K. Veeraswami, J.
1. These two petitions to quash two separate orders, one of the Commissioner of Income-tax and the other of the Income-tax Officer relating respectively to assessment years 1959-60 and 1960-61 turn on construction of Article III of the Agreement for relief from or avoidance of double taxation between India and Ceylon contained in Notification No. S.R.O. 456, dated 6th February, 1957. The petitioner has been assessed as an individual resident and ordinarily resident in India, on his only source of income from a grocery business carried on under the name and style of O.A. Paramasivam Pillai and Sons at 128, 4th Cross Street, Colombo. The income for the first year was determined in both the countries to be Rs. 39,473 and for the next year Rs. 39,047. The Ceylon authorities who assessed the petitioner under the provisions of the Ceylon Income-tax Ordinance, 1932 certified the income-tax payable for the first year to be Rs. 5,919 and for the second year to be Rs. 5,249. The gross taxes arrived at in Colombo for the two years were respectively Rs. 9,889 and Rs. 9,718. Taxes certified were arrived at after deducting relief permissible under Section 45(2) of the Ordinance. Identical incomes for the two years accrued to the petitioner in Ceylon were assessed to tax under the Indian Income-tax Act, 1922, and for the first year, the tax was Rs. 10,282 and for the second year Rs. 9,521. The petitioner was allowed abatement in respect of the two years equivalent to the tax certified by the Ceylon authorities for each of the years, the Income-tax Officer over-ruling his claim to abatement equivalent the gross income-tax assessed in Ceylon for each of the years. In one of these cases, the Commissioner declined to interfere.
2. For the petitioner it is contended that on a proper interpretation of Article III in the agreement, abatement should have been allowed for the years as claimed by him. The argument is that the amount of a tax attributable to the excess asssesed in either country within the meaning of the Article relates to the gross tax without taking into account the relief under Section 45(2) of the Ceylon Ordinance. We are unable to accept this view of the effect of Article III. It reads as follows:
Each country shall make assessment in the ordinary way under its own laws; and where either country under the operation of its laws charges any income from the sources or categories of transactions specified in column I of the Schedule to this Agreement (hereinafter referred to as the Schedule) in excess of the amount calculated according to the percentages specified 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 in either country.
3. The first part of the Article contemplates liberty to each country to make assessment in the ordinary way under its own laws. There is a schedule attached to Article III the first column of which relates to source of income or nature of transaction from which income is derived and columns II and III specify the percentage of income which each country is entitled to charge under the agreement. It is not disputed that the income in question falls under item 8 of the Schedule, which is a residuary one, as to any income derived from a source or category of transactions not mentioned in any of the other items in the Schedule. The second column against this entry allows the entire income to be charged under the Agreement if and where it actually accrues or arises. The third column says that in respect of such income, the other country is not entitled to charge. It is clear, therefore, that for the second part of Article III to apply, there must be identity of income brought to charge in either country. If that is not there obviously there is no question of double burden. The identical amount will be assessed in each country by applying its own laws. Then that country which charges income in excess of the amount allowed under column III is required to allow an abatement 'equal to the lower of the amounts of tax attributable to such excess in either country.' It is said that 'tax attributable' in the Article is the gross tax and not the tax arrived at after deducting reliefs permissible under the laws of a particular country. We are satisfied that this is not the sense of these words. Tax attributable to the excess, in our opinion, is what is determined to be tax payable after statutory deductions are made. That this is the intention will appear from two considerations. One is, as we mentioned, under the first part of the Article, each country will make assessment in the ordinary way under its own laws. That means the assessment is made by applying the provisions of the relevant Act, not merely applying the charging section. It would follow, therefore, that tax attributable to the excess in either country in the context of column III in the Schedule will be tax relevant to the income and determined to be payable. The second consideration is the very object of the agreement which is to give relief from double burden. There can be no burden on the petitioner in excess of what he has been made to bear in respect of identical income in Ceylon. To allow abatement under Article III equal to the gross income-tax assessed in Ceylon would mean the petitioner will be getting not merely relief from double tax, but double relief in respect of that part of the gross tax in Ceylon which the petitioner has not been called upon to bear or pay.
4. The petitions are dismissed with costs, one set. Counsel's fee Rs. 250.