Sabyasachi Mukharji, J. - (1.) This reference arises out of the assessment years 1957-58, 1958-59 and 1959-60. The following question has been referred to this court under Section 66(1) of the Indian Income-tax Act, 1922 : " Whether, on the facts and in the circumstances of the case and on a proper construction of Section 49A and Explanation (ii) to Section 49D of the Indian Income-tax Act, 1922, the Tribunal was right in holding that the Income-tax Officer was not justified in deducting the amount of abatement allowable under the Agreement for Avoidance of Double Taxation with Pakistan from the amount of the Indian income-tax for the purpose of determination of the Indian rate of tax mentioned in Clause (b) of Section 49D(3) of the said Act ? "
(2.) The assessee is a tea company. It, in the relevant years, had tea gardens in what was then known as East Pakistan, in respect of which agricultural income-tax was payable in Pakistan, The assessee's head office had been, however, located in Calcutta and as such the business was controlled and maintained wholly from the taxable territories under the Indian Income-tax Act, 1922. Consequently its income as arising from manufacture and sale of tea had to be assessed under the Indian Income-tax Act, 1922, and in the assessments for the tax years 1957-58, 1958-59 and 1959-60 it was treated as a resident company. The assessee was, therefore, entitled to deduction from the Indian income-tax payable by it in respect of the above assessment years certain sums to be calculated in accordance with the provisions of Section 49D(3) of the Indian Income-tax Act, 1922, the material portion of which at the relevant time provided as follows; "49D. (3) If any person who is resident in the taxable territories in any year proves that in respect of his income which accrues or arises to him during that year in Pakistan he has paid in that country, by deduction or otherwise, tax payable to the Government under any law for the time being in force in that country relating to taxation of agricultural income, he shall be entitled to a deduction from the Indian income-tax payable by him- (a) of the amount of the tax paid in Pakistan under any law aforesaid on such income which is liable to tax under this Act also ; or (b) of a sum calculated on that income at the Indian rate of tax; whichever is less."
(3.) In this case there is no dispute as regards the quantum of the agricultural income of each year which had been subjected to taxation in Pakistan and there is no dispute that relief in the present case had to be calculated in terms of Clause (b) of the above sub-section which spoke of deduction of a sum calculated on the agricultural income arising in Pakistan at the "Indian rate of tax". The expression "Indian rate of tax" was defined in Explanation (ii) which follows Sub-section (4) to Section 49D and provided at the relevant time as follows : " .... the rate determined by dividing the amount of Indian income-tax after deduction of any relief due under the other provisions of this Act but before deduction of any relief due under this section, by the total income.";