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PETITIONER: K.   V. A. L. M. RAMANATHAN CHETTIAR BY L.RS.

       Vs.

RESPONDENT: COMMISSIONER OF INCOME-TAX, MADRAS

DATE OF JUDGMENT11/10/1972

BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN HEGDE, K.S. KHANNA, HANS RAJ DUA, I.D.

CITATION:  1973 AIR 2172            1973 SCR  (2) 650  1973 SCC  (3) 351  CITATOR INFO :  RF         1975 SC2016  (28)  R          1980 SC 252  (9)

ACT: Income Tax Act (11 of 1922), s.49-D--Scope of.

HEADNOTE: The  assessee  was carrying on business in  Malaya  and  was owning rubber plantations.  He was also carrying on business in  ’India.   In respect of the assessment year  1953-54  he declared  his  foreign income from Malaya at  Rs.  2,22,532, income  in  India  at Rs. 39,142  from  sources  other  than business and a loss on business in India at Rs. 68,658.  The Income-tax  Officer allowed double taxation relief on a  sum of  Rs.  1,92,816/-  by adding the income in  India  to  the foreign  income and deducting therefrom the loss  in  India. The  Commissioner,  in exercise.. of his powers  under  s.48 read  with s.49-D of the Income-tax Act, 1922, however,  set off the business loss in India against the business  profits in  Malaya  and held that only the resulting income  of  Rs. 1,53,674  from Malaya could be considered to  have  suffered double taxation and hence granted double taxation relief  in respect  only  of that amount.  The  Tribunal  followed  the decision  of  the  Madras High Court  in  C.I.T.  Madras  v. Arunachalam Chettiar, 49 I.T.R. 574, and confirmed the order of the Commissioner.  The High Court also on reference,  was of  the  view  that the relief granted by  s.49-D  ’on  such doubly  taxed  income’ has reference to the  factual  double incidence  under  two  different  jurisdictions  of  tax  on identical  amounts  of  income,  and  decided  against   the assessee. In  appeal  to this Court, on the scope  of  the  expression ’such  doubly  taxed  income’ in s.49-D  of  the  Act,  with respect to which double taxation relief is given, HELD:     (Per  P. Jaganmohan Reddy, H. R. Khanna and I.  D. Dua, JJ.) The High Court was in error. By  the year 1950, the Government of India  was  encouraging More  and  more  Indian citizens to  establish  branches  in countries with which there was no special agreement for  the avoidance of double taxation, and s.49-D was substituted  in

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place  of  the old one, in 1953, for the purpose  of  giving double taxation relief in respect of taxes on income charged in any country, by deduction or otherwise, under the law  in force  in that country.  The object of the section  is  that the amount of Indian income tax paid or the amount of tax in the  foreign  country, whichever is lower, is allowed  as  a deduction from the tax payable under the Act on such  doubly taxed income.  Prior to 1953, the section afforded relief at half the Indian income tax or half the tax paid in the other country, in respect of the same income whichever is less. if the  concession that was being given by the new section  for encouraging  Indian  citizens to start business  in  foreign countries was only to give relief at the full rate of Indian income-tax instead of half such tax, all that was  necessary by  the  amendment  was  to  delete  the  words  "one  half" occurring  in the section prior to its amendment.   But  the Legislature bad redrafted the entire section with the result that  the  phrase  such doubtly taxed  income’  in  the  new section and the phrase ’same income’ in the repealed section do not have the same import.  The words ’same income’ in the context  would  mean the same kind or species  or  identical income earned in a foreign country 651 on  which tax has been paid in that country, in  respect  of which relief is being claimed from being again subjected  to tax under the Act.  But the words ’such doubly taxed income’ have reference to the foreign income which bears once  again the  burden of Indian income-tax by its being  included  the total  income chargeable under s.3 read with s.2(15) of  the Act.  Under  s.4(1)(b)(ii) the income which  accrues  to  an assessee outside the     taxable   territories  is   to   be included in the total income so that the income under any of the  heads enumerated in s.6 which has accrued or arisen  to the assessee outside the taxable territory and is subject to the tax under the law in force in that country, is  included in his total income attracting the levy of charge under  the Indian Income Tax Act, and is therefore doubly taxed. [667C- D; 672G-H; 673C-E 674B-F, G-H; 675A-B] Once it is recognized that s.49-D does not make the basis of relief  the  tax paid on the income from the  same  head  or source,  then  the  relief to which ,in  assessee  would  be entitled  would be the amount of tax on the  foreign  income which by its inclusion in the total income once again  bears under  the Act.  The word ’such’ in the phrase ’such  doubly taxed  income’ has reference to the foreign income which  is being  subjected to tax by its inclusion in the  computation of  income under the Act and not the same income’  under  an identical  head  of income under the Act.  The  income  from each head under s. 6 is not, under the Act, subjected to tax separately; but it is the total income which is computed and assessed as such in respect of which relief is given for the inclusion of the foreign income, on which tax has been  paid according  to law in force in that country.  The  scheme  of the  Act  is  that  although  income  is  classified   under different heads and the income under each head is separately computed in accordance with the provisions dealing with that particular  bead of income, the income which is the  subject matter of tax under the Act is one income which is the total income.  Income-tax is only one tax levied on the  aggregate of the income classified and chargeable under the  different heads  and  not  a  collection  of  distinct  taxes   levied separately on each head of income.  There is nothing ’in the language  of s.49-D which, either expressly or by  necessary implication,  restricts the grant of double taxation  relief to incomes under the same head. [675F-H; 676A-D]

