D.K. Kapur, J.
1. The firm, M/s. Bansi Dhar Kapur and Sons, was a registered firm with its head office at Amritsar. It was assessed to income-tax for the assessment years 1947-48 and 1948-49 by the ITO, 'D' Ward, Amritsar. Those assessments were made on November 8, 1948, and January 31, 1949, which is long before the Constitution of India came into effect. In making the assessments for these two years, the ITO found that the income of the firm was Rs. 2,92,279 for the assessment year 1947-48 and Rs. 2,08,668 for the year 1948-49, the relevant accounting period for these two years being the years ending March 31, 1947, and March 31, 1948, respectively. In making the calculation of total income, the ITO found in the year ending March 31, 1947, that the Pakistan income was Rs. 1,52,417 and the Jammu income was Rs. 17,092 and for the year ending March 31, 1948, it was found that the Pakistan income was Rs. 37,199 and the Jammu and Kashmir income was Rs. 24,449. The income as found was apportioned between four partners in equal shares. It appears that at first the ITO did not collect the tax payable by the partners on the Pakistan income, but later on this tax was actually recovered by the Collector, Amritsar. The firm appealed to the AAC, who by an order dated August 7, 1950, gave the ITO directions that under art. VI(b) of the Agreement for Avoidance of Double Taxation of India and Pakistan, the tax demand on Pakistan income should be held in abeyance for a period of one year or for such longer period as the ITO considered fit and if this had not been done, it should be done now. In fact, this order was passed on August 7, 1950, after the tax had already been collected.
2. The firm thought that the recoveries which had been effected amounting to Rs. 74,899-6-0 was tax on the Pakistan income which had been wrongly collected and, thereforee, they wrote to the Central Board of Revenue by letter dated September 5, 1950, praying that this amount should have been kept in abeyance till the assessment order was made in Pakistan and, hence, the amount should be refunded. It was also claimed that the recovery was in violation of Circular No. 9 (37) I.T. 50, dated May 2, 1950. There were several other representations to the CBR and a considerable amount of correspondence went on over a period of years.
3. The details of this correspondence are set out in the judgment now under appeal and need not be repeated here.
4. On 7th December, 1960, being dissatisfied with the stand taken up by the CBR, the petitioner instituted Civil Writ No. 535-D/60, before the Circuit Bench of the Punjab High Court at Delhi in which the prayer was as follows:
'...this Hon'ble Court be pleased to quash the arbitrary, illegal, ultra virus and unjust orders of the Income-tax Officer and the Central Board of Revenue in recovering the sum of Rs. 74,899-6-0 on the income from Pakistan branches and in refusing to refund the same and to issue a writ in the nature of certiorari, mandamus or any other appropriate writ......directing the respondent to disregard the above-said orders and refund the amount already paid by the petitioners......'
5. Thus, in short, it is alleged that the amount of Rs. 74,899-6-0 was collected as tax which should be ordered to be refunded by this court. As it appears that the tax was collected in May, 1950, and this writ petition was instituted in December, 1960, it would appear at least, prima facie, that the writ petition was hopelessly belated.
6. The only respondent named in the writ petition was the Central Board of Revenue, Govt. of India. Neither the Union of India nor the ITO, Amritsar, were joined as parties. The petition was contested by the respondent on several grounds and was decided in the Delhi High Court by a judgment dated May 22, 1970. The various points raised by the petitioners were dealt with elaborately in the judgment under appeal. It was held that there was no illegality in the fact that the tax had been collected contrary to an alleged stay order passed by the IAC on February 20, 1950.
7. The main question before the learned single judge was that there was an agreement for Avoidance of Double Taxation made between the Governments of India and Pakistan which was brought into legal effect under s. 49AA of the Indian I.T. Act, 1922, and by virtue of that agreement, the tax had to be collected by the Indian Dominion on Indian income and the Pakistan Dominion was to collect tax on the Pakistan income. It is contended that if tax was payable on the income from Pakistan, it had to be kept in abeyance for a period of one year to enable the assessed to produce a certificate about the tax paid in Pakistan. Later on, the CBR had issued a circular dated May 2, 1950, saying that it was not necessary to produce that certificate. The contention of the petitioner was that abatement was to be allowed as regards the Pakistan tax without production of any certificate. The learned single judge held that the agreement regarding double taxation was applicable when income-tax was being assessed in the two Dominions. It was observed as follows:
'In the present case it was not even the petitioners' case and it is not even the petitioner's case now that he had had to pay anything on account of tax on the income arising in Pakistan. Mr. Awasthy, during the course of his arguments offered that even if the petitioners at this stage were to satisfy the Central Board of Revenue that income-tax on the income arising in Pakistan had been paid by them or had been recovered from them, the department would have no objection to make a refund of the amount. He, thereforee, contended that, in fact, the petitioners had no grievance as the recovery has been made from them on the amount (sic) of tax in India and they have not paid anything on this account in Pakistan. Mr. Awasthy contends that unless there is assessment of tax in Pakistan, the scheme of the agreement cannot function and the petitioners, thereforee, cannot claim any abatement.'
