9911796707
TMI Blog1973 (3) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be taxed in India - - - - - Dated:- 1-3-1973 - Judge(s) : V. RAMASWAMY., G. RAMANUJAM. JUDGMENT The judgment of the court was delivered by RAMASWAMI J.-The assessee was a contractor for the supply of hardware and other goods to the Government departments in Ceylon. For the assessment years 1952-53 to 1958-59, he was assessed in the status of " individual " and " resident and ordinarily resident " on his income comprising of his total income accruing or arising in Ceylon. Originally these assessments were completed by the Income-tax Officer adopting the income from Ceylon on a provisional basis subject to revision on receipt of certificates of assessments from the Ceylon income-tax authorities. On receipt of those certificates, the Income-tax Officer noticed that the income determined by the Ceylon taxation authorities was more than the income which had been included in the Indian assessments when they were completed earlier. The Income-tax Officer accordingly gave notice to the assessee for rectification and enhancement of the assessments for and from assessment years 1952-53 to 1958-59. In reply to a notice, the assessee put forward a claim for relief under the term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 per cent. of the tax payable under the Ceylon laws in respect of Rs. 66,278, the Ceylon income included in the total income of the assessee in India. The assessee's contention was not accepted by the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal. At the instance of the assessee, the Tribunal has referred the following question: "Whether, on the facts and in the circumstances of the case, the order of the Appellate Tribunal refusing abatement to the assessee to the extent of the Indian tax on the Ceylon income excluded from the tax in India according to the Schedule to the Agreement for Avoidance of Double Taxation between India and Ceylon is valid in law? " The question referred involves an interpretation of the Ceylon Agreement and the mode of computation of the abatement. The relevant portions of the Agreement are extracted below: "Agreement for Relief from or the Avoidance of Double Taxation of income between the Government of India and the Government of Ceylon. Article III.- Each country shall make assessment in the ordinary way under its own laws; and where either country under the operation of its laws charges any income from the source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled to charge the entire income which means that they are not liable to forgo or give rebate to any portion of the tax payable to that Government under its law. The latter part of article III then provides that the Government of India shall allow an abatement equal to the lower of the amounts of tax attributable to such cases. In other words, if the tax payable on that portion of the income arising or accruing from Ceylon under the Indian Income-tax Act is in excess of the tax payable in Ceylon, an abatement or refund of tax equal to the amount of tax payable under the Ceylon Income-tax Act is to be given to the assessee. This, in our opinion, is mainly the effect of the provisions of the Ceylon Agreement. Let us now consider some of the decisions which considered the scope and effect of article III and the Schedule of the Ceylon agreements O.A.P. Andiappan v. Commissioner of Income-tax was one of the earliest cases which considered this question. In that case, the petitioner was assessed as an " individual " " resident and ordinarily resident " in India on his only source of income from grocery business carried on by him in Ceylon. The income for the year 1959-50 was determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The identical amount will be assessed in each country by applying its own laws. Then that country which charges income in excess of the amount allowed under column III is required to allow an abatement 'equal to the lower of the amounts of tax attributable to such excess in either country '. " This court further observed: " ...... under the first part of the article, that each country will make assessment in the ordinary way under its own laws. That means the assessment is made by applying the provisions of the relevant Act, not merely applying the charging section. It would follow, therefore, that tax attributable to the cases in either country in the context of column III in the Schedule will be tax relevant to the income and determined to be payable." This decision was affirmed by the Supreme Court on appeal and the judgment of the Supreme Court is O. A. P. Andiappan v. Commissioner of Income-tax. Two contentions were raised before the Supreme Court on behalf of the assessee-appellant. Firstly, in view of the agreement entered into between India and Ceylon, the assessee was not liable to be taxed in India at all in respect of the income accruing in Ceylon. This contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I. Abubacker v. Commissioner of Income-tax, which also dealt with the Ceylon Agreement. On an interpretation of article III and item 8 of the Schedule, the court held that the effect could be summed up in the following three parts : (1) Ascertain the income which has been assessed both under the Ceylon Income-tax Ordinance and the Indian Income-tax Act. (2) Ascertain the portion of that amount (the common income) which is in excess of the a mount calculated according to the percentage prescribed in column III of the Schedule. (3) Ascertain the tax payable on excess (common income) under the ceylon Income-tax Ordinance and the Indian Income-tax Act and allow an abatement equal to the lower of the two amounts of tax. If we give an answer for these questions from the illustrative facts given with reference to the year 1955-56 the answer to the first question is Rs. 66,278, the answer to the second question is also Rs. 66,278 and the answer to the third question is Ceylon tax, Rs. 19,578.07, and the Indian tax Rs. 29,836. The abatement that should be allowed is, therefore, Rs. 19,578.07. But the learned counsel for the assessee strongly relied on the decision of the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not an income exclusively received in India but it was also an income which would be governed by the Pakistan Agreement and since the income related to freight, the source of income came under the description given in item 5(g) of the Schedule to the Pakistan Agreement and not in the residuary item in article 9 thereof and directed the Income-tax Officer to revise the assessment in accordance with the directions given in its order. Thus two questions were decided: (1) whether the income of Rs. 3,43,138 was one exclusively received in India in which case the Pakistan Agreement will not be applicable at all; and (2) if it is an income not exclusively received in India, but an income to which the Pakistan Agreement would be applicable, then under what source of income in the Schedule to that Agreement, the abatement will have to be given. The Supreme Court did not deal with the first question and considered only the second question and held that there is no distinction between hire and freight and item 5(g) includes hire charges received as well. Since the income will fall under the specific item 5(g), it will not come under item 9 which is a residuary item. Thus, the Supreme Court I ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
