9911796707
TMI Blog1978 (3) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee lent money to the managed companies in East Pakistan and that money was lent at Calcutta in their head office and then was brought into East Pakistan for the business of the managed companies of the assessee. The claim of the assessee, before the ITO was that a sum of Rs. 2,07,028 was the income of the assessee in Pakistan as interest on borrowed money, as the managed companies of the assessee-firm utilised the assessee's money for which interest had been charged. The account of the assessee's managed companies was debited with the sum of Rs. 2,07,028 and the assessee's account was credited. But after crediting the amount of interest accrued to East Pakistan of lending money to the two sugar mills on interest account of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es by assessee was Rs. 25,00,000 and the average rate of interest was 4 per cent. per annum. He further found that the interest that was due to the assessee on funds advanced to the managed companies in Pakistan would be Rs. 1,00,000. The AAC, therefore, held that Rs. 1,00,000 was the income derived by the assessee from moneys lent on interest and brought into Pakistan in cash or in kind. The AAC, therefore, ignored the assessee's claim of interest accrued in Pakistan at Rs. 2,07,028 and also the figure of interest taken by the ITO, Pakistan, which was Rs. 1,37,708. The department being aggrieved filed an appeal before the Tribunal and urged that the Agreement for avoidance of double taxation between India and Pakistan was not enforceabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Agreement for avoidance of double taxation between India and Pakistan there was no logic in the argument of the department to hold that the assessee's case would fall under the item No. 9 of the Schedule to art. IV of the said agreement as that was a residuary clause. The Tribunal was also of the view that there was no question of construction or meaning of item No. 5(f) because the said item was clear, plain and unambiguous. The Tribunal in conclusion held that the AAC was correct in the view taken by him in holding that the sum of Rs. 1,00,000 was income derived by the assessee from moneys lent on interest and brought into Pakistan in cash or in kind. On the above facts, the following question of law as directed by the High Court wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the amount calculated according to the percentage specified in columns 2 and 3 thereof, that Dominion shall allow an abatement equal to the lower amount of tax payable on such excess in their Dominion as provided for in article VI. " Clause 5(f) and cl. 9 of the Schedule to art. IV of the Indo-Pakistan Agreement are as follows : -------------------------------------------------------------------------------------------------------------------------------------------------- "Sources of income or Percentage of income which Remarks nature of transaction from each Dominion is entitled to which income is derived charge under the Agreement ---------------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neys lent would be diverted to East Pakistan for the development of those two mills situated in East Pakistan of which the assessee was the managing agent. Thus, the assessee claims to come within cl. 5(f) of the agreement whereas the revenue argues that it must come within cl. 9. In cl. 5(f) of the Agreement, Pakistan is entitled to the charge of 100 per cent, of the income. The money had been brought to Pakistan by the managed companies and the assessee derived income from money lent on interest and brought into that Dominion. Pakistan in that case would be entitled to claim 100 per cent. of the income. Clause 9 of the agreement is a residuary clause. The assessee could be brought under this clause had there been no intention of applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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