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TMI Blog1978 (6) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... g of section 154 of the Income-tax Act, 1961 ? " The learned counsel for both the parties rightly submit that the letters " re " of the word " recalculation " in the question is a mistake. Therefore, we reframe it by deleting the letters " re " from the aforesaid word. The assessment year is 1962-63. The assessee is a company. The assessee earned income both in India and Pakistan. Its Indian income less capital gains was assessed at Rs. 10,13,442 and the capital gains was assessed at Rs. 1,57,747. Its Pakistan income under the Pakistan Income- tax Act was assessed at Rs. 14,72,163 in Pakistan. The ITO in India at the time of the original assessment reduced the Pakistan income to Rs. 11,58,155 and computed the total income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nguage of the aforesaid agreement is confused, inept and difficult to decipher. It was also argued that the successor-ITO was wrong in applying the average rate of tax for working out the abatement referred to in art. IV and that, in any event, it was a debatable issue. It was further argued that the words " total income in each Dominion " in art. VI(a) of the Agreement do not refer to the total income worked out under the I.T. Acts of India but are referable to the total income comprising only of those elements of income which form the subject-matter of the Schedule to art. IV. It was, therefore, argued that both the issues were debatable and that the ITO was wrong in resorting to the proceeding under s. 154 of the Act. The Tribunal held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bly taxed income should be reduced or increased by reference to the non-doubly taxed income at a lower rate. In other words, his argument is that the ITO is to compare the actual amount of tax levied in India and the actual amount of tax levied in Pakistan and then to compare the two figures and apply the lower figure. He further submits that the ITO cannot reduce or increase the actual tax levied in India for comparison and the term " total income " in the agreement does not mean the total income as assessed in India but it means the total income comprising of the items specified in the Schedule. Mr. Bajoria further argues that the ITO originally adopted the aforesaid construction in computing the abatement which was sought to be rectifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir respective laws. He argues that the ITO acting under s. 154 has rightly applied the average rate of tax for working out the abatement of the excess referred to in art. IV of the agreement. He refers to art. VI(a) of the agreement and argues that the words " total income " mean the total income as computed under the I.T. Acts of India and the abatement has to be worked out by applying the formula set out in art. VI of the said agreement. A further contention of Mr. Sengupta is that the ITO at the time of the original assessment applied the correct formula so far as the tax computation was concerned but he failed to apply the said formula while computing the corporation tax for the purposes of abatement and, therefore, it was an obviou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come bears to the total income of the assessee in each Dominion. " Under art. IV each Dominion must make assessment in the ordinary way under its own laws. The word " their " in art. IV is to be read as it either " as stated in the aforesaid cases. This article says that where any Dominion has charged any income from the sources or categories of transactions specified in the Schedule in excess of the amount calculated according to the percentage set out in columns 2 and 3 thereof that Dominion shall allow an abatement equal to the lower amount of tax payable on such excess in either Dominion as provided for in art. VI. Article VI(a), so far as it is relevant for our purposes, says that for the purposes of the abatement to be allowed, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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