DEPUTY COMMISSIONER OF INCOME TAX Vs. TATA UNISYS LTD

LAWS(IT)-2001-4-25

INCOME TAX APPELLATE TRIBUNAL

Decided on April 26,2001

Appellant

VERSUS

Respondents

JUDGEMENT

S.C. Tiwari, Accountant Member - (1.) 1 to 9. [These paras are not reproduced here as they involve minor issues]. 10. Ground of Appeal No. 5 reads as under: - On the facts and in the circumstances of the case and in law the learned CIT(A) erred in holding that the assessee is entitled to relief under Section 91 in respect of full income accrued or arisen outside of India though 50% is only included in the total income and taxed in India. 11. Facts of the case leading to this ground of appeal, briefly, are that the assessee earned certain income outside India. However, as the assessee-company was resident in India within the meaning of the Act, its foreign income was liable to assessment in India as well. Such foreign income was included in the gross total income of the assessee. However, before computation of total income, the assessee was given deduction at the rate of 50 per cent on the foreign income in accordance with the provisions of Section 80-O. As the same income had also been subjected to tax outside India, the assessee claimed double taxation relief in respect of the entire taxes paid overseas. The Assessing Officer however held the view that the relief under Section 91 claimed by the assessee was required to be restricted to 50 per cent because by virtue of provisions of Section 80-O only 50 per cent of such income was subjected to tax in India. On assessee's appeal, the learned Commissioner (Appeals), relying upon his order for assessment year 1987-88, directed that the assessee may be allowed full double taxation relief as claimed. The relevant part of the Commissioner (Appeals)'s order for assessment year 1987-88 reads as under: - 3. Ground No. 2 relates to relief under Section 91 of the Act. It is stated that: - The D. C. has erred in restricting relief under Section 91 to 50 per cent of taxes paid overseas. The assessee being 'resident' in India is liable to tax in India on the entire income accruing or arising outside India. The whole of assessee's income from U. S. A. and Newzealand is, therefore, included in computation of income of the assessee and is suffering double taxation. Based on the Supreme Court's decision in K.V.AL.M. Ramanathan Chettiar's case 88 ITR 169 the assessee is entitled to total relief of Rs. 8,51,664 in respect of taxes paid overseas. It is further submitted that the C.I.T. (A) (VII) by his order dated 12-2-1991 allowed full relief following the S.C. decision (supra) in the appellant's case. The D.C.I.T. is hereby directed to allow full relief in this year also. The learned DR placed reliance upon the assessment order from the order of IT AT in the case of the assessee for assessment year 1987-88, being order of IT AT, Mumbai Bench 'D', dated 26-6-1998 in ITA No. 5847/Bom./91,it is seen that there is no discussion in this respect in the Tribunal order and it therefore appears that the Department did not prefer appeal on this issue against the order of the learned Commissioner (Appeals) for assessment year 1987-88. However, each year being independent unit of assessment and there being no res judicata, the right of the Department to agitate this issue for assessment year 1988-89 cannot be whittled down. The learned DR relying on the order of the Assessing Officer in this behalf, argued on merits that as only 50 per cent of foreign income suffered tax in India it was only fair and reasonable to allow the assessee deduction of only 50% of the taxes paid by it in the foreign country on such income. The learned counsel of the assessee, on the contrary, argued that the learned Commissioner (Appeals) had rightly decided this issue in favour of the assessee for assessment year 1987-88 and that order was rightly based on the judgment of Hon'ble Supreme Court in K.V.AL.M. Ramanathan Chettiar v. CIT [1973] 88 ITR 169. 12. We have carefully considered the rival submissions. On a careful consideration, it appears to us that the preponderance of judicial opinion on this issue is in favour of revenue and against the assessee. In the case of CIT v. C. S. Murthy [l988] 169 ITR 6861 (AP), the assessee was entitled to deduction under Section 80RRA. The Hon'ble Andhra Pradesh High Court held that the requirement of double taxation relief is that the income must have been taxed outside India and the same income must have been subjected to tax in India. Therefore, relief is not available in respect of that portion of income which is not subjected to tax in India. As in that case half of the assessee's income was entitled to deduction under Section 80RRA. Hon'ble Andhra Pradesh High Court held that only remaining half was doubly taxed income in respect of which assessee was entitled to relief under Section 91. Same view has been taken by Hon'ble Andhra Pradesh High Court in their judgment in the case of CIT v. M.A. Mois [1994] 210 ITR 284 also. In the case of CITv. Dr. K. L. Parikh [1994] 209 ITR 394 (Raj), the assessee was entitled to special deduction under Section 80RRA. Hon'ble Rajasthan High