RAJAGOPALAN, J. - For the assessment year 1947-48 the petitioner was assessed to income-tax in India. The total of the remittances by the petitioner from the profits of the business he carried on in Burma in the relevant year of account was Rs. 1,15,382. His net assessable income in India was computed as Rs. 1,11,490. The income-tax payable on that income was determined at Rs. 64,715-13-0. The assessment was confirmed successively by the Assistant Commissioner and by the petitioner. The order of the Tribunal was on the 14th July, 1952.
The assessment proceedings in Burma with reference to the petitioners income there during the same period was completed on 11th February, 1952, and the petitioner was assessed to pay a tax in Burma of Rs. 48,847-8-0. The petitioner paid that tax in instalments in due course.
On 31st July, 1953, the petitioner applied to the Burma authorities for relief from the doubt taxation he had suffered and obtained a refund of Rs. 19,586-14-0 in March, 1954. On 15th March, 1953, that is after the termination of the assessment proceedings in India and in Burma and even before he applied to the authorities in Burma for relief, the petitioner applied to the first respondent, the assessing authority in India, for relief from the double taxation to which the assessee had been subjected in the year of assessment 1947-48. That application was rejected on the only ground that it had been preferred beyond the period of four years prescribed by section 50 of the Income-tax Act. The Assistant Commissioner agreed with that view and dismissed the appeal preferred by the petitioner. The Central Board of Revenue, which the petitioner approached for redress, declined to interfere.
The petitioner applied under article 226 of the Constitution for the issue of a writ of certiorari to set aside the orders of the respondents, the Income-tax Officer and the Assistant Commissioner.
The only question decided by the department, that is, by respondents Nos. 1 and 2 was that of limitation. Whether apart from that the petitioner was entitled to relief from doubt taxation in India was not considered by the departmental authorities. The argument before me ranged over a wide field. I shall first examine on what statutory basis as assessee could claim relief from the double taxation to which he had been subjected in India and in Burma in the year of assessment 1947-48.
It should be taken as settled that the law to apply to the claim of the assessee in this case was the law as it stood in the year of assessment in question, 1947-48 : see Maharaja of Pithapuram v. Commissioner of Income-tax and Commissioner of Income-tax v. Isthmian Steamship Lines. In Commissioner of Income-tax v. Isthmian Steamship Lines the supreme Court pointed out at page 577 of the report :
'...... in income-tax matters the law to be applied is the law in force in the assessment year unless otherwise stated or implied.'
The law in India governing the grant of relief from double taxation has been amended from time to time. Section 49A of the Income-tax Act, as it was finally amended by the Finance Act of 1953 (Act 14 of 1953), provides for relief where there are reciprocal arrangements between India and the other country, in both of which the assessee has been subjected to income-tax. Section 49D regulates the grant of relief in the absence of such reciprocal arrangements. Section 49D as it now stands was amended by Act 25 of 1953. But it should be remembered the it is not the provisions of section 49A or 49D as they now stand that the petitioner can invoke with reference to the assessment year 1947-48.
On 1st April, 1947, which marked the commencement of that assessment year 1947-48, India and Burma were still in the British empire. The grant of relief from double taxation India and in and in Burma was governed by the India and Burma Income-tax Relief Order of 1936, (hereinafter referred to for convenience as the 1936 Order), which had been issued by His Majesty in Council under section 159 of the Government of India Act, 1935, and the corresponding provision of the Burma Act. Rule 40A of the Indian Income-tax Rules, 1922, prescribed the form in which the application had to be preferred for relief under the 1936 Order. Rule 40B prescribed the form in which an appeal should be preferred to the Assistant Commissioner against the order of the Income-tax Officer who disposed of the application preferred in conformity with rule 40A. Rule 40A and 40B have been left intact despite the subsequent legislative changes to which I shall refer.
India attained independence on 15th August, 1947, and Burma on 4th January, 1948. By the India Provisional constitution Order, 1947, dated 14th August, 1947, promulgated under the provisions of the Indian Independence Act, 1947, section 159 of the government of India Act stood repealed in effect. With that the basis for the 1936 Order disappeared, and the 1936 Order itself ceased to have any statutory force thereafter.
