P.B.MUKHARJI, J. -
(1.) THIS is a reference by the CIT under s. 66(1) of the Indian IT Act. The two questions asked in the reference are as follows:
"(1) Whether, in the facts and circumstances of this case, the claim for double taxation relief was properly made within the meaning of s. 49A of the IT Act, read with the IT (Double Taxation Relief) (United Kingdom) Rules, 1948 ? and (2) Whether, in the facts and circumstances of this case, the claim for the double taxation relief was made within the period prescribed under the Indian IT Act and the Rules?"
(2.) BEFORE answering these two questions, it will be appropriate to set out the relevant facts. The assessee is a non-resident sterling company. Dividend is its only source of income from India. It had also income which accrued or arose outside India from dividends from companies outside India having income accruing or arising in India. Dividends from India were returned in s. A of the return under s. 22(2), whereas other dividends were returned in s. C of the said return as not being chargeable in India.
The assessments were made in the first instance for the year 1940-41 and 1941-42 on the 16th Dec.,1943, for the year 1942-43 on the 17th Dec., 1943, and for the year 1943-44 on the 20th Jan., 1944. In such assessments the ITO did not include the income accruing outside India in the total income of the company. This was made because of the then decision of the Calcutta High Court in Raleigh Investment Co. Ltd. (1943) 11 ITR 393 (Cal). The calendar of the history of the Raleigh Investment case (supra) has a bearing on the assessments under consideration in this reference. On the 9th April, 1943, a Special Bench of the Calcutta High Court of Derbyshire C.J., Mitter and Lodge JJ. in Raleigh Investment Co. Ltd. vs. Governor-General in Council (supra), held that as the dividends of the sterling companies were declared outside the then British India and paid to the assessee company outside British India, they were income arising to a non-resident outside British India and that Expln. (3) to s. 4(1)(c) of the Indian IT Act was ultra vires and invalid inasmuch as it was not within the extra-territorial powers conferred on the Indian Legislature by the Government of India Act, 1935. Therefore, it held that, as the tax was paid under an illegal demand, it could be recovered back as money had and received and that s. 67 of the Indian IT Act was not a bar to the maintainability of the suit. About a year thereafter on the 27th of March, 1944 the Federal Court of India reversed that decision of the Calcutta High Court in Governor-General in Council vs. Raleigh Investment Co. Ltd. (1944) 12 ITR 265 (FC). It held that the source of the dividends paid to the assessee-company by the sterling companies was British India and in making the dividends liable to income-tax and super-tax on that basis the Indian Legislature was not giving its law any extra-territorial operation and, even if there was any extra-territorial operation in the impugned provisions, it was within the legislative powers given to the Indian Legislature by the Government of India Act, 1935. The Federal Court, however, also held that the suit related to a matter concerning revenue within s. 226 of the Government of India Act, 1935, and the High Court of Calcutta had no original jurisdiction to entertain the suit. Thereafter, on the 2nd Feb., 1947, the Privy Council dismissed the suit on the technical ground that this was a matter concerning revenue and did not express any opinion on the question whether the impugned provision was ultra vires or not. The Privy Council decision is reported in Raleigh Investment Co. Ltd. vs. Governor-General in Council (1947) 15 ITR 332 (PC). The fate of the Raleigh Investment case between the 9th April, 1943, and the 2nd Feb., 1947, had material effect on the assessments in this reference.
While the Raleigh Investment (supra) case was going through the hierarchy of Courts, the assessee filed formal notices of claim under s. 49 of the IT Act on the 24th Dec., 1943, and 25th Jan., 1944. This was accepted by the IT Department as a "provisional claim" for relief from double income-tax for the four years mentioned there in those letters--1940-41, 1941-42,1942-43 and 1943-44. Then the records of this case were transferred to Bombay where the Calcutta decision of the Raleigh Investment case (supra) was not binding on the ITO. Notices under s. 34 of the IT Act were issued upon the assessee on the 28th Sept., 1944, for all the above years by the ITO for assessment of what was then regarded as the escaped income from the dividends, which could not be taxed under the Calcutta decision in Raleigh Investment case (supra). Now these revised assessments under s. 34 were completed on the 29th March, 1945, the 28th March, 1946, the 27th March, 1947, and the 19th Jan., 1948, for the respective years 1940-41, 1941-42, 1942-43 and 1943-44. The communications of the orders of assessment of these respective years were made on the 7th April, 1945, the 9th April, 1946, the 9th April, 1947, and the 3rd Feb., 1948.
(3.) FOR the proceedings under s. 34 of the IT Act on the escaped assessment, the assessee's whole case was that they were entitled to relief for the same reasons as on the original assessment from double income-tax both in India and the United Kingdom and, therefore, they should be allowed that relief. The assessee's claim was lost on the ground that such claim for relief from double income-tax from proceedings under s. 34 was not put in time and was, therefore, barred by limitation. It may be appropriate to mention here that by letter dt. the 26th Oct., 1951, wrongly mentioned as 27th Oct., 1951, in the reference, M/s Price Waterhouse Peat and Co., for the assessee, enclosed an application for relief from double income-tax under s. 49 of the IT Act. This letter has, by consent of parties and counsel, been made a part of this paper book.
Now the ITO refused to grant relief to the assessee from double taxation in respect of the escaped income under s. 34 on the grounds:
(1) no regular claim under the prescribed form was submitted within the prescribed period of time; and (2) the provisional claim made on the 24th Dec., 1943, and 25th Jan., 1944, were in general terms and the returns filed before those dates did not include the dividend on which the double income-tax relief was now claimed.