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Rolls  Royce Ltd. v., Short, 10 T.C. 59, Assam  Railway  and Trading Co.  Ltd. v. The Commissioner of In-land Revenue, 18 T.C.  509,  O.A.P. Andippan v. Commissioner  of  Income-tax, Madras,  82 I.T.R. 876 and Inland Revenue  Commissioners  v. National  Mortgage  and Agency Co., of New  Zealand,  [1935] A.C. 524, distinguished and explained. C.I.T.,  Madras  v. Arunachalam Chettiar,  499  I.T.R.  574, disapproved. (Per Hegde J. dissenting) : The construction of the  section given  by the Commissioner, Tribunal and the High  Court  is the proper construction. [653G] Under our income-tax law in every assessment year, the total income of an assessee during the previous year is brought to tax.   It is made up of income from various sources set  out in  s.4. The section attracts into the pool income,  profits and gains from whatever sources derived, which are  received or  deemed  to be received in the taxable territory  in  the previous year by the assessee; and one of the components  is the income that has accrued or arisen to him in the previous year, outside the taxable territory.  In computing the total income of the assessee the procedure adopted is that  income under each head is first determined after giving  deductions to  which  the  argessee is entitled under  that  head,  and thereafter,  the total income is arrived at for the  purpose of detecting the 652 rate  of tax as well as for the quantification of  tax  due. Section  4 requires that there should be a recalculation  of the incomewhich  has  be doubly taxed. in  making  that calculation, the authority computing tax will have to  leave those portions of the income which have not be doubly taxed. [654D F; 656A C] The  ingredients  of  s.49-D, which  gives  double  taxation relief, are: (i)the  assessee  must have been resident in  the  taxable territory the year; (ii)that  some  income must have accrued or arisen  to  him outside the taxable territory during that year; (iii)in  respect of that income he must have  paid,  by deduction  or otherwise, tax under the law ’in force in  the country in question; and (iv)if  he  fulfills all the above Conditions  he  will  be entitled to deduction from the Indian income-tax payable  by him  of a sum calculated of such doubly taxed income at  the Indian  rate of tax or the rate of tax of the said  country, whichever is lower. [655C-F] The  expression  "such  doubly taxed  income"  involves  two aspects:  (a)  it exclusively relates to the  income  earned outside  India, and (b)it relates only to that part  of  the income earned outside India which is doubly taxed; that  is, the  same  income must have been doubly taxed.   The  income that  gets  relief  under  s.49-D,  is  only  that   inclom- identified income-which has been ’subjected to tax not  only in  the  country in which it was earned, but  also  in  this country.   The  section  does not concern  itself  with  the totality  of the income or even with the source  of  income, but, concerns itself with that part of the income which  has been subjected to double taxation. [655F-H] If the entire tax paid by the assessee in a country  outside India is to be deducted while computing his tax liability in this   country,  then  there  is  no  necessity   ’for   the Legislature to enact s. 49-A.  It is not reasonable to think that  s.49-D  gives more relief than that is  likely  to  be given  under an agreement under s.49-A. Anything  more  than that,  cannot be considered as relief from double  taxation,