Court, following their earlier judgment in the case of CIT v. R.N. Jhanji [l990] 185 ITR 5861 held that only remaining 50 per cent was doubly taxed and, therefore, the assessee was entitled to double taxation relief of 50 per cent of tax deducted at source in foreign country under Section 91 read with Section 80RRA. 13. Coming now to the judgment in case of K. V. AL. M. Ramanathan Chettiar (supra), the assessee, a resident in India, was doing money-lending business in Malaya as well as in India. For the assessment year 1953-54 the assessee's income in Malaya was Rs. 2,22,532 whereas in India the assessee had incurred a business loss of Rs. 68, 858 and he had income from other sources of Rs. 39, 142. The Income-tax Officer added the income from other sources to the foreign income and deducted from the total thus computed the loss in India of Rs. 68, 858. He granted double taxation relief on the balance of Rs. 1,92,816. The CIT revised this order and reduced the business loss of Rs. 68, 858 from Malaya income and held that only the balance Rs. 1,53,674 could be held to have suffered double taxation. On a reference, the High Court affirmed the computation of the CIT. On assessee's appeal, Hon'ble Supreme Court by majority judgment reversing the decision of High Court held that the sum of Rs. 1,92,816 had suffered double taxation. While delivering this judgment, Hon'ble Justice P. Jaganmohan Reddy, writing the majority judgment observed as under: - We do not say that the question to be determined is easy to resolve and in this we are in distinguished company of judges who have felt similar difficulties, but, in our view, what commends to us most is that once it is recognised that the section we are interpreting does not make the basis of relief the tax paid on the income from the same head or source, as we have shown that the change in the language does not, then the relief to which an assessee would be entitled would be the amount of tax paid on the foreign income which by its inclusion in the total income once again bears tax, under the Act. The word 'such' in the phrase 'such doubly taxed income' has reference to the foreign income which is again being subjected to tax by its inclusion in the computation of the income under the Act and not the same income under an identical head of income under the Act. The income from each head under Section 6 is not under the Act subjected to tax separately, unless the Legislature has used words to indicate a comparison of similar incomes but it is the total income which is computed and assessed as such, in respect of which tax relief is given for the inclusion of the foreign income on which tax had been paid according to the law in force in that country. The scheme of the Act is that although income is classified under different heads and the income under each head is separately computed in accordance with the provisions dealing with that particular head of income, the income which is the subject-matter of tax under the Act is one income which is the total income. The income-tax is only one tax levied on the aggregate of the income classified and chargeable under the different heads; it is not a collection of distinct taxes levied separately on each head of income. In other words, assessment to income tax is one whole and not group of assessments for different heads or items of income. In order, therefore, to decide whether the assessee is entitled to double taxation relief in respect of any income, the consideration that the income has been delivered under a particular head would not have much relevance. There is indeed nothing in the language of Section 49D which either expressly or by necessary implication restricts the grant of double taxation relief to incomes under the same head. In this view, we discharge the answers given by the High Court, and answer them in the negative and in favour of the assessee. [Emphasis supplied] On perusal of this judgment we are of the view that there is no assistance to the case of the assessee by that judgment. In that case, Hon'ble Supreme Court was concerned as to whether double taxation relief was available to only incomes under the same head. The basic dispute related to heads of income and not to the quantum of income doubly taxed in view of deductions granted in India. If at all, the thrust of this judgment goes against the assessee inasmuch as the Hon'ble Apex Court clearly recognised that the foreign income once again bears tax under the Act by its inclusion in the total income and not otherwise. In the present case, it is only 50 per cent of the foreign income which has been included in the total income and thus bore tax in India. 14. In view of the discussion in the foregoing paragraphs, we hold that the learned Commissioner (Appeals) was not justified in directing the Assessing Officer to grant the assessee double taxation relief under Section 91 as claimed by the assessee. We therefore reverse the impugned order on this point and restore the order of the Assessing Officer. 15. to 17. [These paras are not reproduced here as they involve minor issues].;

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