P. Subramonian Poti, J. - An interesting question concerning the constructions of S. 220 (7) of the Income-tax Act, 1961, arises for decision. Sub-sec. (7) of S. 220 of the Act reads :
Where an assessee has been assessed in respect of income arising outside Indian in a county the laws of which prohibit or restrict the remittance of money to India the Income-tax Officer shall not treat the assessee as in default in respect of the tax which is due in respect of that amount of his income which, by reason of such prohibition or restriction, cannot be brought into India, and shall continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed.
Explanation : For the purposes of this section, income shall be deemed to have been brought into India if it has been utilised or could have been utilised for the purposes of any expenditures actually incurred by the assessee outside India or if the income, whether capitalised or not, has been brought into India in any form.'
The assessee in this case has income arising also from Ceylon. That income cannot be brought into India since the laws of that country restrict remittance of money to India. Therefore, according to the petitioner, he is entitled to claim that he shall be treated as not in default in respect of such part of the tax is attributable to the income accruing to him from Ceylon until the restriction is removed. But this right being subject to the explanation to the section, the further question that is to be considered is whether any part of such income is to be deemed to have been brought to India. If it is so deemed, then, in regard to so much of the tax as is due in respect of the amount so deemed to be brought in he shall not be treated as not in default, or in other words, that part of the tax will have to be paid by him. Any part of the income accruing to him in Ceylon will be deemed to have been brought to India if that has been utilised for purposes of any expenditure actually incurred by him outside India or if the income whether capitalised or not has been brought to India in any form. The assessee has paid advance tax in Ceylon in respect of the income for the year 1966-67. The Income-tax Department treated the income to the extent it had been utilised for payment of income-tax in Ceylon as income utilised for expenditure actually incurred by the assessee outside India and therefore that was deemed to be income brought to India. Consequently enforcement was sought to be made of that part of the tax which would, be due in respect of the amount of income representing the advance tax paid by the assessee in Ceylon. According to the assessee the advance tax paid by him in Ceylon out of his income which could not be repatriated to India cannot fall within the scope of Explanation to S. 220(7) of the Act. The stand taken by the Revenue is that expenditure thus incurred outside India by the assessee is, by reason of the Explanation, an amount deemed so have been brought to India and therefore to that deemed income the provision in the main part of sub-section (7) will not apply.
2. The terms 'expenditure' is not defined in the Income-tax Act, 1961. In common parlance expenditure means, amounts spent by a person or expended by a person. Payments of taxes are normally items of expenditure and therefore without anything more the explanation would indicate that even expenditure by way of payment of taxes outside India out of the Income which cannot be repatriated to India should be deemed to have been brought to India. But learned counsel Sri. Peter appearing for the petitioner in this case wants this court to construe the term expenditure in a more limited sense. According to counsel, since the amount paid by way of income-tax in Ceylon is amount which he has obliged to pay by the very fact of income having accrued to him there it cannot be deemed to be an item of expenditure, for, if it be otherwise the consequence would be that on money which has not reached his hands in India and by which he was not benefited to any extent in India he is asked to pay tax in India. According to counsel it may even happen that where the assessees income arising to him outside India is considerable compared to his income in India and the tax upon it is consequently high, the tax he may have to pay by reason of treating such expenditure as deemed income in India may happen to be more than the income which he actually receives in India. I do not rule out the possibility of such a hypothetical case. But I am not to strain the language of the section in order to reach an equitable result if the meaning of the section is plain enough. I do not think even the difficulty pointed out by learned counsel does exist, for, S. 90 of the Act conceives of reliefs in such cases. Section 90 of the Income-tax Act, 1961, reads :
'90. The Central Government may enter into an agreement with the Government of any country outside India -
(a) for the granting of relief in respect of income on which have been paid both income-tax under this Act and income-tax in that country, or
(b) for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country, or
(c) for exchange of information for the prevention of evasion or avoidance of income-tax chargeable under this Act or under the corresponding law in force in that country, or investigation of cases of such evasion or avoidance, or
(d) for recovery of income-tax under this Act and under the corresponding law in force in that country,
and may, by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement.'
Ceylon is a country with which reciprocal arrangement have been reached by India in accordance with S. 90. In cases where the income is derived in such countries and tax has to be paid on such income in such countries, provision is made for relief in regard to payment of such tax under S. 90 of the Act. Under the terms of S. 220 of the Act the income is deemed to have been received in India by the assessee by reason of expenditure by way of payment of tax in Ceylon out of the income reamining in Ceylon. The petitioner has to make the payment of tax over again on an amount on which he has paid in Ceylon is part of the total income of the assessee he is entitled to relief under the agreement which is intended for avoidance of double taxation of income under the Income-tax Act, 1961, and under the corresponding law in force in that country. That is only by the by, for, that need not determine the fate of this petition. On the language of S. 220(7) of the Act, if amount paid by a person as income-tax is deemed to be expenditure incurred by such a person, the stand of the Revenue must be upheld. I see not reason to hold, against the plain meaning of the term expenditure that the income-tax paid by an assessee is not an item of expenditure. That would be expenditure in Ceylon if it is paid in Ceylon towards tax due on the income accrued in that country. Though it is not actually received in India so long as the section deems such income as one brought into India and therefore falling within the scope explanation the petitioners complaint cannot succeed. In this view, I see no reason to allow this Petition.
In the result, the Original Petition is dismissed. Parties are directed to suffer costs.