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but  would  amount to tax concession.  If the  relief  given under  an agreement under s.49-A and the relief given  under s.49-D mean the same thing, tin Legislature must be held  to have  indulged  in an exercise of futility.   Section  49-D, being  a residuary provision, must be understood to cover  a field other than that covered by s.49-A. Under the  section, as  it stood before the amendment in 1953, relief was  given in  respect of the same income which was taxed  twice  over. After amendment, relief is given on such doubly taxed income The two expressions ’the same income’ and ’such doubly taxed income’ mean the same thing. [656 G-H; 657 A.0. E.G.] Despite the difference in language the section is similar in scope  to s.27 of the United Kingdom Finance Act, 1920,  and the decisions rendered under the U.K. Act have a bearing  on the point in controversy. [657G; 658C-D] In the present case, the assessee’s income from property and other sources amounting to a sum of Rs. 39,142 has not  been doubly  taxed.   Hence  that income cannot  enter  into  the calculation  of the doubly taxed income of the assessee  and that income could not have been included in the return  made by  the assessee in Malaya.  That being  in calculating  the doubly taxed income, that component of the total income  has to be 653 kept  apart.  Further, the entire business income earned  in Malaya  though  taxed in Malaya has not been taxed  in  this country.   Out  of that sum only a sum of Rs.  1,53,674  has been  taxed  in  this country.  The business  loss  in  this country  cannot be said to have been taxed in this  country. A  relief  does not amount to a taxation.   Double  taxation relief  should not be mixed up with tax concessions.  It  is only  that  income  which can be said to  have  been  doubly taxed, that is entitled to-relief under the section. [656 S- G] Rolls  Royce  Ltd. v. Short, 10 Tax Cas. 59  and  The  Assam Railways and Trading Co. Ltd. v. The Commissioners of Inland Revenue, 18 Tax Cas. 509, applied. Commissioner  of  Income-tax  v.  Arunachalam  Chettiar,  49 I.T.R. 574, approved. Commissioner  of Income-tax, Bombay City-II v.  New  Citizen Bank of India Ltd. and Anr., 58 I.T.R. 468. referred to.

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos. 1840  and 1842 of 1972. Appeal  by  certificate from the judgment  and  order  dated March 12, 1968 of the Madras High Court in Tax Case No.  202 of 1962 (Reference No. 5 of 1964). S.   T. Desai and T. A. Ramachandran, for the appellant. B.   Sen, P. L. Juneja, B. D. Sharma and R. N. Sachthey, for the respondents. M. S. K. Sastri and M. S. Narasimhan, for the intervener. The  majority opinion of P. Jaganmohan Reddy, I. D. Dua  and H.   R. Khanna, JJ. was delivered by P. Jaganmohan Reddy, J. K.   S. Hegde, J. gave a dissenting opinion. HEGDE, J. I have had the advantage of reading the judgment prepared by my learned brother Reddy J. I regret I am unable to  agree with the construction placed by him on S. 49-D  of the  Indian Income-tax Act 1922 (to be hereinafter  referred to as the Act).  I agree with him that there is considerable difficulty in interpreting that provision but that does  not absolve this Court from its duty of properly construing that provision.  On a proper construction of that provision, I am

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of   the  opinion  that  the  conclusion  reached   by   the Commissioner, the Tribunal and the High Court is the  proper one. The  facts of the case are fully set out in the judgment  of my  learned brother Reddy J. It is needless to repeat  those facts in their entirety.  It will be sufficient if  set  out the material facts relating to the assessment year  1953-54. During the relevant previous year, the deceased assesses who carried on business in Malaya and also owned rubber  gardens abroad declared his foreign income as 654 Rs.  222,532.  He had been assessed in Malaya in respect  of that  income.   As  he  was resident  in  India  during  the relevant  previous year, that income must be  considered  as having  accrued to hi-in in India in view of s.  4(1)(b)(ii) of  the Act.  During the relevant year, he was  carrying  on business in India also.  In that business he suffered a loss of  Rs.  68,858.   In this country  his  income  from  other sources  amounted  to Rs. 39,142.  It  mainly  consisted  of income from property.  In his assessment proceedings in this country,  he claimed double taxation relief under  s.  49-D. The Income-tax Officer added his income arising outside that taxable  territories with his income from other  sources  in India (Rs. 2,22,532+Rs. 39,142=Rs. 2,61,674 and from that he deducted  Rs. 68,658, the business loss suffered by  him  in India and taxed him on a total income of Rs. 1,92,816.   The Commissioner revised that order.  He came to the  conclusion that  the income that has suffered double taxation was  only Rs. 153,674.  He accordingly granted double taxation  relief only  in respect of that amount.  His view was confirmed  by the Tribunal in appeal and by the High Court in a  Reference under s. 66(1). Under  our  Income-tax law, in every  assessment  year,  the total  income  of an assessee during the  previous  year  is brought  to  tax.   It is made up  of  income  from  various sources.   Those  sources are set out in s. 4  of  the  Act. Clause  (a)  of sub-s. (1) of s. 4 attracts into  the  pool, income,  profits  and gains from  whatever  sources  derived which are received or deemed to be received in the,  taxable territory  in  the  previous year by or  on  behalf  of  the assessee.  income  is  defined  in  s.  2(C).   That  is  an inclusive definition.  One of the components of ’income’  is ’dividend’  which  is  defined in s.  2  (6)(A).   Both  the expressions  ’income’ as well as ’dividend’ include  certain receipts  which are deemed as ’income’ or ’dividend’.   Sec- tion  4(1)(b)  enumerates various other sources  of  income. One of the components which makes up the total income is the income that has accrued or arisen to a resident in India  in the previous year, outside the taxable territory. We shall now see what s. 49-D says.  It is not necessary  to quote  the entire section.  The portion of the section  that is material for our present purpose runs thus :               "If any person who is resident in the  taxable               territories  in  any  year  proves  that,   in               respect of his income which accrued or  arises               during   that   year   without   the   taxable               territories  he  has paid in any  country   by               deduction or otherwise under the law in  force               in  that country, he shall be entitled to  the               deduction  from the Indian income-tax  payable               by him of a sum calcu-               655               lated  on  such  doubly taxed  income  at  the               Indian  rate of tax or the rate of tax of  the               said   country,  whichever  is   the   lower."

