Skip to content


Commissioner of Income-tax Vs. S.K. Srinivasan - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 9 of 1966 (Reference No. 4 of 1966)
Judge
Reported in[1970]75ITR93(Mad)
ActsIncome Tax Act, 1922 - Sections 66(1) and 66(2)
AppellantCommissioner of Income-tax
RespondentS.K. Srinivasan
Appellant AdvocateV. Balasubrahmanyan and ;J. Jayaraman, Advs.
Respondent AdvocateS. Swaminathan and ;K. Ramgopal, Advs.
Excerpt:
- - the revenue overruled the objection of the assessee and held that the assessee was entitled to relief in respect of the amounts taxed in both the countries at the lower of the two rates of tax in ceylon and in india, having been unsuccessful even before the appellate assistant commissioner, the assessee took up the matter on second appeal to the tribunal who held the revenue's reckoning of the relief on the basis that the lower of the rates of tax should be taken into consideration while granting the relief was wrong, and it held that the assessee was entitled to relief in the sum of rs. whilst this application for reference was pending, the assessee also, by an independent application for the purpose, requested the tribunal to refer another question of law as well for an answer to..........worked out the relief as under ;indiaceylon rs.rs.total income38,49046,172tax paid10,094.528,280ceylon income38,43046,112proportionate tax on ceylon income10,094 x 38.43038,4908.280 x 46,11246,172 10,000.818,269.11.2. the assessment, in fact, was completed on july 31, 1959, and relief was granted on the above basis to the extent of rs. 8,269.11. later, the income-tax officer, on the basis that the relief granted was in excess of the correct relief which ought to have been granted, re-calculated the same and ultimately awarded relief to the assessee in the sum of rs. 6,891. the basis on which such a reduced relief was granted was worked out on the theory that under article iii of the inter-country agreement, the ceylon rate of tax only was the basis to reckon the relief and not the.....
Judgment:

Ramaprasada Rao, J.

1. The assessee is a chartered accountant. In respect of the assessment year 1958-59, accounting year ending on March 31, 1958, his total independent income was determined at Rs. 38,490. Since the assessee was assessed as 'resident and ordinarily resident', he was granted relief under Article III of the Double Taxation Avoidance Agreement with Ceylon. The Income-tax Officer worked out the relief as under ;

INDIACEYLON Rs.Rs.

Total income38,49046,172Tax paid10,094.528,280Ceylon income38,43046,112Proportionate tax on Ceylon income10,094 X 38.430

38,4908.280 X 46,112

46,172 10,000.818,269.11.

2. The assessment, in fact, was completed on July 31, 1959, and relief was granted on the above basis to the extent of Rs. 8,269.11. Later, the Income-tax Officer, on the basis that the relief granted was in excess of the correct relief which ought to have been granted, re-calculated the same and ultimately awarded relief to the assessee in the sum of Rs. 6,891. The basis on which such a reduced relief was granted was worked out on the theory that under Article III of the inter-country agreement, the Ceylon rate of tax only was the basis to reckon the relief and not the total income relateable to a particular source or sources. The assessee objected to the re-opening of the assessment and also questioned the procedure latterly adopted by the Income-tax Officer in the matter of the grant of relief under the Double Taxation Avoidance Agreement with Ceylon. The revenue overruled the objection of the assessee and held that the assessee was entitled to relief in respect of the amounts taxed in both the countries at the lower of the two rates of tax in Ceylon and in India, Having been unsuccessful even before the Appellate Assistant Commissioner, the assessee took up the matter on second appeal to the Tribunal who held the revenue's reckoning of the relief on the basis that the lower of the rates of tax should be taken into consideration while granting the relief was wrong, and it held that the assessee was entitled to relief in the sum of Rs. 8,269.11 as originally worked out. Regarding the other question, it was of the view that the initiation of the proceedings under Section 147 of the Income-tax Act, 1961, was valid. The Commissioner of Income-tax applied under Section 256(1) to refer the other question of law said to arise out of the Tribunal's order. Whilst this application for reference Was pending, the assessee also, by an independent application for the purpose, requested the Tribunal to refer another question of law as well for an answer to be rendered by this court. The result is, the following two questions of law, the first at the instance of the Commissioner of Income-tax, Madras, who has regularly applied for such a reference, and the second at the instance of the assessee, who did not make any such application in accordance with law, have been referred to us for our decision :

'1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee was entitled to double tax relief of Rs. 8,269.11 under the Agreement for relief from or Avoidance of Double Taxation between India and Ceylon (S. R. 456 dated6th February, 1957) ?

2. Whether, on the facts and in the circumstances of the case, the initiation of the proceedings under Section 147 are valid in law?'

3. A preliminary objection was rightly taken by Mr. Balasubrahmanyan, learned counsel for the revenue, that the second question which has been referred by the Tribunal cannot be gone into by this court as the procedure expressly prescribed by statute for such a reference has not been availed of by the assessee. This preliminary objection has to be upheld in view of the decision of this court in Commissioner of Income-tax v. K. Rathnam Nadar, : [1969]71ITR433(Mad) where this court observed :

' Where either the Commissioner or the assessee has made an application under Section 66(1) of the Indian Income-tax Act, 1922, for a reference to the High Court, it is not open to the other party in reply to the application filed by the opposite party to ask for reference of a question which it -wants to be referred. The only way by which a party can ask for a reference of any question to the High Court is by filing an application under Section 66(1) and, if that is refused, to apply to the High Court under Section 66(2). As the jurisdiction given to the High Court under Section 66(2) is conditional on an application under Section 66(1) being refused by the Tribunal, the total absence of an application under Section 66(1) would be a complete bar to an application under Section 66(2). The scope of Section 66 should not be decided by a reference to the rules made under the Act by the Tribunal. The right of the Appellate Tribunal to regulate its own procedure cannot confer on it the power to frame a rule conferring a substantive right not contemplated by or conferred by Section 66.'

4. The above ratio is a complete answer and the preliminary objection has to be upheld. We are not therefore, answering the second question as it need not be answered.

5. On the first question we are of the view that the Appellate Tribunal was right. The answer to this question depends on the interpretation of Article III of the Agreement for relief from or Avoidance of Double Tax ratio in India and Ceylon, which reads as follows :

'Each country shall make assessment in the ordinary way under itsown laws : and where either country under the operation of its laws chargesany income from the sources or categories of transactions specified incolumn 1 of the Schedule to this Agreement (hereinafter referred to as theSchedule) in excess of the amount calculated according to the percentagesspecified in columns II and III thereof, that country shall allow an abatement equal to the lower of the amounts of tax attributable to such excess ineither country.'

6. On a prima facie reading of the text of this article it is clear that the country is obliged to allow an abatement equal to the lower of the amounts of tax attributable to such excess in either country. The words used are 'amounts of tax'. They have no relation to or impact over the rates of tax prevalent in each of the countries. The Income-tax Officer, therefore, has erred in resting his conclusion on the rates prevalent in India and Ceylon and calculating the quantum of abatement on the basis of such rates and ultimately granting relief to the assessee. He ought to have taken the entire amount of tax paid by the assessee or payable by the assessee in both these countries and ought to have granted an abatement equal to the lower of the amounts of tax attributable to such excess, in either country. If this is the true formula on which the double taxation relief was to rest, then the Tribunal has come to the right conclusion with whom we agree. We find that the assessee, on the basis of the above, is entitled to the relief in the sum of Rs. 8,269.11. We, therefore, answer the question in the affirmative and in favour of the assessee with costs. Couusel's fee Rs. 250.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //