Prem Chand Jain, J.
1. The petitioner-company, which is a public limited company registered under the Companies Act, was originally incorporated in the name of Saraswati Sugar Syndicate Ltd, with its registered office at Lahore. In July, 1947, the registered office of the company was shifted to Abdullapur (now Yamuna Nagar), Distt. Ambala. The name of the company was changed to Saraswati Industrial Syndicate Ltd. with the approval of the Central Govt. with effect from 2nd May, 1963.
2. The petitioner-company was an assessee under the Indian Income-tax Act, 1922 (hereinafter referred to as the 'old Act'), as also under the Income-tax Act, 1961 (hereinafter called 'the Act'), and had been regularly assessed and paying income-tax on its income. During the accounting year relevant to the assessment year 1947-48, the petitioner-company deposited a sum of Rs. 1,29,953-4-0 as advance tax under Section 18A of the old Act. The advance tax was deposited in two equal instalments of Rs. 64,976-10-0 on 14th December, 1946, and 15th March 1947.
3. On 15th August, 1947, partition of the country took place under Section 18(3) of the Indian Independence Act, 1947 (hereinafter called as the ' Indian Act '), the I.T. Act as it existed before the coming into force of the Indian Act', applied both to the dominions of Pakistan and India and the effect of this simultaneous application to both the dominions was that the advance tax paid by the petitioner-company was liable to be adjusted against the assessments made both in Pakistan and in India.
4. It is further alleged that, vide order dated 13th November, 1948, copy annex. P-2 to the petition, the ITO, Ambala, completed the assessment of the petitioner-company for the assessment year 1947-48 (accounting year ending 31st August, 1946) and created a demand of Rs. 2,32,524 against the petitioner-company. Similarly, the ITO 'E' Ward, Lahore, vide his order dated 16th March, 1950, completed the assessment of the petitioner-company for the assessment year 1947-48 (accounting year ending 31st August, 1946) and after adjusting the abatement under the inter-dominion agreement, created a net demand of Rs. 21,266-5-0 against the petitioner. Copy of the order dated 16th March, 1950, is attached as annex. P-3 to the petition.
5. In the present petition, the only dispute is whether the petitioner-company is entitled to claim adjustment of an amount of Rs. 1,08,686-15-0 which amount is due to it out of the advance tax of Rs. 1,29,953-4-0 paid by it in Lahore. The amount of Rs. 1,08,686-15-0 has been calculated after deducting the amount of Rs. 21,266-5-0 for which a demand was created by the ITO, Lahore, with regard to the assessment year 1947-48(accounting year ending 31st August, 1946). So far as the payment of the amount of advance tax, i. e., Rs. 1,29,953-4-0 is concerned, the same has been found to have been proved as intimated by the ITO, Ambala, to the petitioner-company, vide letter dated 26th November, 1948, copy annex. P-4. In spite of the fact that prolonged correspondence has taken place between the petitioner-company on the one side and the revenue on the other side, no relief was granted to the petitioner-company with regard to the amount of Rs. 1,08,686-15-0 and finally notice dated 1st September, 1975, copy annex. P-22, was issued against the petitioner-company requiring it to make the payment of the aforesaid amount within 15 days of the receipt of the notice, failing which the amount would be realised by resorting to coercive measures. It is in this situation that the present petition has been filed by the petitioner-company calling in question the legality of the notice issued by the revenue, copy annex. P-22, with a further prayer that a direction be issued to the revenue to make an adjustment of the amount of Rs. 1,08,686-15-0.