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             (emphasis supplied) Before  analyzing the ingredients of this provision,  it  is necessary to mention that s. 49-D gives relief to the extent mentioned in that ’section in respect of the income accruing or arising in countries outside India with which our country has  no  reciprocal  agreement for relief  or  avoidance  of double  taxation.   With the countries with  which  we  have reciprocal  agreements for the relief from double  taxation, s.  49-A  applies.   In cases falling  under  that  section, relief to be granted depends upon the terms of the concerned agreement.   Now  turning back to s. 49-D and an  sing  that provision, we find the following ingredients:-               (1)   The assessee in question must have  been               resident in the taxable territory in any year;               (2)   That  the some income must have  accrued               or arisen to him outside the taxable territory               during that year;               (3)   In  respect of that income he must  have               paid  by deduction or otherwise tax under  the               law in force in the country in question and               (4)   If he fulfills all the above conditions,               he  will  be entitled to  deduction  from  the               Indian  income-tax  payable by him  of  a  sum               calculated on such doubly taxed income at  the               Indian  rate of tax or the rate of tax of  the               said country whichever is lower. There  is  no  dispute  that  the  first  three   conditions enumerated  above have been satisfied in the  present  case. The real question for decision is as to what is the scope of the  expression  "of a sum calculated on such  doubly  taxed income".   This expression involves two aspects viz. (1)  It exclusively  relates  to the income  earned  outside  India. This is clear from the word "such"’ and (2) It relates  only to  that  part of the income earned outside India  which  is doubly taxed.  In other words the same income must have been doubly taxed.  The income that gets relief under s. 49-D  is Only that income--identified income which has been subjected to  tax twice over.  In other words the income in  question- may  be  whole or part-must have been subjected to  tax  not only in the country in which it was earned but also in  this country.  From the language of s. 49-D, it is clear that  it does  not concern itself with the totality of the income  or even  the  source of the income. it merely  concerns  itself with  that  part of the income which has been  subjected  to double taxation.  7-L499Sup.  C. I. /73 656 The provision requires that there should be a  recalculation of that income which has been doubly taxed.  In making  that calculation,  the authority computing the tax will  have  to leave  those portions of income which have not  been  doubly taxed. In computing the total income of an assessee, the  procedure adopted is that income, profits or gains under each head  is first  determined  after  giving  deductions  to  which  the assessee  is  entitled under that head  and  thereafter  the total  income is arrived at for the purpose  of  determining the rate of tax as well as for the quantification of the tax due.   Supposing an assessee, has various sources of  income such  as  salaries,  interest  on  securities,  income  from property,  profits  or  gains  of  business,  profession  or vocation,  income from other sources and capital gains,  the income under each head has to be first determined.  For  the determination  of  the taxable income under each  head,  the taxing authorities have not only to take into  consideration

