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Commissioner of Income-tax Vs. Associated Cement Companies Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 137 of 1976
Judge
Reported in[1991]188ITR511(Bom)
ActsIncome Tax Act, 1922 - Sections 49AA
AppellantCommissioner of Income-tax
RespondentAssociated Cement Companies Ltd.
Excerpt:
.....of assessment' from pakistan authorities which assessee is unable to produce - assessee unable to file 'certificate of assessment' because of strained political relations between india and pakistan and failure of tax authorities in pakistan - in case 'certificate of assessment' is impossible to obtain assessee can resort to other collateral evidence and satisfy taxing authority - tribunal justified in not insisting assessee to produce before income tax officer satisfactory evidence of tax paid by it upon assessment in pakistan - question answered in affirmative. - - the matter was carried to the income-tax appellate tribunal and the assessee stated that it had found it impossible to file this certificate of assessment because of the strained political relations between india..........income in pakistan at the figure of rs. 82,53,308 on a proportionate basis. the tax payable on the pakistan income was worked out at rs. 39,92,098. the assessee urged that the demand in respect of this amount should be kept in abeyance. deducting this figure from the gross demand of rs. 2,46,31,614, the tax payable was worked out by it at rs. 2,06,39,516. the tax already paid under section 210 and that deducted at source amounted to rs. 2,08,34,995. the assessee, therefore, claimed that it was entitled to a refund of rs. 1,95,479 on which interest was payable to it under the provisions of section 214 of the income-tax act, 1961. the income-tax officer deducted from the gross demand of rs. 2,46,31,614 the aforesaid amount of rs. 2,08,34,995, arrived at the net demand of rs. 37,96,618 and.....
Judgment:

S.P. Bharucha, J.

1. The reference is made at the instance of the Revenue in regard to the assessment year 1965-66 and the following question is posed :

'Whether, on the facts and in the circumstances of the case, the Tribunal was in law justified in holding that the assessee was entitled to refund of Rs. 1,95,479 and interest thereon under section 214 on the Income-tax Officer satisfying itself in regard to the taxes paid on Pakistan by the production of collateral evidence in the shape of copies of assessment orders, notice of demand, etc., and in the absence of the certificate of assessment from the Pakistan authorities which the assessee is unable to produce?'

2. The assessee is a public limited company which owns factories that manufacture cement. Two of these factories were situated within Pakistan. They were run till March, 1966, when they were closed down and sold off. The income, according to the assessee, from the two factories in Pakistan was included in the assessee's assessments both in India and in Pakistan. The Income-tax Officer is India assessed the total income of the assessee for the year in question at Rs. 5,09,25,526 upon which the gross demand of tax worked out of Rs. 2,46,31,614. The Income-tax Officer calculated the assessee's income in Pakistan at the figure of Rs. 82,53,308 on a proportionate basis. The tax payable on the Pakistan income was worked out at Rs. 39,92,098. The assessee urged that the demand in respect of this amount should be kept in abeyance. Deducting this figure from the gross demand of Rs. 2,46,31,614, the tax payable was worked out by it at Rs. 2,06,39,516. The tax already paid under section 210 and that deducted at source amounted to Rs. 2,08,34,995. The assessee, therefore, claimed that it was entitled to a refund of Rs. 1,95,479 on which interest was payable to it under the provisions of section 214 of the Income-tax Act, 1961. The Income-tax Officer deducted from the gross demand of Rs. 2,46,31,614 the aforesaid amount of Rs. 2,08,34,995, arrived at the net demand of Rs. 37,96,618 and worked out the tax kept in abeyance on a proportionate basis with reference to this amount.

3. In appeal, the Appellate Assistant Commissioner rejected the claim of the assessee to refund of Rs. 1,95,479 and interest thereon under section 214 on the ground that the refund would be due to the assessee only when it produced before the Income-tax Officer a certificate of assessment from the tax authorities in Pakistan. The matter was carried to the Income-tax Appellate Tribunal and the assessee stated that it had found it impossible to file this certificate of assessment because of the strained political relations between India and Pakistan and the failure of the tax authorities in Pakistan. It tendered, however, the copy of an affidavit filed by the Financial Controller before the Commissioner of Income-tax in setting out all the facts relevant to its assessment to income-tax in Pakistan for the concerned assessment year. The Tribunal held that, in view of the fact that it was not possible for the assessee to produce the certificate of assessment from the Pakistani tax authorities, it was fair and proper that the Income-tax Officer should satisfy himself in regard to the assessee's assessment in Pakistan with reference to other evidence, such as copies of the assessment order, notice of demand, etc. Such collateral evidence, the Tribunal said, should, in the circumstances of the case, be treated as sufficient compliance with the requirements.

4. Mr. Jetley, learned counsel for the Revenue, drew our attention to the Agreement for Avoidance of Double Taxation between India and Pakistan [1948] 16 ITR 4. This agreement was entered into, inter alia, in exercise of the powers conferred by section 49AA of the Indian Income-tax Act, 1922. By a notification issued by the Government of India on December 10, 1947, the agreement was required to be given effect to in India. What is relevant therein for our purposes is sub-clause (b) of article VI. It reads thus : (See [1948] 16 ITR 4)

'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 a 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.'

5. Mr. Jetley submitted that, having regard to the aforesaid provision, a certificate of the assessment issued by the Pakistani tax authorities was imperative and no refund could be given to the assessee without it. The agreement is between two States and is intended to avoid double taxation. Sub-clause (b) of article VI relates to the obligation of the State making the demand, without allowing the abatement provided for by the agreement, to hold in abeyance for a period of at least one year, the collection of the portion of the demand equal to the estimate abatement. Where the assessee produced a certificate of assessment from the other State within such period of time, the uncollected portion of the demand is required to be adjusted against the abatement provided for by the agreement. If such certificate is not produced, the outstanding demand may be collected. The sub-clause does not impose an obligation of a mandatory nature upon the assessee. It cannot be read to place upon the assessee an obligation to produce such certificate of assessment or forfeit his right to the abatement. A certificate of assessment would be the best evidence but, where it is impossible to obtain it, the assessee can resort to other evidence and satisfy the taxing authorities on the strength thereof. Having regard to the circumstances of the case, the Tribunal was, therefore, justified in not insisting the assessee to produce before the Income-tax Officer other satisfactory evidence of the tax paid by it upon assessment in Pakistan.

6. In the circumstances, the question that is posed to us is answered in the affirmative and in favour of the assessee.

7. There shall be no order as to costs.


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