Section 49A (1) of the Income-tax Act, as it factually stood, on 1st April, 1947, ran :
'The Central Government may, by notification in the Official Gazette, make provision for the granting of relief in respect of income on which has been paid both income-tax (including super-tax) under this Act and Dominion income-tax.'
Section 49A (2) explained what Dominion income-tax meant. Burma had not then come within the scope of section 49A. Section 49A was amended by section 11 of Act 48 of 1948, to bring Burma within the scope of section 49A (1). Act 48 of 1948 was published on 8th September, 1948. But by section 1 (1) of that Act the amendment to section 49A of the Income-tax Act took effect from 30th March, 1948, which was within the year of assessment with which I am concerned, 1947-48. The amended section 49A (1) ran :
'The Central Government may, by notification in the Official Gazette, make provision for the granting of relief in respect of income on which have been paid both income-tax (including super-tax) under this Act and either Dominion income-tax in one or more countries or Burma income-tax.'
Sub-section (2) defined Dominion income-tax and sub-section (3), which was added by Act 48 of 1948, defined Burma income-tax.
The basis of section 49A was radically changed after India became a Sovereign Indian republic in 1950. Section 49A, as amended by the Finance Act of 1953 (Act 14 of 1953) with effect from 1st April, 1953, ran :
'The Central Government may enter into an agreement -
(a)..... with the Government of any country outside India for the granting of relief in respect of income on which have been paid both income-tax (including super-tax) under this Act and income-tax..... in that country....... or
(b) with the Government of any country outside India for the avoidance of double taxation of income, profits and gains 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.'
As there was no reference to Dominion income-tax or Burma income-tax in the amended section 49A, the old sub-sections (2) and (3) of section 49A stood deleted.
It was represented that the notification contemplated by section 49A as amended in 1953 has not yet been issued with reference to taxes paid in Burma. But as I said, it is not section 49A as it not stands that determines the claim of the petitioner.
Section 49D, as it was enacted in 1939, was in force till it was amended by Act 25 of 1953 with effect from 1st April, 1952. Section 49D as it stood in the year of assessment 1947-48 ran :
'If any person who has paid by deduction or otherwise Indian income-tax for any year in respect of any income arising without British India in a country the laws of which do not provide for any relief in respect of income-tax charged in British India proves that he has paid income-tax by deduction or otherwise under the laws of the said country in respect of the same income, he shall be entitled to the deduction from the Indian income-tax payable of a sum equal to be half of such Indian income-tax or to one half of such tax payable in the said country, which ever is the less.'
Thus the position on 1st April, 1947, was that, with reference to income-tax levied on an assessee both in India and Burma for 1947-48, the grant of relief in India, with which I am now concerned, was regulated by the 1936 Order. But this provision lapsed on 15th August, 1947, when the India (Provisional Constitution) Order, 1947, was issued under the authority of the Indian Independence Act, 1947. Section 49A (1) of the Income-tax Act, which was amended to include Burma, came into force only on 30th March, 1948. Even the amended section 49A could not be invoked by the petitioner, as the necessary notification was never issued by the Government of India. The only other statutory provision the petitioner could invoke was section 49D. That stood unaltered all through the year 1947-48. One of the factors to be established before section 49D could be applied was that in 1947-48 the laws of Burma did not provide for any relief in respect of income-tax charged in India. What the position was in Burma in that year is not clear. It was never investigated by the departmental authorities that dealt with the application of the petitioner. It is however, only fair to them to observer that they took the view that the petitioner would have been entitled to relief, if only he had applied within the period of limitation prescribed by section 50 of the Income-tax Act. They did not feel called upon to determine under what statutory provisions the petitioner could claim any relief, had not the limitation factor intervened. It seems to me that till the nature of the claim and the statutory basis for that claim are ascertained, the question of limitation may not arise for consideration.
I have pointed out that both in Maharajah of Pithapuram v. Commissioner of Income-tax, and in Commissioner of Income-tax v. Isthmian steamship Lines, it was held that the law to apply was the law in force in the year of assessment. The difficulty in this case is that the same 'law' was not in force throughout the year 1947-48. The law in force on 1st April, 1947, at the commencement of the year was the 1936 Order. That lapsed in the course of the year on 15th August, 1947. The amended section 49A which included Burma was in force at the end of the year. It came into effect of 30th March, 1948. Such a contingency of change in law in the course of the assessment years did not arise for consideration in either of the two cases to which I have referred.
