Sinha, C.J. - (1.) This is an appeal which relates to the interpretation of certain articles in the ''agreement for avoidance of double taxation between India and Pakis tan" This agreement was entered into between the Dominions of India and Pakistan under the powers granted by Section 49AA of the Income-tax Act 1922, (hereinafter referred to as the 'said Act') Section 11A of the Excess Profits Tax Act, 1947 and Section 18A of the Business Profits Tax Act 1947, as adopted by the India (Adaptation of Income-tax, Profits tax and Rent Recovery Acts) Order 1947 Section 49AA of the said Act runs 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". The question posed in this appeal is in respect of the income assessment of the appellant for the assessment year 1947-48.
(2.) The reason why Section 49AA was inserted in the said Act, is as follows: partition of British India in the year 1947 raised the problem as to how to avoid excessive or double taxation of assessees who had income in both the Dominions. This question has of course been rendered more acute by the separation of India and Pakistan into two separate sovereign States. In order to guard against the possibility of excessive or double taxation. Section 49AA was introduced in the said Act.
(3.) Section 49AA 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, we are concerned with Articles IV, V and VI of the said agreement which are set out below: "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 source or categories of transactions specified in Column I of the Schedule to this Agreement (hereafter 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 paybale on such excess in (their) Dominion as provided for in Article VI (Underlined here in ' ') 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 paybale in each Dominion on the excess or the doubly taxed income, as the case may be, shall be such proportion of the tax paybale in each Dominion at the excess or the doubly taxed income bean to the total income of the assessee 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 discretion) the collection of a portion of the demand equal to the estimated abatement. If the assessee produces the certificate of assessment in the other Dominion within the period of one year or any longer period allowed by 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, we are concerned in this case with Item 9 only there of which is set out below:-- Source of Income (sic) nature of transaction from which income is derived Percentage of income which each Dominion is entitled to charge under the Agreement. Remarks. 1 2 3 4 9 Any income derived from a source or category of transaction-not mentioned in any of the foregoing items of this schedule. 100 per cent by the in which the income actually accrues or arises. Nil by the other Dominion In this case, we are called upon to interpret the provision of Articles IV, V and VI of the said Agreement The language of the Agreement is confused, inapt and extremely difficult to decipher. It is, therefore, all the more necessary to have a judicial interpretation of it in Commissioner of Income-Tax Bombay City II v. Shanti K Maheswari, Tendolkar J observes that in respect of the said agreement a cynic will say that the language has been employed to conceal the thoughts of its authors This Court has on numerous occasions commented on the manner in which legal drafting is being done These comments have however fallen on deaf ears. In construing such a document, we can only do our best the result may not be entirely satisfactory.;