8. The learned single judge examined the agreement between the Dominions of India and Pakistan in some detail and found that once the tax has been recovered from the petitioner they could only claim refund if they had been assessed to income-tax in Pakistan. Reliance was placed on a judgment of the Bombay High Court in CIT v. Shanti K. Maheshwari : 33ITR313(Bom) . Another case referred was Shell Co. of India v. CIT : 51ITR669(Cal) . Before the learned single judge, the assessed was unable to say that any tax had been paid in Pakistan. The single judge dealt with another argument addressed on behalf of the assessed which was based on the circular, referred to earlier, to the effect that a certificate was not necessary from Pakistan. The learned single judge observed that it was doubtful whether the circular had any legal effect, but on the basis of the same the CBR should give relief to the petitioner if they were otherwise entitled to the same. It was argued before the single judge on behalf of the department that the writ petition was nothing more than one claiming refund of money paid and was covered by Suganmal v. State of Madhya Pradesh : 56ITR84(SC) , where the Supreme Court had held that such a writ was not maintainable as a suit was always maintainable for recovering money illegally collected. The counsel for the writ petitioners claimed that the writ was not only to bring about a refund, but also to challenge the recovery proceedings.
9. On the question of delay, the learned single judge observed that the delay was of nine years. If a suit had been filed in 1960, the same would have been hopelessly barred by time, whether it was a suit for refund or for a declaration challenging the recovery by the ITO. Relying on the judgment of the Supreme Court in State of Madhya Pradesh v. Bhailal Bhai, : 6SCR261 , the learned single judge stated:
'Applying the ratio of the above case there is no option but to hold that the petition has been filed after a great deal of delay and the petitioners are not entitled to any relief.'
10. The petitioner has now appealed under clause 10 of the Letters Patent. The learned counsel contends that the conclusions recorded by the learned single judge are not sound. He relies on the agreement concerning double taxation and contends that the conclusion of the learned single judge is not warranted by the terms of the agreement because the agreement stipulates that the Pakistan income should be assessed in Pakistan and the Indian income should be assessed in India. He contends that after the income had been assessed by the ITO, the tax on the Pakistan portion of the income should not have been recovered, but should be kept in abeyance to await the assessment by the Pakistan authorities. Originally, the agreement stipulated that the recovery of tax should be kept in abeyance for one year to await the production of a certificate from Pakistan. Later, by a circular issued by the CBR, this provision was relaxed and it was no longer necessary to produce a certificate. That being so, he contends that the recovery of the tax on the Pakistan portion should have been kept in abeyance and the recovery effected was totally invalid.
11. We have carefully considered the submissions made by the learned counsel for the appellants. The judgment of the learned single judge holding that the writ petition is highly belated and has to be dismissed on that score alone seems to be entirely sound and correct. The recovery was effected in May, 1950, but the writ petition was filed in December, 1960, more than ten years later. No Explanationn for the delay is forthcoming. It is not understandable why the petitioner could not have moved the court earlier. Moreover, according to the petitioners, the recovery of the tax was illegal, so, in any event, they had a right to file a suit. There being an alternative remedy, there does not seem to be any reason why the writ court should entertain a petition of this type after an inordinate delay. On this short ground the petition could have been dismissed in liming.
12. We fully endorse the conclusions of the learned single judge except to the enforceability of the circular, but would like to give some additional reasons to uphold the conclusions.