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the  gross income under each head, they must go further  and deduct  from  the  gross  income  under  each  head  various concessions  to  which  the  assessee  is  entitled  to  and thereafter arrive at the total income. Quite clearly the assessee’s income from property and  other sources  amounting  to a sum of Rs. 39,142/-  has  not  been doubly  taxed.   Hence  that income cannot  enter  into  the calculation  of doubly taxed income of the assessee as  that income  could not have been included in the return  made  by the assessee at Malaya.  That is not an income earned by the assessee outside the territories of India.  That being so in calculating  the doubly taxed income, that component of  the total  income  has  to be kept apart.   Further  the  entire business  income of Rs. 2,22,532/- earned in  Malaya  though taxed in Malaya, has not been taxed in this country.  Out of that sum only a sum of Rs. 1,53,674/- has been taxed in this country.   The business loss in this country cannot be  said to  have, been taxed in this country.  A relief  given  does not amount to a taxation.  To repeat, it is only that income which can be said to have been doubly taxed, is entitled  to relief  under  s.  49-D.  Counsel for  the  parties  rightly conceded  that  the-  source of income  is  not  a  relevant consideration.  What is material under s. 49-D is the income which is doubly taxed. If the entire tax paid by the assessee in a country  outside India is to be deducted while computing his tax liability in this   country,  then  there  was  no  necessity   for   the Legislature  to  enact  s. 49-A.  An  agreement  under  that provision,  at  the  highest could  have  provided  for  the deduction  from  the  tax  payable in  this  country  by  an assessee,  the  tax  paid  by  him  in  a  foreign  country. Anything more than that cannot be considered as relief  from double taxation.  It would amount to tax concession-.  It is equally  unlikely that the relief given under  an  agreement entered into under s. 49-A 657 can be less than the relief available under s. 49-D.  If the relief given under an agreement under s. 49-A and the relief given  under  s. 49-D mean the same thing,  the  Legislature must  be held to have indulged in an exercise  in  futility. Such  a  line of reasoning is impermissible.   Section  49-D must be understood to cover a field other than that  covered by  s. 49-A.  Further it is not reasonable to think that  s. 49-D gives more relief than that is likely to be given under an  agreement  under  s. 49-A, s.  49-D  being  a  residuary provision. Section 49-D as it now stands is the result of an  amendment made in 1953.  Prior to that the section read :               "If  any person who has paid by  deduction  or               otherwise  Indian Income-tax for any  year  in               respect  of  any income  arising  without  the               taxable  territories in a country the laws  of               which do not provide for any relief in respect               of  income-tax charged in the  taxable  terri-               tories  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               one  half of such Indian Income-tax or to  one               half of such tax payable in the said  country,               whichever is less." Under  the section as it stood before the amendment in  1953 relief  was given "in respect of the same income" which  was taxed  twice  over.  Under the present provision  relief  is

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given to "such doubly taxed income".  I am clear in my  mind that  so  far as the identification of the income  which  is entitled  to double taxation relief is concerned, there  has been no change in the law.  The expression "the same income" and "such doubly taxed income’ mean the same thing.  We  are not concerned with the other changes effected in s. 49-D.The statement  of  objects and reasons for  bringing  about  the change in s. 49-D or the Select Committee’s report  relating to  that provision do not throw any light in the  matter  of identification  of  the income which-is entitled  to  double taxation relief. Section 49-D despite the difference in the language employed in  my  opinion is similar in scope to s. 27 of  the  United Kingdom  Finance  Act, 1920.  The relevant portion  of  that section reads as follows :               "If  any person who has paid, by deduction  or               otherwise, or is liable to pay, United Kingdom               income  tax for any year of assessment on  any               part of his income Proves to the  satisfaction               of the Special Commissioners that ’he has paid               Dominion income-tax for that year in 658 respect of the same part of his income, he shall be entitled to relief from United Kingdom income tax paid or payable  by him  on  that  part of his income at a rate  thereon  to  be determined as follows :               (a)   If  the  Dominion rate of tax  does  not               exceed  onehalf  of the  appropriate  rate  of               United  Kingdom tax, the rate at which  relief               is  to be given shall be the Dominion rate  of               tax;               (b)   In  any  other case the  rate  at  which               relief is to be given shall be one-half of the               appropriate rate of United Kingdom tax." The  English provision entitles an assessee to  relief  from double  taxation  in respect of that part of his  income  on which he has paid dominion income-tax and he is also  liable to pay incometax in United Kingdom in respect of that  part. The income which is entitled to relief under, that provision is "the same part of his income" which is liable to be taxed both in the United Kingdom as well as in the Dominion.  That is  exactly what is done under s. 49-D.  Our Act instead  of using the expression "the same part of his income" which  is doubly  taxed has used the expression "of such doubly  taxed income".  But the two expressions mean the same thing. The decisions rendered under the United Kingdom Act bear  on the point in controversy in this case. In  Rolls Royce Ltd. v. Short(1), question arose as to  what extent  the  assessee  was entitled to  relief  from  double taxation  under the aforementioned s. 27.  The facts of  the case  are  not material for our present purpose.   But  that decision sets out the scope of s. 27. This is how its  scope is described by Rowlatt J. sitting on the King’s Bench.               "The object of Section 27 of the Finance  Act,               1920 was to mitigate the hardship involved  in               paying IncomeTax in the United Kingdom in full               upon profits which has already been subjected;                             to  Income  Tax  in  a  Dominion,  and   if  the               Legislature  had  thought  fit  to  say   that               wherever  income had been taxed in a  Dominion               and  the same profits came thereafter  at  any               time to form the basis of a tax in the  United               Kingdom  the sum already paid on  that  income               should form a basis of relief, the thing might

