- (1.) THE partition of British India and the constitution of Dominions of India and Pakistan, in the year 1947, brought to their heels many problems, including the problem of avoidance of double taxation of assesses carrying on business and earning income both in India and Pakistan. The petitioner State Bank of India is confronted with such a difficulty and has approached this Court for relief. A Bank called the Imperial Bank of India was constituted under the Imperial Bank of India Act (XLVII of 1920) and took over the undertakings of then existing Presidency Banks at Bombay, Madras and Calcutta. The said Imperial Bank of India had numerous branches, inter alia, in territories now comprised in Pakistan. On July 1, 1955 The State Bank of India Act (XXII of 1955) came into force and by virtue of the said Act the entire undertaking of the Imperial Bank of India, along with all its properties, rights and liabilities, devolved on and vested in the petitioner Bank Assessment of Income-tax was, as such, continued by the Income-tax authorities against the petitioner Bank as successor to the former Imperial Bank of India.
(2.) IN the assessment year 1947-48 the petitioner Bank was resident both in India and Pakistan. Consequently, the income accruing in both the countries (apart from foreign income outside both the countries) was included in the computation of income of both the countries, with the result that there arose a possibility of double taxation. In order to guard against such possibility, Section 49 AA was inserted in the Income Tax Act, 1922, by the India (Adaptation of Income Tax, Profit Tax and Revenue Recovery Acts) Order, 1947, which read as follows: - "the Central Government may enter into an agreement with Pakistan for the avoidance of Double taxation of income, profits and gains under this Act and under the law in force in Pakistan and may by notification in the official Gazette make such provision as may be necessary for implementing the agreement. " Section 49a was amended by the Income Tax and Business Profit Tax (Amendment) Act, 1948 and the words "or the United Kingdom" were inserted after the word "pakistan" wherever appearing in the section. Thereafter, there was an agreement for avoidance of double taxation in India and Pakistan, entered into between the two countries (then two Dominions) and the said agreement was notified on December 10, 1947. In this Rule, I am concerned with Articles IV, V and VI of the said agreement and here in below the said Articles are set out:-Article IV-Each Dominion shall make assessment in the ordinary way under its own laws ; and where either Dominion under the operation of its laws charges any income from the sources or categories of transactions specified in column 1 of the schedule to this Agreement (hereinafter referred to as the schedule) in excess of the amount calculated according to the percentage specified in columns 2 and 3 thereof, that Dominion shall allow an abatement equal to the lower amount of tax payable on such excess in their Dominion as provided for in Article VI. (Underlined by me for the purpose of the discussion hereinafter stated), article V-Where income accruing or arising without the territories of the Dominions is chargeable to tax in both the Dominions, each Dominion shall allow an abatement equal to one-half of the lower amount of tax payable in either Dominion on such doubly taxed income. Article VI- (a) For the purposes of the abatement to be allowed under Articles IV and V, the tax payable in each Dominion on the excess or the doubly taxed income, as the case may he, shall be such proportion of the tax payable in each Dominion as the excess or the doubly taxed income bears to the total income of the assesses in each Dominion. (b) Where at the time of assessment in one Dominion, the tax payable on the total income in the other Dominion is not known, the first Dominion shall make a demand without allowing the abatement, but shall hold in abeyance for a period of one year (or such longer period as may be allowed by the Income Tax Officer in his dicretion) the collection of a portion of the demand equal to the estimated abatement, if the assesses produces the certificate of assessment in the other Dominion within the period of one year or any longer period allowed by the Income Tax Officer, the uncollected portion of the demand will be adjusted against the abatement allowable under this agreement ; if no such certificate is produced, the abatement shall cease to be operative and the outstanding demand shall be collected forthwith. Of the schedule referred to in Article IV. I am concerned with Item 9 only of the Schedule, which I set out below:-
(3.) THE language of the agreement is a good deal inappropriate at places. So much so that in the case of Commissioner of income Tax v. Shanti K. Maheswari, (1) (1958) 33 I. T. R. 313 at p. 317, Tendolkar, J. observed that with reference to the Agreement "a cynic may well say that the language has been employed to conceal the thoughts of its authors " in dealing with the language of Article 4, Tendolkar, J. observed in the judgment referred to above (at page 323) : "now in the first instance it appears to us-and counsel at the Bar are also agreed-that the word 'their' in article IV is obviously a slip or an error and could in its context have only been 'either'; and it is only on the basis of the word 'either' that we will deal with the meaning to be attached to Article IV. Indeed if the word were 'their' it may make it somewhat more difficult than it actually is to interpret Article IV. " I do not know how his Lordship could have arrived at the same conclusion, if he had not read 'either' for 'their'. The word 'their' is not synonymous with 'either', the former being disjunctive in character and the latter being not so. Be that as it may, I respectfully agree with his Lordship that in order to make Article IV workable the word 'their' should be read as 'either'. His Lordship had one advantage when he was pleased to read 'either' in place of 'their', because the Bar agreed to such a reading. I have not that advantage. I have, therefore, incidentally to see if international agreements containing obvious errors, may be corrected or correctly read by the judiciary. In this difficult task I have been greatly assisted by Mr. Sampath Iyengar, learned Advocate for the petitioner and by Mr. Gouri Mitter, learned Advocate for the respondents. Regard being had to the nature of the difficulty confronting me in this respect, I sought further assistance from Mr. Subrata Roy Chowdhury, an Advocate well known for his studies in International Law, as amicus curiae and I am thankful to him for his able assistance. The word 'treaty' is a generic term and means any international agreement in written form, whether embodied in a single instrument or in two or more related instruments, (called either treaty, convention, protocol, covenant, charter, statute, act, declaration, concordat, exchange of notes, agreed minute, memorandum of agreement, modus vivendi or any other appellation)concluded between two or more states or other subject of international law and governed by international law. Signature, ratification, accession, acceptance or approval of treaty means in each case the act whereby a state establishes, on the international plane, its consent to be bound by a treaty. Signature, however, may also mean, according to the context, an act whereby a state authenticates the text of a treaty without establishing its consent to be bound. After treaties are made, particularly treaties between members of the United Nations, it is necessary to have such treaties registered and published in the manner provided by Article 102 of the Charter of United Nations. The said Article reads as follows: - " (1) Every treaty and every international agreement entered into by any members of the United Nations after the present charter comes into force shall as soon as possible be registered with the Secretariat and published by it (2) No party to any such treaty or international agreement which has not been registered in accordance with the provisions of paragraph 1 of this Article may invoke that treaty or agreement before any organ of the United Nations. ";