13. The first and the foremost point that arise in this case is that the so-called Pakistan income was not Pakistan income at all. There was no Pakistan during the relevant period. As far as the assessment year 1947-48 is concerned, the accounting period ended on March 31, 1947, which was before the Dominion of Pakistan was formed. No doubt, in making the assessment on November 8, 1948, the ITO has found that out of the sum of Rs. 2,92,279, the sum of Rs. 1,52,417 was earned from branches in Pakistan situated in Sialkot, Rawalpindi, Lyallpur and Karachi. But at that time, these places were all in British India, so the income was entirely in British India. The income from Jammu was no doubt earned in an Indian Princely State, so it had to be separately computed. The reason that the ITo treated this income as being income from Pakistan was that he was making the assessment long after the two Dominions of Pakistan and India had been formed. In order to see how this income was to be taxed, we have to apply the Indian I.T. Act, 1922, applicable to the taxable territories. At that time, taxable territories included the portion of British India which was later separated to form the Dominion of Pakistan. Under the Indian I.T. Act, 1922, the business of a partnership firm with several branches is to be assessed at its principal place of business. This is provided by s. 64. Thus, the ITO at Amritsar had to include the income from the firm's partnership branches wherever they might be in British India. He had also to include the income outside the taxable territories, i.e., in Jammu, for the purpose of computing the total world income. By no means could it be said that the assessed-firm would also be assessed at its branches in Pakistan for the simple reason that under the relevant provisions of the Indian I.T. Act, 1922, the assessed had to be assessed at only one place, i.e., at its principal office. Once that assessment was completed, by no means could the income be taxed by any other ITO. Similarly, in the assessment year 1948-49, the accounting period was April 1, 1947, to March 31, 1948. Up to August 15, 1947, the so-called Pakistan branches were in British India in the taxable territories and it was only after August 15, 1947, that those branches came to Pakistan. It is not the assessed's case that that income arose in Pakistan after it was formed. In fact, it is noted in the assessment order for 1948-49 as follows:
'Income from Pakistan.
Net income returned for all the branches there is Rs. 37,199; this shows a drastic fall on profits which are alleged to be due to riot and communal disturbances at all the places where in these branches the assessed has written off as loss all the stocks that were lying there at the time of partition; it is stated that, in spite of serious attempts, the assessed could not secure the control of these goods at any of these branches. Accordingly the net result shown is arrived at without addition to the value of those stocks left there at the time of riots, in August 1947.'
14. Thus, the income was that which arose up to August 15, 1947, and not afterwards. Up to the date of August 15, 1947, the assessed had to be assessed in Amritsar where its head office was situated and at no other place. This would mean that it is difficult to understand how the assessed could be assessed in Pakistan and that is why the assessed is unable to show that it has in fact been assessed in Pakistan and could be assessed.
15. Learned counsel has referred to the Agreement for Avoidance of Double Taxation of Income between the Govt. of the Dominion of India and the Govt. of the Dominion of Pakistan which was noticed on December 10, 1947, and became legally effective under s. 49AA of the Indian I.T. Act, 1922. It was provided there that the agreement would apply to income-tax assessments made on or after August 15, 1947, in respect of the assessment year 1947-48 and those made after April 1, 1948, for later assessment years. No doubt, the agreement would apply to the assessed-firm if it was being doubly taxed in the two Dominions. Article IV is worded as follows:
'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 sources or categories of transactions specified in column 1 of the Schedule to this Agreement (hereinafter 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 payable on such excess in their Dominion as provided for in Article VI.'
16. Now, this article visualises the assessments being made in the ordinary way under the laws applicable to India and Pakistan and then provides for an abatement in accordance with the Schedule. As already observed, the present assessed could not have been assessed in Pakistan. The assessed could be assessed only in Amritsar because for the year 1947-48, its head office was at Amritsar. thereforee, under art. IV, it is impossible for the Dominion of Pakistan to tax the assessed. Now, taking the year 1948-49, the same position will hold true up to August 15, 1947. If the assessed had continued business offices in Pakistan would have become its head office for the purpose in Pakistan after August 15, 1947, then the office or one of the of the Indian Income-tax Act, 1922, as applied to Pakistan, and in that case the assessed could have been assessed in Pakistan. That is neither the factual case before us nor has it been disclosed that the assessed was in fact taxed by the Pakistan I.T. authorities. It would, thereforee, follow that art. IV does not apply to the case of the assessed-firm.
17. Then it is necessary to turn to art. V, which states:
'Article V. - Where any 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.'
18. This article visualises that income accruing or arising is chargeable to tax in both the Dominions when it arises outside both the Dominions. The opening words 'where any income accruing or arising without the territories' refer to any particular income arising outside both India and Pakistan. In that case, in computing the total world income of an assessed, the said income is to be included in the assessment both in India as well as Pakistan, but the division has to be half and half by allowance of an abatement. This article would apply only to the income arising in Jammu which was at that time outside both India and Pakistan. This, in fact, is not the claim. The income arising from Jammu is not the disputed claim and so, this shows that art. V does not apply.
19. We then turn to art. VI(a), which says:
'Article VI (a) - For the purpose of the abatement to be allowed under articles IV or V, the tax payable in each Dominion on the excess or the doubly taxed income, as the case may be, shall be such proportion of the tax payable in each Dominion as the excess or the doubly taxed income bears to the total income of the assessed in each Dominion.'