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             have worked out very simply.  But that has not               been done obviously because it is quite  clear               that before relief can be given in respect  of               Dominion  Income Tax paid on  profits  brought               into charge to Income-tax in this country,  it               must be shown that the               (1)   10 Tax Cas 59.               659               Dominion  Income-tax  and the  United  Kingdom               Income  Tax  are paid in respect of  the  same               year  and on the same income or as the  phrase               is used here, "part of income".               The  learned  judge  equated  the  expressions               "part of income" and "same income" as  meaning               the same thing.               In  the course of his judgment,  his  Lordship               observed               "If  you  read  the first  few  lines  of  the               section,  really  on  the  words  of  it,  the               section  only  appears  to  apply  where  this               overlapping of taxation has been partial, that               is to say, where a man has part of his  income               taxed  doubly and not where he has  the  whole               taxed   doubly,  which  obviously  cannot   be               intended." When  the  matter  was taken up in appeal to  the  Court  of Appeal  Pollock  M. R. set put the conditions on  which  the relief  can be given under s. 27.  Those conditions, to  put it in the words of the Master of Rolls are:               "First,  it  is the person who  has  paid  the               United  Kingdom  Income Tax  by  deduction  or               otherwise  for any year of assessment  on  any               part of his income who may claim relief.   The               second step is that that tax payer must  prove               to  tie  satisfaction  of  the  Special   Com-               missioners  that he has paid  Dominion  Income               Tax for that year of assessment "in respect of               the same part of his income" as that on  which               he  has paid United Kingdom Income  Tax.   And               the third step is that if such proof is given,               the tax-payer becomes entitled to relief from-               United Kingdom Income Tax "on that part of his               income",  that is, on that same part  referred               to  previously  on which he  has  paid  United               Kingdom Income Tax and Indian Tax."               Proceeding   further  the  Master   of   Rolls               observed               "The  fact of paying a tax in a Dominion  does               not  induce  relief.  The basic  condition  is               that a person has paid tax on his income  over               here-then,  if  some part of  that  income  so               charged  and  assessed to tax  in  the  United               Kingdom  can be identified and proved to  have               paid  Dominion tax, that same part  which  has               suffered dual taxation can be relieved of  the               tax  paid  here up to the  measure  of  relief               given by the Section." The decision which is more appropriate for our present  pur- pose is that rendered in The Assam Railways and Trading  Co. Ltd.  v. The Commissioners of Land Revenue(1.  The  relevant facts of that case are as follows:  (1) 18 Tax cas 509. 660 The assessee company, which was incorporated and  controlled in the United Kingdom, carried  On the business of running a

