- (1.) This appeal, by certificate granted by the Calcutta High Court under section 66-A (2) of the Income Tax Act, 1922 arises out of a reference made by the Income Tax Appellate Tribunal (hereinafter referred to as "the tribunal") wherein the following question was referred for the opinion of the High Court: "Whether on the facts and in the circumstances of the case, the tribunal was right in holding that the sum of Rs 1 lakh was income derived from money lent as interest and brought into Pakistan in cash or in kind within the meaning of clause 5 (f) of the Schedule to the agreement for Avoidance of Double Taxation Between India and pakistan. "
(2.) The High Court has answered the said question against the Revenue and in favour of the assessee. It relates to Assessment Year 1949-50.
(3.) The facts, briefly stated, are that the assessee was the managing agent of two sugar mills situated in East Pakistan. The assessee had lent moneys to the managed companies in East Pakistan which was brought from Calcutta to east Pakistan for business of the managed companies of the assessee. The appellate Assistant Commissioner found that the interest that was due to the assessee on funds advanced to the managed companies in Pakistan would be rs 1,00,000 and held that Rs 1,00,000 was the income derived by the assessee from moneys lent on interest and brought into Pakistan in cash or in kind. The Tribunal agreed with the Appellate Assistant Commissioner and upheld the claim of the assessee that the matter fell within the ambit of clause 5 (f) of the Schedule to Article IV of India and Pakistan Avoidance of Double Taxation Agreement and it did not accept the claim of the Revenue that it fell under clause 9 of the said Schedule. Clauses 5 (F) and 9 of the said Schedule to the said Agreement read thus : Sources of income or nature of transaction from which income is derived percentage of income which each Dominion is entitled to charge under the Agreement Remarks 5. (F) Income derived from any money lent at interest and brought into a Dominion in cash or in kind. 100% by the Dominion into which the money is brought. Nil by the other. 9. Any income derived from a source or category of transactions not mentioned in any of the foregoing items of this Schedule. 100% by the Dominion in which the income actually accrues or arises. Nil by the other.;