Jaganmohan Reddy, J. (alongwith Khanna and Dua, JJ.) Hegde, J. (Disagreeing). - (1.) THE Judgments of the court were delivered by
(2.) THESE are appeals by certificate from a common judgment of the Madras High Court rendered in three references under S. 66(1) of the Income Tax Act, 1922 (hereinafter called the 'Act') pertaining to assessment years 1953-54, 1954-55 and 1955-56. In the reference relating to the first assessment year three questions in respect of the last two, two questions were referred by the tribunal. The three questions relating to the first reference are : (1) Whether on the facts and in the circumstances of the case, the Tribunal is right in its view that the Commissioner of Income Tax had jurisdiction to revise the order of refund? (2) Whether on the facts and in the circumstances of the case, the Tribunal is right in its view that the order of refund under Section 48, read with S. 49-D is independent and distinct from the assessment order? (3) Whether on the facts and in the circumstances of the case, the Tribunal is right in confirming the computation of relief as modified by the Commissioner? In the reference relating to the last two assessment years, the questions were: (1) Whether on the facts and in the circumstances of the case, the Tribunal is right in modifying the order of the Appellate Assistant Commissioner? 354 (2) Whether on the facts and in the circumstances of the case, the Tribunal is right in its interpretation of S. 49-D? Before the High court the first question on the first reference was not pressed and therefore was answered against the assessee. The remaining two questions which were considered to be similar to the two questions in the other two references were also answered against the assessee. Before us the second question in the first reference was not pressed, as such substantially the third question in that reference and the first and second questions in the other two references which deal with the validity of the order of the Commissioner and the High court need alone be considered in these appeals. The assessee who is now dead and is succeeded by legal representatives was doing money-lending business in Malaya as well as in this country. He also owned rubber gardens abroad. In respect of the first assessment year 1953-54 the assessee declared his foreign income as Rs. 2,22,532.00 and showed a loss on business in India as Rs. 68,858.00 and income from other sources as Rs. 39,142.00. In the other two references it is not necessary to refer to the incomes earned by him abroad and in India except to say that the Appellate Assistant Commissioner allowed the appeal in part holding that the income from all the sources in India have to be considered together just as income from all sources abroad must be considered together and in that view held that the net assessed income in India from Malaya is what has suffered double tax. What is to be determined in these appeals is, on what basis should the double taxation relief be afforded to the assessee. It will be sufficient if we take the first assessment as illustrative of the problem which is posed in these appeals.
(3.) THE Income Tax Officer allowed double taxation relief on a sum of Rs. 1,92,816 by adding income from other sources to the foreign income and deducting from the total thus computed the loss of Rs. 68,858.00. THE Commissioner in exercise of his powers under S. 48, read with S. 49-D however held that that computation was wrong because according to him the business loss of Rs. 68,858.00 incurred by the assessee can be set off only against the business profits of Rs. 2,22,532.00 earned in Malaya resulting in a business income of Rs. 1,53,674.00 being the only income from Malaya which can be considered to have suffered double taxation. In appeal against the order of the Commissioner, the tribunal following the judgment in C. I. T., Madras v. Arunachalam Chtttiar came to the conclusion that the expression "such doubly taxed income" can only indicate that it is that portion of the income on which tax in fact has been imposed and paid by the assessee that qualifies for double income relief. THE High court also was of the view that the relief granted by S. 49-D on such doubly taxed income has reference to the factual double incidence under two different jurisdictions of tax on identical amount of income, that is to say, an identical income on which two taxes have been imposed under the Indian jurisdiction and the other by a foreign authority. It is clear that a decision in these appeals will depend on the construction of S. 49-D which bristles with difficulties and is not easy to resolve. A great deal would depend on the approach to the question and the meaning to be given to 'such doubly taxed income'. If we are to approach the construction of the S. on a comparison with the reliefs given under S. 49-A or on the analogy of cases decided under S. 27 355 of the United Kingdom Finance Act or on an a priori assumption that the relief under S. 49-D could not be greater than that which can be given under Section 49-A or on the basis of reciprocity under S. 27, we venture to think it will not lead to satisfactory conclusion. S. 49-A empowers the Central government to enter into agreements with the government of any country outside India for the granting of relief in respect of income on which have been paid both income-tax (including super-tax) under the Act and the income-tax in that country or with the government of any country outside India for the avoidance of double taxation of income, profits and gains under the Act and under the corresponding law in force in that country and may, by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement. Before the amendment of that S. by the Finance Act, 1953, with effect from 1/04/1953, there were other provisions giving relief in respect of Part B States and Dominion income-tax and agreement for avoidance of double taxation in India, Pakistan or U. K. apart from S. 49 which granted relief in respect of income-tax. In 1948, S. 49 which granted relief in respect of income taxed both in India and in U. K. was omitted and S. 49-A as it then was, was amended to enable central government to make provision by notification to grant relief in respect of income on which both India and United Kingdom levied tax. Under the amended S. 49-A the Incometax Double Taxation in United Kingdom Rules were made. It would appear on the relevant provisions an assessee can claim double taxation relief if he can show that he has paid tax on the same income both in India and in the foreign country. In order to obtain the relief it was also necessary to show that the income must have been charged to tax in both countries. Where a resident of India earns income in a foreign country with which the government of India has no arrangement for relief against or avoidance of double taxation, relief has been afforded to him under S. 49-D.;