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railway,  working coal mines, brickwords etc., in Assam  and also carried on a plantation business there.  The, whole  of its  income  arose in India with the exception  of  a  small amount arising from investments in England.  The company had issued,  in  the  United Kingdom, debenture  stock  and  the interest  thereon  was  paid  in  the  United  Kingdom.   In computing the company’s liability to United Kingdom  income- tax Case 1 of Schedule D for the years 1928-29 and  1929-30, the  debenture interest was not allowed as a  deduction  and certain  profits  from  a  tea garden  were  included  as  a receipt.  The assessments on the company to Indian incometax and super-tax for the corresponding years in respect of  its business profits were, in accordance, with the provisions of Indian Income-tax law, arrived at after deducting the amount of debenture interest and excluding the tea garden  profits. The assessee claimed that the relief in respect of  Dominion income-tax  to,  which  it was entitled  under  Section  27, Finance Act, 1920 should be based on the whole of its income as  computed  for the purpose of United Kingdom  Income  Tax less  only  the  income  arising  in  England,  without  any deduction  for  the  debenture interest or  the  tea  garden profits.   The  Special  Commissioners  refused  the  relief claimed.   The House of Lords affirmed the decision  of  the Special  Commissioners.   It held that the company  had  not borne  double taxation on that part of its income which  was applied  in  payment  of debenture interest or  on  the  tea garden  profits  and  hence was not entitled  to  relief  in respect  thereof.  From this decision, it is seen  that  the total  income of the assessee arising or accruing in  United Kingdom for the purpose of double taxation relief was  split into four parts i.e. (1) income arising  in England (2)  the interest  on debenture that was given deduction to in  India (3) the tea garden profits and (4) the other income. There was no dispute that the income from the investments in England was not to be taken into consideration while deter-- mining  the  double  taxation  relief.   This  position  was conceded  by the assessee.  If we apply the same,  ratio  to the  facts  of the case before us, we have to  exclude  from consideration while determining the double taxation  relief, the  income of Rs. 39,142/- an income exclusively earned  in India and was not brought to tax in Malaya.  Next, deduction given in India in respect of the interest on debenture loans was  not  taken into consideration  while  affording  double taxation  relief because that portion of the  Indian  income was  not subjected to double taxation because of the  relief given  under the Indian Income-tax Act.  Let us  apply  that principle  to  the facts of the present  case.   The  amount deducted in this country as business loss (Rs. 68,858/-) was not  subjected  to double taxation.  That amount  was  never taxed in this country. 661 We  should  not  mix  up double  taxation  relief  with  tax concessions.  The  main judgment,of the, House of  Lords  in Assam  Railways, case (supra) was delivered by Lord  Wright. Analyzing  s.  27  of the Finance  Act,  1920,  Lord  Wright observed               "The Section requires that the taxpayer should               prove  (1) that he has paid tax in the  United               Kingdom for any year on a certain sum which is               part  of his income; in this connection, I  do               not  think  that the word "part"  is  used  to               exclude  the whole but merely to point  to  an               ascertainable  sum of income which is  brought               into question; (2) that he has paid tax in the               Dominion "in respect of" the same part of  his

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             income  for  that year : here  the  words  "in               respect  of as contrasted with "on" do not,  I               think,  involve any latent distinction,  since               the  word  on" would be  inapplicable  to  the               "same income" which becomes a separate taxable               subject  in the Dominion.  The  taxpayer  then               becomes  entitled to relief.  It  seems  clear               that  there must be a definite part of  income               brought  into question, and that can  only  be               expressed in a sum of money.  As income ex  vi               termini  must be expressed in a sum of  money,               the  words "the same part of his income"  must               involve a comparison between two sums of money               which prove to be the same.  The contention of               the appellants is to the contrary : it is said               on their behalf that the words "the same  part               ’of his income" refer solely to what is called               the  source,  and that identity of  amount  is               immaterial  and  does not come  into  question               except  for  the purpose of  ascertaining  the               rate of tax to be allowed for.  I cannot agree               with  this  argument.  No doubt  questions  of               source,  as it has been called, that is,  such               questions as where the income comes from,  are               essential  to identify so far as  that  aspect               goes, what is taxed in the United Kingdom with               what  is  taxed  in  the  Dominion,  but,   in               addition,  the  income  itself  that  is,  the               amount  of money, must also be identified.   I               think the words "the same part of his  income"               are apt to include both elements of comparison                             and identification." These  observations,  if I may say so with  respect  clearly bring  out the legal principles bearing on the  issue  under discussion. In  my  judgment the decision. of the Madras High  Court  in Commissioner   of  Income-tax  v.  Arunachalam   Chettiar(1) correctly lays down the law on the subject. Mr.  S.  T. Desai, learned Counsel for the  assessee  placed considerable  reliance  on the decision of the  Bombay  High Court in (1)49, I. T. R. 574. 662 Commissioner  of  Income-tax Bombay City-II v.  New  Citizen Bank of India Ltd. and anr. (1) Therein the court was called upon  to interpret an agreement entered into under S.  49-A. In  that  case the court was not required to  interpret  the scope  of  s.  49-D.  There is no doubt  that  some  of  the observations made in that case lend support to the arguments advanced  on  behalf of the assessee.  In   my  opinion  the learned judges of the High Court in that case did not  bring out  correctly the-ratio of the decisions in Assam  Railways and  Trading  Co. (supra) and Rolls  Royce’s  case  (supra). They  sought to distinguish those cases on the basis of  the facts   of  those  cases  ignoring  the   legal   principles enunciated therein. In the result I dismiss these appeals. JAGANMOHAN REDDY, J.-These are appeals by certificate from a common  judgment of the Madras High Court rendered in  three references  under  s.  66(1) of  the  Income-tax  Act,  1922 (hereinafter  called  the  Act’)  pertaining  to  assessment years,  1953-54,  1954-55  and 1955-56.   In  the  reference relating  to  the first assessment year three  questions  in respect of the last two, two questions were referred by  the Tribunal.   The  three  questions  relating  to  the   first

