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TMI Blog1980 (9) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... income was Rs. 37,199 and the Jammu and Kashmir income was Rs. 24,449. The income as found was apportioned between four partners in equal shares. It appears that at first the ITO did not collect the tax payable by the partners on the Pakistan income, but later on this tax was actually recovered by the Collector, Amritsar. The firm appealed to the AAC, who by an order dated 7th August, 1950, gave the ITO directions that under art. VI(b) of the Agreement for Avoidance of Double Taxation of India and Pakistan, the tax demand on Pakistan income should be held in abeyance for a period of one year or for such longer period as the ITO considered fit and if this had not been done, it should be done now. In fact, this order was passed on 7th August, 1950, after the tax had already been collected. The firm thought that the recoveries which had been effected amounting to Rs. 74,899-6-0 was tax on the Pakistan income which had been wrongly collected and, therefore, they wrote to the Central Board of Revenue by letter dated 5th September, 1950, praying that this amount should have been kept in abeyance till the assessment order was made in Pakistan and, hence, the amount should be refunded. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that if tax was payable on the income from Pakistan, it had to be kept in abeyance for a period of one year to enable the assessee to produce a certificate about the tax paid in Pakistan. Later on, the CBR had issued a circular dated 2nd May, 1950, saying that it was not necessary to produce that certificate. The contention of the petitioner was that abatement was to be allowed as regards the Pakistan tax without production of any certificate. The learned single judge held that the agreement regarding double taxation was applicable when income-tax was being assessed in the two Dominions. It was observed as follows: "In the present case it was not even the petitioners' case and it is not even the petitioner's case now that he had had to pay anything on account of tax on the income arising in Pakistan Mr. Awasthy, during the course of his arguments offered that even if the petitioners at this stage were to satisfy the Central Board of Revenue that income-tax on the income arising in Pakistan had been paid by them or had been recovered from them, the department would have no objection to make a refund of the amount. He, therefore, contended that, in fact, the petitioners h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to any relief. " The petitioner has now appealed under cl. 10 of the Letters Patent. The learned counsel contends that the conclusions recorded by the learned single judge are not sound. He relies on the agreement concerning double taxation and contends that the conclusion of the learned single judge is not warranted by the terms of the agreement because the agreement stipulates that the Pakistan income should be assessed in Pakistan and the Indian income should be assessed in India. He contends that after the income had been assessed by the ITO, the tax on the Pakistan portion of the income should not have been recovered, but should be kept in abeyance to await the assessment by the Pakistan authorities. Originally, the agreement stipulated that the recovery of tax should be kept in abeyance for one year to await the production of a certificate from Pakistan. Later, by a circular issued by the CBR, this provision was relaxed and it was no longer necessary to produce a certificate. That being so, he contends that the recovery of the tax on the Pakistan portion should have been kept in abeyance and the recovery effected was totally invalid. We have carefully consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provided by s. 64. Thus, the ITO at Amritsar had to include the income from the firm's partnership branches wherever they might be in British India. He had also to include the income outside the taxable territories, i.e., in Jammu, for the purpose of computing the total world income. By no means could it be said that the assessee-firm would also be assessed at its branches in Pakistan for the simple reason that under the relevant provisions of the Indian I.T. Act, 1922, the assessee had to be assessed at only one place, i.e., at its principal office. Once that assessment was completed, by no means could the income be taxed by any other ITO. Similarly, in the assessment year 1948-49, the accounting period was 1st April, 1947, to 31st March, 1948. Up to 15th August, 1947, the so-called Pakistan branches were in British India in the taxable territories and it was only after 15th August, 1947, that those branches came to Pakistan. It is not the assessee's case that that income arose in Pakistan after it was formed. In fact, it is noted in the assessment order for 1948-49 as follows: " Income from Pakistan. Net income returned for all the branches there is Rs. 37,199 ; this show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see could not have been assessed in Pakistan. The assessee could be assessed only in Amritsar because for the year 1947-48, its head office was at Amritsar. Therefore, under art. IV, it is impossible for the Dominion of Pakistan to tax the assessee. Now, taking the year 1948-49, the same position will hold true up to 15th August, 1947. If the assessee had continued business in Pakistan after 15th August, 1947, then the office or one of the offices in Pakistan would have become its head office for the purpose of the Indian Income-tax Act, 1922, as applied to Pakistan, and in that case the assessee could have been assessed in Pakistan. That is neither the factual case before us nor has it been disclosed that the assessee was in fact taxed by the Pakistan I.T. authorities. It would, therefore, follow that art. IV does not apply to the case of the assessee-firm. Then it is necessary to turn to art. V, which states: " Article V.-Where any income accruing or arising without the territories of the Dominions is chargeable to tax in both the Dominions, each Dominion shall allow an abatement equal to one-half of the lower amount of tax payable in either Dominion on such doubly taxed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced, the abatement shall cease to be operative and the outstanding demand shall be collected forthwith." This article is applicable only if the question of abatement arose and the quantum of tax in the other Dominion is not known. In the present case, this problem does not arise at all. No tax was payable by the assessee in Pakistan for the simple reason that no income had arisen in Pakistan, but income had arisen in British India and had been fully taxed in Amritsar, so it could not be taxed in Pakistan because at that time the territories now in Pakistan were also part of British India. That being so, art. VI does not apply. It was contended by learned counsel for the appellant that on this point the decision of the AAC had become final. It is now necessary to quote that portion of the decision dated 7th August, 1950. This is the decision of the AAC, " A" Range, Amritsar, for the year 1947-48: " The Income-tax Officer has allocated the demand in the assessment order as arising in India, Jammu and Pakistan, but since it was a registered firm, the question of levying tax did not arise. The counsel, however, informs me that the terms of the Agreement have not been observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich means that the court has to see whether the petitioner will be subjected to double taxation or is likely to be subjected to the same. As pointed out, the petitioner was a registered firm with its head office in Amritsar. In the relevant period, the branches were also in British India, so the assessments had to be made in Amritsar. In normal circumstances, no assessment could be made at any other place because the assessee has to file return in accordance with law only at one place which is the normal place at which he is assessed. The firm was accordingly assessed at Amritsar. In computing a firm's income, the income from all other branches is to be included in the single assessment made at the head office. This happened in the appellant's case. It happened for both the years 1947-48 and 1948-49. The accounting period covered by these two years was the period 1st April, 1947, to 31st March, 1948. The Dominion of Pakistan was born on 15th August, 1947. Admittedly, no income accrued to the assessee in Pakistan after that date, so the entire income which is covered by the dispute now before the court arose in British India and was taxed in accordance with the law applicable to Bri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned single judge rightly held that the writ petition was belated and could not be entertained on that ground and further when there was an alternative remedy by way of a suit which could have been exercised within a period of three years at the most. Furthermore, we uphold the decision to the effect that before the appellant could be entitled to a refund, they had to show that they were being subjected to double tax or the possibility of double tax. There is one other interesting aspect of this case that may be referred to Per curiam. Article IV of the Agreement provides that each Dominion shall make the assessment in the ordinary way and then when the demand is raised for the tax, an abatement has to be allowed in accordance with the Schedule. As it happens, the assessee in this case was a registered firm. Being a registered firm, the assessee did not have to pay any tax, but the share of income had to be apportioned to the individual assessment of the partners. The question as to how the abatement was to be made would, therefore, arise in the assessments of the individual partners and not in the assessment of the registered firm. As far as the ITO was concerned, he had merel ..... 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