J. S. VERMA, C. J. - (1.) THIS is a reference under section 256 (1) of the Income-tax Act, 1961 at the instance of the Revenue to answer the following question of law, namely, "whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that the assessee is entitled to relief u/s 91 (1) of the T. T. Act, 1961 on the full amount of tax deducted at sourse of Rs. 16, 413/- in the foreign country ?"
(2.) THE relevant assessment year is 1976-77. During the relevant period the assessee, a medical practitioner had received salary in Iran of Rs. 1,41,265/-on which the tax deducted at source in Iran was Rs. 16, 413/- THE assessee also earned the income of Rs. 5247/- in India during the same year. THE assessee claimed the deduction under section 80 RRA in respect of the remuneration received by him for services rendered outside India and also relief from double taxation under section 91 (1) of the Income-tax Act, 1961. THE Income-tax Officer held that the relief under section 91 (1) was allowable only of the amount of tax. paid on Rs. 70,632/- which was fifty percent of the remuneration received for services rendered outside India since the deduction under section 80 RRA was allowed to the same extent. THE Income-tax Officer took the view that fifty per cent of the foreign income which was deducted under section 80 RRA was not doubly taxed and, therefore, the remaining half only which had been included in the income for the purpose of tax in India was doubly taxed. Accordingly, it was only fifty percent of the foreign income which qualified for relief from double taxation under section 91 (1) of the Act. The assessee's appeal to the Appellate Assistant Commissioner failed who confirmed the view taken by the Income-tax Officer. However, assessee's further appeal to the Tribunal has been allowed and it has been held by the Tribunal that the assessee is entitled to the credit of the entire amount of tax of Rs. 16,413/- deducted at source in the foreign country on the total foreign income of Rs. 1,41,265/-; and not merely to the credit of tax paid on 50% of the foreign income i. e. Rs. 70,632/- which alone has been included for tax in India under the Income-tax Act, 1961. Hence, this reference at the instance of the Revenue. There is no controversy about the construction of section 80 RRA. According to this provision the assessee was entitled to a deduction from the remuneration received by him from the foreign employer of the amount equal to fifty percent thereof. On this basis deduction of Rs. 70,632/- being fifty percent of the total foreign income of Rs. 1,41,265/- was given to the assessee in computing the total income of which the assessee was required to pay tax in India under the Income-tax Act, 1961. The controversy is only about construction of section 91 (1) of the Income-tax Act, 1961. According to the assessee he is entitled to relief under section 91 (1) from double taxation of the total amount of tax amounting to Rs. 16, 413/- paid by him in the foreign country on the total foreign income of Rs. 1,41,265/- notwithstanding the fact that only fifty percent of the foreign income amounting to Rs. 70,632/- has been included in computing the total income for the purpose of payment of tax in India. On the" other hand the Revenue contends that since Rs. 70,632/- only being fifty percent of the total foreign income has been included in computing the total income for the purpose of taxation, it is only the tax paid on this amount in the foreign country which qualifies for relief from double taxation under section 91 (1 ). The question is, which of the constructions made of Section 91 (1) has to be accepted. The relevant parts of section 80 RRA and section 91 (1) of the Income-tax Act, 1961 as they existed at the relevant time are as under:- "80 RRA. Deduction in respect of remuneration from foreign employers- (1) Where the gross total income of an individual who is a citizen of India includes any remuneration received by him from any foreign employer for any service rendered by him outside India, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the individual, a deduction from such remuneration of an amount equal to fifty percent thereof: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91. Countries with which no agreement exists.- (I) If any person who is resident of India in any previous year proves that, in respect of his income which accrued or arose during that previous year outside India (and which is not deemed to accrue or arise in India), he has paid in any country with which there is no agreement under section 90 for the relief or avoidance of double taxation, income-tax, by deduction or otherwise, under the law in force in that country, he shall be entitled to the deduction from the Indian Income-tax payable by him of a sum calculated on such doubly taxed income at the Indian rate of tax or the rate of the said country, whichever is the lower or at the Indian rate of tax if both rates are equal. " Section 80 RRA says that in computing the total income of the individual' deduction equal to fifty percent of the foreign income shall be given. Thus the 'total income' computed under the Income-tax Act, 1961 includes only fifty percent of the foreign income by virtue of the deduction granted under section 80 RRA. As earlier stated there is no controversy about the meaning or effect of section 80 RRA and a deduction of an amount equal to fifty percent of the foreign income has been given 'in computing the total income of the individual'.
(3.) NOW comes for consideration the disputed meaning of section 91 (1) which admittedly applies in the present case. This provision provides for relief from double taxation on that amount included in the income which has already been taxed in the foreign country. The question is what is, the amount which can be said to be doubly taxed in these circumstances? The expression requiring construction in section 91 (1) is such doubly taxed income'. The provision for relief from double taxation is that deduction would be given from the Indian Income-tax payable by the individual of 'a sum calculated on such doubly taxed income at the rate of tax specified. This means that after ascertaining the total Indian Income-tax payable on the total income determined under the provisions of the Income-tax Act, 1961, giving the deduction under section 80 RRA and all benefits permitted by other provisions of the Act, a deduction would be made therefrom of tax calculated at the specified rate on such doubly taxed income', on which tax has already been paid in the foreign country. Ordinarily this should mean that any part of the foreign income, which has not been included in the income on which the Indian income-tax is payable cannot be treated as doubly taxed; and it is only that amount of the foreign income which is included once again in the income on which the Indian income-tax is payable which can be characterised as doubly taxed. Accordingly, it is only the tax already paid on that part of the foreign income which is included once again in the income and is taxed again under the Indian Income-tax Act which is required to be deducted for the purpose of giving relief from double taxation. In other words, that part of the foreign income of which deduction is given under section 80 RRA 'in computing the total income of the individual' for the purpose of determining the Indian income-tax payable cannot be said to be taxed once again in India in order to qualify for the relief from double taxation. This appears to be the logical construction of section 91 (1) of the Act which is also in consonance with the object of its enactment. If the assessee's contention is accepted then the assessee would be given relief not only in respect of the amount which has been taxed twice but also in respect of the amount which has been taxed once only in the foreign country and not also in India on account of the deduction given under section 80 RRA while computing the total income of the individual. It is obvious that section 91 (1) is not to be construed in isolation but in the company of section 80 RRA since the two are a part of the same scheme. We shall now consider certain other provisions and the specific argument of learned counsel for the assessee based on those provisions. ;