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TMI Blog1977 (6) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... in India on a total income of Rs. 3,73,117. This amount of total income included income of Rs. 1,72,373 earned in U.K. Although the rest of the income was earned in the then undivided India, and the assessment year too began when India was undivided, it became necessary to consider separately income included therein, but referable to Pakistan which came into being later on. The income referable to Pakistan worked out at Rs. 1,19,220. That was because abatement of tax had to be given under the agreement for the avoidance of double taxation with Pakistan as per Notification No. 28 dated December 10, 1947, with reference thereto. As the remaining part of the total income was assessed to tax both in India and in U.K., the assessee was also eligible for double income-tax relief to that extent. The Income-tax Officer made the assessment for the said year some time in March, 1961. During the course of the assessment proceedings the assessee had claimed abatement of tax in respect of the Pakistan income and that was duly granted. It also claimed double income-tax relief in respect of the income taxed both in India and in U.K. By his order dated September 27, 1963, the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner was correct so far as the double income-tax relief in respect of income-tax was concerned but it was erroneous so far as the double income-tax relief in respect of super-tax was concerned. The Tribunal in the course of its order pointed out that the double income-tax relief in respect of income-tax both in India and in U.K. was being regulated by section 49 of the Act. However, under section 108 of the Government of India Act, 1935, there was a bar to the introduction of any amendment affecting, inter alia, the granting of relief in respect of income taxed or taxable in U.K. When the two Dominions of India and Pakistan were formed, section 108 of the Government of India Act was deleted. So also by Act No. 10 of 1948 section 49 of the Indian Income-tax Act, 1922, was also deleted. Simultaneously, a notification was issued under section 49A of the Act to provide for such relief against double taxation of income both in India and in U.K. That Notification is No. 50 dated September 25, 1948. Substantially, it reproduced the provisions of section 49 of the Act. The Tribunal examined the scheme of the notification for providing relief and considered the definition of the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son, we have to give effect to it. Therefore, in calculating the Indian rate of super-tax the numerator is Rs. 15,868.46 and it will be divided by Rs. 3,73,117 which is the total income assessed and which is not eligible for any further adjustment. This follows from the language of clause 2(b) already extracted. It appears to us that the above will involve a slight difference to the calculation as made by the Appellate Assistant Commissioner. The order of the Appellate Assistant Commissioner will have to be modified only to that extent." In the reference application filed by the assessee it requested the Tribunal to raise five questions which are quoted in paragraph 7 of the statement of the case. However, the Tribunal deemed it fit to raise one question thinking it to be a comprehensive one as stated above. Mr. Kaka on behalf of the assessee has submitted that while determining the Indian rate of tax to be paid by the assessee the amount of Indian super-tax has to be calculated as provided in clause 2(b) of the Income-tax (Double Taxation Relief) (United Kingdom) Rules, 1948, published by Notification No. 50, dated September 25, 1948. He submitted that the view that was taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd either Dominion income-tax in one or more countries or Burma income-tax while section 49AA empowered the Central Government to enter into an agreement with Pakistan or U. K. for avoidance of double taxation of income, profits and gains under the Indian Income-tax Act and under the corresponding law in force in Pakistan or U. K. That section also empowered the Central Government by notification in the official Gazette to make such provision as may be necessary for implementing that agreement. In view of the provisions of section 49AA, an agreement for avoidance of double taxation in India and Pakistan was entered into and it was published in the Government Gazette under Notification No. 28 dated December 10, 1947: See [1948] 16 ITR (Statutes) 4. In exercise of the powers conferred by section 49A of the Indian Income-tax Act, 1922, the Central Government was pleased to make the Income-tax (Double Taxation Relief) (United Kingdom) Rules, 1948, for the granting of relief in respect of income on which tax has been paid both in the Provinces of India and in the United Kingdom. We are concerned with these rules and especially the definition of the expression "Indian rate of tax" contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal divided the net income-tax in India of Rs. 79,342.91 by the net income in India of Rs. 2,53,897 and arrived at the figure of the Indian income-tax at 60 pies in a rupee. This finding of the Tribunal has not been challenged by the revenue, because the revenue has not asked for any reference against the same. The question referred to us merely relates to the double taxation relief in respect of super-tax. Having regard to the definition of the expression "Indian rate of tax" given in rule 2(b), to the amount of Indian Income-tax as therein determined, has to be added the amount of Indian super-tax before deduction of any relief due to the claimant under these Rules divided by his total income. Strictly speaking, this being a statutory rule has to be interpreted having regard to the language used. Much of the controversy between the parties would have been avoided if regard be had to the nature of the deductions required to be made for determining the amount of Indian income-tax and the absence of any provision of deduction while determining the amount of Indian super-tax. For the purpose of calculating the amount of Indian income-tax, from the Indian income-tax a deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the net result is the same. The Appellate Assistant Commissioner in his order has clearly pointed out that if the total income is taken before reducing it by the amount of income assessed in Pakistan it will be fair that the corresponding tax payable on total income should also be taken before reducing it by abatement of tax paid in Pakistan. That, in our opinion, qua the super-tax is the correct approach. What is the effect of the agreement for avoidance of double taxation between India and Pakistan has been considered by the Supreme Court in the case of Ramesh R. Saraiya v. Commissioner of Income-tax [1965] 55 ITR 699. After reproducing the relevant clauses of this agreement, especially clauses IV and VI thereof, at page 705, the Supreme Court observed: "It seems to us that the opening sentence of article IV of the agreement that each Dominion is entitled to make assessment in the ordinary way under its own laws clearly shows that each Dominion can make an assessment regardless of the agreement. But a restriction is imposed on each Dominion and the restriction is not on the power of assessment but on the liberty to retain the tax assessed ...... But the Schedule does not limi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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