee in each Dominion." Now, Mr. B. L. Pal, learned counsel for the department, argues before us that under the Double Taxation Agreement each dominion is left free to make an assessment in the ordinary way under its own laws. This means that the total income has to be computed in the first instance under the Indian law and the tax payable thereon has to be determined. This also implies that before determination of tax payable by the assessee whatever statutory relief is open to the assessee regarding the computation of tax has also to be given. According to the learned counsel, the question of granting abatement arises only after the completion of the assessment under each Dominion's laws. The abatement is equal to the lower amount of tax payable on the income charged actually in excess of the amount calcul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It provides specifically that any income, profits or gains falling within if " agricultural income " shall not be included in the total income of the person receiving them. There is no dispute that at least during the relevant period this was the law both in India and under the relevant provisions of income-tax laws in Pakistan. It follows, therefore, that the assessee's agricultural income was not assessable to income-tax at all in Pakistan and article If of the Agreement for Avoidance of Double Taxation provides, inter alia, that the agreement shall continue to be in force so long as the scope of the charging provisions in the Acts which are referred to in the agreement remain unaltered in both the Dominions. In the instant reference so far as computation of income by the Indian Income-tax Officer is concerned, there is no dispute as to what was the assessee's business income from Pakistan and what was the assessee's agricultural loss in Pakistan. The dispute centres round the question of abatement under the Agreement for Avoidance of Double Taxation particularly under article IV thereof. Now, under the Income-tax Act as adapted in Pakistan, agricultural income arising in Paki ..... X X X X Extracts X X X X X X X X Extracts X X X X
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