6. In response to the notice, the respondents have put in appearance and have filed written statement, in which the material allegations made in the petition have been controverted. What has been averred in the written statement is that the advance tax paid was adjustable towards the assessments made for the assessment years under consideration both in Pakistan as well as in India. However, it depended on the excess, if any, which was made after the adjustment of the demand in the respective dominions. For this, one had to wait for the refund order, if any, passed as a result of the assessment. No adjustment could be granted as the petitioner had not furnished any order of the Pakistan authorities granting it the refund claimed by it as a result of the assessments made in Pakistan. I am not referring to the other averments made in the written statemeat as, during arguments, the main stand on behalf of the revenue by the learned counsel was that adjustment could be granted to the company only if any refund voucher was produced from the Pakistan authorities.
7. The petitioner-company chose to file a replication to the written statement submitted on behalf of the respondents in which the stand taken by it in the petition has been reiterated.
8. The short question that needs determination in this petition is whether the petitioner is entitled to have the amount of Rs. 1,08,686-15-0 set off in India from the impugned assessment for the year 1947-48 out of the amount that he paid in Lahore as advance tax under Section 18A of the old Act.
9. It was contended by Mr. Sibal, learned counsel, that the petitioner had made advance payment under Section 18A of the old Act, that this section read with Section 48 provides for a refund of the excess amount ; that the petitionerwas assessed in Lahore for the assessment year 1947-48 and a demand for an amount of Rs. 21,266-5-0 was created, that the said amount was paid by the petitioner on 28th February, 1955, that in reality the petitioner was entitled to claim a set off with regard to the entire amount of advance tax paid, i. e., for Rs. 1,29,953-4-0, as the amount of the demand created by the ITO, Lahore, had independently been paid by the petitioner, that the petitioner was legally entitled to the adjustment of the advance tax paid in Pakistan, in India, that it was beyond the control of the petitioner to secure the refund voucher from Pakistan in spite of the fact that untiring efforts were made by the petitioner in that respect and that, in the circumstances of the case, before claiming adjustment, it was not at all incumbent on the petitioner to have produced the refund voucher.
10. On the other hand, the main stand taken by Mr. Awasthy, learned counsel for the revenue, was that the petitioner could claim adjustment of the amount of advance tax paid by him in Pakistan only on the production of the refund voucher. What was emphasised by the learned counsel was that assessments had taken place subsequently, also in Pakistan, and that, as is evident from the letter of the petitioner-company written to the ITO, Ambala Cantt., dated 14th January, 1955, copy annex. P-7, the only prayer made was to keep the collection of tax in abeyance till the company had received the refund voucher from the Pakistan authorities and that in order to allow any adjustment it was incumbent on the petitioner to have produced the refund voucher for verification as to how much amount out of the advance tax remained unadjusted. In-other words, the only plea put forward, by the learned counsel was that the production of a refund voucher was a sine qua non for an adjustment of the balance amount of advance tax in India.
11. After giving our thoughtful consideration to the entire matter, we find considerable force in the contention of the learned counsel for the petitioner. It may be observed at the outset that in the present case the point involved, though simple, has been unnecessarily complicated by the revenue. As is evident from the facts of the case, payment of advance tax under Section 18A in Pakistan to the tune of Rs. 1,29,953-4-0 is admitted. The only technical plea taken by the revenue in order to avoid adjustment is that a refund voucher should be produced by the petitioner. In our view, this is an untenable approach of the revenue, especially when there is absolutely no material on the record to show that in subsequent years some demand was created in Pakistan against the petitioner and that against that demand the amount of advance tax was liable to be adjusted. As earlier observed, the petitioner even did not ask for an adjustment of the amount of Rs. 21,266-5-0 for which a demand was created by the ITOfor the assessment year in question and that he paid that amount on the creation of the demand. There would have been some merit in the stand taken by the revenue if the amount of the advance tax had not been proved to have been paid.