20. This article deals with the abatement to be allowed under articles IV or V. The question of abatement will arise only if there is a double tax or a possibility of double taxation. If neither a double tax takes place nor there is a possibility of a double tax, then the possibility of abatement does not arise. Article VI (b) deals with the situation when the assessment in one Dominion takes place without knowing the amount of the double tax in the other Dominion. The article reads as follows:
'Article VI (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 assessed 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.'
21. This article is applicable only if the question of abatement arose and the quantum of tax in the other Dominion is not known. In the present case, this problem does not arise at all. No tax was payable by the assessed in Pakistan for the simple reason that no income had arisen in Pakistan, but income had arisen in British India and had been fully taxed in Amritsar, so it could not be taxed in Pakistan because at that time the territories now in Pakistan were also part of British India. That being so, art. VI does not apply.
22. It was contended by learned counsel for the appellant that on this point the decision of the AAC had become final. It is now necessary to quote that portion of the decision dated August 7, 1950. This is the decision of the AAC, 'A' range, Amritsar, for the year 1947-48:
'The Income-tax Officer has allocated the demand in the assessment order as arising in India, Jammu and Pakistan, but since it was a registered firm, the question of levying tax did not arise. The counsel, however, informs me that the terms of the Agreement have not been observed while making assessment on the partners. According to article VI (b) reproduced above, the ITO was to make a demand without allowing abatement but was required to hold in abeyance for a period of one year or since longer period as he considered fit, the collection of a portion of the demand equal to the estimated abatement. If this has not been done, he is directed to do it now'.
23. It is contended that the AAC accepted the conclusion that the abatement was to be granted. Undoubtedly, the order can be read in that way. However, this order was passed after the amount had already been collected, and so, it has little consequence. Moreover, the primary condition for allowing an abatement is the fact that the other Dominion is proceeding to tax the income arising in that other Dominion. In this case, the income did not arise in Pakistan because no such Dominion existed and, secondly, as the assessed closed its business before Pakistan was formed, the question of being assessed in Pakistan did not arise. This fact would make this order impossible of compliance: (a) because the amount had already been collected, and (b) because there was no Pakistan assessment or the possibility of an assessment.
24. Then, we have the order of the AAC for the year 1948-49 which was passed on December 19, 1949. In this year also, it was stated as follows:
'Assessment of Pakistan income: Assessment for 1948-49 was made on total income of Rs. 2,08,668. This includes an income of Rs. 37,189 arising from the appellant's branches at places now in Pakistan. The appellant claimed that the assessment of this sum ought to have been made in accordance with the terms of the Agreement for Avoidance of Double taxation in India and Pakistan. This agreement is published, vide notification No. 28 dated 10-12-47. The firm is a registered one and, thereforee, no tax was levied. The Income-tax Officer ought to have held for collection an estimated abatement in accordance with article VI (b) of the Agreement for a period of one year or such longer period as he considered necessary. If this has not been done, it may be done now.'
25. This order was also passed after the amount had actually been realised. The same argument holds true with regard to this year also.
26. In dealing with a case of this type, a writ court has to examine whether the petitioner is entitled to relief in debito justitiae, which means that the court has to see whether the petitioner will be subjected to double taxation or is likely to be subjected to the same. As pointed out, the petitioner was a registered firm with its head office in Amritsar. In the relevant period, the branches were also in British India, so the assessments had to be made in Amritsar. In normal circumstances, no assessment could be made at any other place because the assessed has to file a return in accordance with law only at one place which is the normal place at which he is assessed. The firm was accordingly assessed at Amritsar. In computing a firm's income, the income from all other branches is to be included in the single assessment made at the head office. This happened in the appellant's case. It happened for both the years 1947-48 and 1948-49. The accounting period covered by these two years was the period April 1, 1947, to March 31, 1948. The Dominion of Pakistan was born on August 15, 1947. Admittedly, no income accrued to the assessed in Pakistan after that date, so the entire income which is covered by the dispute now before the court arose in British India and was taxed in accordance with the law applicable to British India. As pointed out, there is no possibility of the tax being imposed on any part of this income in Pakistan. It is, thereforee, no understandable how the tax which is ought to be refunded by the writ petition can be refunded to the appellants.
