ASSOCIATED CEMENT COMPANIES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under S. 256(1) of the IT Act, 1961, by the Tribunal, Bombay Bench 'D', Bombay, referring to us for our opinion the following questions :

(2.) WE are concerned in this case with the asst. yrs. 1963 64 and 1964 65. The assessee, which is cement manufacturing company, had, during the relevant assessment years, two of its 16 cement factories in Pakistan, which were ultimately closed down and sold of in 1965. However, for the concerned assessment years the assessee's income from the said factories in Pakistan was required to be included in its assessment in India for computing its world income. The ITO computed such income of the assessee is Pakistan at Rs. 73,18,580 and estimated the income tax at Rs. 34,33,227 as payable thereon. The ITO, in view of the provisions of Art. VI(b) of the Agreement for Avoidance of Double Taxation between India and Pakistan, observed in his order :

(3.) THE assessee by its letter dt. 25th Oct., 1967, objected to the said method of calculation adopted by the ITO in first deducting from the gross demand, the advance payment made by it and holding that balance of Rs. 11,25,011.16 in abeyance under the D.T.A. and contended that the tax of Rs. 34,33,227 attributable to the assessee's income in Pakistan as computed at Rs. 73,13,550 ought to have been first deducted from the gross demand of Rs. 2,46,89,251 raised by the ITO and from the balance which represented the tax payable in India a credit for the advance tax paid of Rs. 2,35,64,239.84 should have been allowed. The assessee, therefore, claimed that consequently the balance of Rs. 23,08,215.84 was refundable to the assessee company on which it was entitled to interest under S. 214 of the Act from the date of payment of advance tax till the payment of refund. The ITO by his letter dt. 30th Oct., 1967, rejected the said claim of the assessee both for the refund and interest.