12. There is no gainsaying that because of the strained relations between the two countries it may not have been possible for the petitioner to obtain a refund voucher for verification from the Pakistan authorities. But that fact by itself, in the absence of any other material, would not disentitle the petitioner to claim adjustment. The question whether an advance tax paid in Pakistan is liable to be adjusted against the assessments made both in Pakistan and India, stands settled by the' Supreme Court in CIT v. Bharat Carbon and Ribbon . : 60ITR91(SC) , wherein it has been observed thus (p. 94) :
' In our opinion the effect of Section 18(3) of the Indian Independence Act was to change the incidence of the advance tax paid. Previously the advance tax was to be adjusted towards a single regular assessment to be made by British India. After the Indian Independence Act the advance tax was liable to be adjusted against two regular assessments, one by India and one by Pakistan. In Pakistan, under Section 18A(11), the Pakistan Government was entitled to adjust the advance tax paid by the assessee against its demand. Similarly, the Government of India was entitled to adjust the amount against its demand.'
13. Reference may also be made to a judgment of the Allahabad High Court in L. Dwarka Dass v. ITO : 29ITR60(All) , wherein an identical question on practically similar facts arose for consideration and the learned judge in that respect observed thus (p. 66) :
' Coming to the first contention of the learned counsel for the petitioner that the petitioner having made an excess payment under Section 18A of the Act, he is entitled to a refund under Section 48 and to a consequent set-off from the assessments for the subsequent years under Section 49E, he argues that the Act has made no exception in the liability of the Government to make a refund concerning those payments which were made in the territories which now constitute the Dominion of Pakistan. I think there is force in this contention. The excess payments were made in Lahore, which was previously the principal place of the petitioner's business and, under Section 64 of the Income-tax Act, the petitioner was assessable by the Income-tax Officer of Lahore. At Lahore the petitioner made payments under Section 18A and he was compelled to do so because of the provisions of the Act, otherwise he would have laid himself open to a liability for payment of penalty. The amounts must have been credited immediately to the account of the Government of India. In view of the conditions that prevailed in Lahore immediately before and after the15th August, 1947, the petitioner's business must have suffered a set back and he has admittedly now made Lucknow his principal place of business. The payment was made under Section 18A(1) of the Act at the time when it was applicable to the area where the payment was made and the petitioner having made payments under Section 18A to the Government of India, the provisions of Section 48 are attracted to the facts of the case. The petitioner satisfied the Income-tax Officer at Lucknow that the amount that he paid under Section 18A exceeded the amount with which he was chargeable under the Income-tax Act for the years 1946-47 and 1947-48 and the Income-tax Officer referred the matter to higher authorities.
The petitioner's case clearly comes under the wording of that section and he is thus entitled to a refund of the excess payments made for the years 1946-47 and 1947-48. According to Section 49E, if a refund is found to be due to any person, the Income-tax Officer, in lieu of payment of the amount, may set off the amount to be refunded or any part of that amount against the tax remaining payable by the person to whom the refund is due. The Income-tax Officer thus has the power either to refund the amount or to set it off against the income-tax due for the subsequent years and the petitioner requested him to adopt this latter course of setting off the excess paid under Section 18A. There cannot be much doubt that, if the Income-tax Officer had decided to make the refund, he would have preferred to follow the course of setting off the excess from the amount due for the subsequent years under Section 49E of the Act. But he refused to do so as, according to him, the payment having been made in Lahore, the petitioner was not entitled to claim a refund of that amount from the assessments made in Lucknow.'
14. From the aforesaid two judgments, again it is quite evident that the ITO in India is bound to give a credit for the unadjusted amount of advance tax paid in Pakistan before partition. To us it appears to be a case where the I.T. authorities in India have for no tenable reason declined to make an adjustment of the amount of Rs. 1,08,686-15-0 and have taken refuge behind the hyper-technical objection that adjustment can be made only if the refund voucher is produced by the petitioner. In this view of the matter, we hold that the petitioner is entitled to claim set-off/adjustment of an amount of Rs. 1,08,686-15-0.
15. For the reasons recorded above, we allow this petition, and quash the impugned notice, annexure P-22, dated 1st September, 1975. In the circumstances of the case, however, we make no order as to costs.