27. It appears that the stand of the appellant has been based entirely on the language of the double taxation agreement between India and Pakistan. That agreement was intended to cover quite a different problem, the problem arising from an assessed being taxed in two different countries for the same income. As millions of people had been displaced during the partition period and had to change their place of residence, it would follow that they could be taxed in both countries on account of being residents of India or Pakistan at one time and then became residents of the other Dominion. Or, they might change their regular place of business, i.e., the head office might shift from one Dominion to the other. In such a case, there would always be a question that the assessed is being assessed in both countries. Then there cases of firms, companies and individuals who were not displaced, but continued to carry on business in both Dominions even after the setting up of the two Dominions. Whereas before the division of the country, they would be taxed at only one place, (after the division) such person could be taxed at two places. In order to meet this situation and deal with such cases of persons who were actually subjected to or were capable of being subjected to double taxation on the same income in the two countries, the agreement was made. The assessed is not one of these persons. The assessed had the same head office and was not displaced as far as the income-tax law is concerned. It so happens that some of its income arose in the territory now forming Pakistan, but it arose before Pakistan was actually created. And so, the appellants have not been doubly taxed and any reference to that agreement seems to be out of place.
28. In this background, it is quite understandable when the CBR took the stand that if the assessed can show that it had been taxed in Pakistan or some proceedings had been taken there, only then the question of refund of the tax would be entertained. The stand of the CBR, thereforee, is quite correct.
29. We would, thereforee, come to the conclusion that this appeal is without merit. The learned single judge rightly held that the writ petition was belated and could not be entertained on that ground and further when there was an alternative remedy by way of a suit which could have been exercised within a period of three years at the most. Furthermore, we uphold the decision to the effect that before the appellant could be entitled to a refund, they had to show that they were being subjected to double tax or the possibility of double tax.
30. There is one other interesting aspect of this case that may be referred to per curiam. Article IV of the Agreement provides that each Dominion shall make the assessment in the ordinary way and then when the demand is raised for the tax, an abatement has to be allowed in accordance with the Schedule. As it happens, the assessed in this case was a registered firm. Being a registered firm, the assessed did not have to pay any tax, but the share of income had to be apportioned to the individual assessment of the partners. The question as to how the abatement was to be made would, thereforee, arise in the assessments of the individual partners and not in the assessment of the individual partners and not in the assessment of the registered firm. As far as the ITO was concerned, he had merely to assess the registered firm and make the apportionment. the relevant provision of the Indian I.T. Act, 1922, operative at that time was s. 23(5), which then read as follows:
'Notwithstanding anything contained in the foregoing sub-sections, when the assessed is a firm and the total income of the firm has been assessed under sub-section (1), sub-section (3) or sub-section (4), as the case may be, - (a) in the case of a registered firm, the sum payable by the firm itself shall not be determined but the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, shall be assessed and the sum payable by him on the basis of such assessment shall be determined...'
31. In this case, when the firm was assessed for the assessment year 1947- 48, the ITO stated as follows:
'This being the case of a registered firm no demand is created here. This income will be assessed directly in the hands of the partners at the time of their personal assessments whose share allocation is as under...'
32. This order visualises that there would be a personal assessment of the individual partners later. The question of allowing any abatement under the article would arise only in the case of the individual partners because they were the only persons who could be ordered to pay tax. Similarly, for the year 1948-49, a similar observation was made in the firm's assessment.
33. The individual income from the so-called Pakistan branches for the year 1947-48 was Rs. 38,104 and for the year 1948-49 it was Rs. 9,300. The application of the article, if it applied at all, would have to be done at the time of the personal assessment. It appears that in fact individual assessments were made which are not on the record of the writ petition and then recovery certificates were issued against the four individual partners which were held in abeyance by the ITO by letter dated May 13, 1950, annex. VIII annexed to the writ petition. It also appears that, later, the ITO by letter dated May 22, 1950, stated that certain arrears were remaining against the demand. It is not immediately clear from the facts on the record that these are the same demands which were earlier held in abeyance by the ITO. In fact, the appellant and the writ petitioner which is a firm, did not have to pay any tax and the real grievance was of the individual partners in their individual assessments. The firm itself had no grievance and need no have come to this court at all because the firm was not subject to any tax and did not have to pay any tax under the then applicable provisions of the income-tax law.
34. It was pointed out to the learned counsel for the appellant that in fact that firm had no grievance, but he submitted that the individual partners could act collectively by instituting the present writ petition and appeal. This does not appear to be correct. Under the income-tax law, a registered firm is a separate assessed and the individual partners are separate assesseds distinguishable from the firm. There was no grievance as far as the firm was concerned, because neither did the firm have to pay any tax in India nor in Pakistan. The grievance, if any, was of the partners in their individual cases. thereforee, it would appear that the petitioner before the court and, thereforee, the present appellant, is not a party with any grievance.
35. In any case, for the foregoing reasons, we dismiss the appeal with costs.