- (1.) THE following questions of law have been referred to us for opinion:- " (1) Whether on the facts and in the circumstances of this case, the amount of rs. 3,43,138/- received by the assessee was derived from a source or category of transaction mentioned in Item 5 (g) of the schedule to the Agreement for the Avoidance of Double Taxation of Income between India and Pakistan ?" (2) If the answer to the above question be in the negative, then whether the aforesaid sum fell under item 9 of the Schedule to the aforesaid Agreement ?"
(2.) THE circumstances under Which the aforesaid two questions come up for our consideration are hereinafter stated in brief. The assessee, Bengal river Service Company Limited, was, at the material time, carrying on the business of plying of river boats. The assessment year with which are concerned in this reference is 1947-48, corresponding to the Calender year 1946, which is the accounting year. At a period of time when there had been no partition of India, certain vessels belonging to the assessee were requisitioned by the then Government of India 'on charter basis' It appears from the chart annexed to the statement of case that five vessels belonging to the assessee were requisitioned, in the year 1941, and seven other vessels were requisitioned in the year 1945. The first lot of 5 vessels were requisitioned in Calcutta and were all de-requisitioned, also in calcutta, in the year 1947. The other seven vessels were requisitioned at Narayanganj and were de-requisitioned, also at narayangunj, in the year 1947. We are, however, in this difficult position that we do not have the order of requisition on our records and we do not know under which particular provision of law the requisition had been made, although we are inclined to think that such requisition may have been made under the provision of the Defence of india Rules, which were in operation at that time. Also, we do not have the document of Charter-party on our records and do not know the terms thereof. Normally for requisition of property compensation is payable. We would have proceeded on the basis that the sum of money that was being paid to the assessee, on account of the requisition, was compensation but the case proceeded on the basis that the money paid to the assessee was either vessel hire or vessel rent and may be treated as income. In the absence of the orders of requisition made and the charter, in which the agreement between the parties for user of the vessels by the government was included, no contenion was raised before us that the money received by the assessee would not be income being compensation paid for requisition of property. We make this position clear at the outset, in order to emphasise upon the very narrow limits within which the arguments advanced both on behalf of the Revenue and the assessee were encompassed.
(3.) AT the point of time when the assessment was taking place partition of british India into India and Pakistan had already taken place. It is well known that the partition of India brought mny problems in its wake. One such problem was the problem of double taxation for businessmen, who used to carry on business in both the geographical localities which ultimately became India and Pakistan. In order to solve their difficulties, there was an agreement between the then Dominons of India and Pakistan known as the agreement for Avoidance of Double taxation in India and Pakistan. It is necessary for us to refer to certain portions of that agreement, which was notified on December 10, 1947: "in exercise of the powers conferred by section 49a of the Indian Income Tax Act, 1922 (XI of 1922), section 11a of the Excess Profits Tax Act, 1940 (XV of 1940), and section 18a of the Business Profits Act, 1947 (XXI of 1947), as adapted by the India (Adaptation of Income Tax, Profits Tax and revenue Recovery Acts), Order, 1947, the Central Government is pleased to direct that all provisions of the annexed agreement for the avoidance of double taxation of income, profits and gains 101 under the said Acts which has been concluded between India and Pakistan shall be given effect to in the Dominion of India. Whereas the Government of the dominion of India and the Government of the Dominion of Pakistan desire to conclude an agreement for the avoidance of double taxation of income chargeable in the two dominions in accordance with their respective laws : now, therefore, the said two Governments do hereby agree as follows-Article I. ******* article II. ******* article III. ******* 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 or transactions specified in column I 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 article V. ******* article VI.- (a) For the purpose of the abatement to be allowed under article IV or V, the tax payable in each dominion on the excess or the doubly taxed income, as the case may be, 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 assessee in each Dominion. (b) ******* article VII. ******* article VIII. ******* article IX. ******* JUDGEMENT_27_TLCAL0_1967Html1.htm;