In my opinion it was the law in force at the commencement of the assessment year, that is, on 1st April, 1947, that should apply in the absence of any statutory provision to the contrary. As pointed out by the Privy Council in Maharajah of Pithapuram v. Commissioner of Income-tax, '..... the subject of charge is not the income of the year of assessment, but the income of the previous year.' The rights and liabilities in relation to the income of the previous year which had ended before 1st April, 1947, had to be determined in the assessment year 1947-48, or later, but with reference to the law in force in 1947-48. Where there has been a change in the law in the relevant assessment year, and where there is not specific statutory provision to direct whether the law in force at the commencement of the assessment year or that at the end of that year should apply, it appears more logical to apply the law as it stood at the commencement of the assessment year. In this case the assessee could theoretically at least have applied for relief at any time after 1st April, 1947. Though it is neither the date of the application nor the date of the order that determines the issue, which is the statutory provision under which relief could be granted, if an application had been presented on 1st April, 1947, and disposed of before 14th August, 1947, it was obviously the law in force on 1st April, 1947, that is, the 1936 Order, that would have applied. That the application was made later and dealt with even later does not appear to me to affect the principles to apply. Once again I must stress the absence of any statutory provision to direct that the law in force at the commencement of the assessment year shall not apply.
The learned counsel for the petitioner urged that, if for any reason the 1936 Order was held inapplicable, since the petitioner could not avail himself of the amended section 49-A, which was the law in force at the end of the assessment year, in the absence of any notification issued by the Government, the assessee could claim relief only under section 49D which remained in force throughout the year without any change. It is not necessary to express any concluded opinion of mine on the soundness or otherwise of this contention. I have held that the law to apply is what it was on 1st April, 1947, that is, the 1936 Order.
The next question is, does section 50 of the Income-tax Act apply when relief by way of refund is asked for under the 1936 Order. The 1936 Order, it should be remembered, was independent of the provisions of the Income-tax Act. The statutory basis for the 1936 Order was section 159 of the Government of India Act, 1935, and not any of the provisions of the Income-tax Act. No provision of the Income-tax Act could cut down the rights that could be claimed under the 1936 Order so long as that order was in force. The proviso to rule 7 of Part I of the 1936 Order no doubt vested a power in the Governor-General to terminate the operation of the 1936 Order, but that power was never exercised. It is true that the forms prescribed for applications for relief under the 1936 Order were incorporated in the Income-tax Rules, 1922. As I have pointed out, rule 40A prescribed the form in which an application for relief had to be made to the Income-tax Officer. Rule 40B, which in effect provided for an appeal to the Assistant Commissioner, prescribed the form in which a memorandum of appeal had to be presented. But neither the 1936 Order nor rules 40A and 40B prescribed any period of limitation. Whether the Income-tax Rules could have prescribed any period of limitation when the 1936 Order itself did not, does not arise for consideration. Factually at least the Income-tax Rules did not prescribed any period of limitation. Rule 5 of Part II of the 1936 Order cannot have the effect of making the provisions of section 48 and section 50 applicable to a claim for relief under the 1936 Order. The claim for relief under the 1936 Order defined and delimited the right of the assessee. Rules 40A and 40B provided the machinery for the enforcement of that right. No period of limitation was imposed.
The orders of the departmental authorities, respondents Nos. 1 and 2, are liable to be set aside as they did not take into account the relevant factors on a consideration of which the petitioners claim had to be disposed of. I have only indicated the true basis in law for the claim for relief and the absence of any provision having the force of law in the 1936 Order itself prescribing any period of limitation. It will be for the first respondent to decide in the first instance whether the petitioner is entitled to any relief, and, if he is entitled, the authority will have to decide the quantum of relief in accordance with the provisions of the 1936 Order, in particular, rule I of Part II of that Order.
The rules nisi is made absolute and the orders of respondent Nos. 1 and 2 will stand set aside, with a further direction to the first respondent to dispose of the application of the petitioner according to law.
The petitioner will be entitled to his costs. Counsels fee Rs. 250.