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reference are:-- 1.Whether  on the facts and in the circumstances  of  the case   the  Tribunal,  is  right  in  its  view   that   the Commissioner  of  Incometax had jurisdiction to  revise  the order of refund ? 2.Whether on the facts and in the circumstances of the case, the  Tribunal is right in its view that the order of  refund under. section 48 read with section 49-D is independent  and distinct from the assessment order ? 3.Whether on the facts and in the circumstances of the case, the  Tribunal  is  right in confirming  the  computation  of relief  as modified by the Commissioner ? In  the  reference relating  to  the last two assessment years,  the  questions were :- 1.’Whether  on the facts and in the circumstances of  the case,  the Tribunal is right in modifying the order  of  the Appellate Assistant Commissioner ? 2.Whether  on the facts and in the circumstances  of  the case the Tribunal is right in its. interpretation of section 49-D ? Before  the  High  Court the first  question  on  the  first reference w ’not pressed and therefore was answered  against the  assessee.   The  remaining  two  questions  which  were considered  to be similar to the two questions in the  other two  references  were also answered  against  the  assessee. Before us the second question in the first (1)  58, I. T, R. 468. 663 reference  was not pressed, as such substantially the  third question  in  that  reference  and  the  first  and   second questions  in the other two references which deal  with  the validity of the order of the Commissioner and the High Court need alone be considered in these appeals. The  assessee who is now dead and is succeeded by legal  re- presentatives was doing money lending business in Malaya  as well  as  in this country.  He also,  owned  rubber  gardens abroad, in respect of the first assessment year 1953-54  the assessee  declared  his foreign income as Rs.  2,22,532  and showed a loss on business in India as Rs. 68,858 and  income from  ’other  sources  as Rs. 39,142/-.  In  the  other  two references  it  is  not necessary to refer  to  the  incomes earned  by  him abroad and in India except to say  that  the Appellate Assistant Commissioner allowed the appeal in  part holding  that the income from all the sources in India  have to  be considered together just as income from  all  sources abroad  must be considered- together and in that  view  held that  the net assessed income in India from Malaya  is  what has suffered double tax.  What is to be determined in  these appeals is, on what basis should the double taxation  relief be  afforded to the assessee.  It will be sufficient  if  we take  the  first assessment as illustrative of  the  problem which is, posed in these appeals. The  Income-tax Officer allowed double taxation relief on  a sum of Rs. 1,92,816/- by adding income from other sources to the  foreign  income  and  deducting  from  the  total  thus computed  the  loss  of Rs.  68,858.   The  Commissioner  in exercise  of  his  powers s under s. 48 read  with  s.  49-D however  held  that  that  cornputation  was  wrong  because according to him the business loss of Rs. 68,858 incurred by the  assessee  can  be set off  only  against  the  business profits  of  Rs. 2,22,532 earned in Malaya  resulting  in  a business  income of Rs. 1,53,674 being the only income  from Malaya  which  can  be considered to  have  suffered  double taxation.  In appeal against the order of the  Commissioner, the  Tribunal  following the judgment in  C.I.T.  Madras  v.

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Arunachalam  Chettiar(1)  came to the  conclusion  that  the ’expression  "such  doubly taxed income" can  only  indicate that  it is that portion of the income on which tax in  fact has been imposed and paid by the assessee that qualifies for double income relief.  The High.  Court also was of the view that  the  relief granted by s. 49-D on  such  doubly  taxed income  has reference to the factual double incidence  under two  different jurisdictions of tax on identical  amount  of income,  that  is to say, an identical income on  which  two taxes  have been imposed under the Indian  jurisdiction  and the other by a foreign’ authority.  (1)49 I. T. R.  574. 664 It is clear that a decision in these appeals will depend  on the construction of s. 49-D which bristles with difficulties and  is not easy to resolve.  A great deal would  depend  on the approach to the question and the meaning to be given  to ’such  doubly  taxed  income’.  If we are  to  approach  the construction of the section on a comparison with the reliefs given under s. 49-A or on the analogy of cases decided under s.  27 of the United Kingdom Finance Act or on an  a  priori assumption  that  the  relief under s.  49-D  could  not  be greater than that which can be given under s. 49-A or on the basis  of  reciprocity under s. 27, we venture to  think  it will not lead to satisfactory conclusion.  S. 49-A  empowers the  Central  Government to enter into agreements  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 the  Act  and  the income-tax  in  that country or with the Government  of  any country  outside India for the avoidance of double  taxation of  income,  profits and gains under the 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.  Before the amendment of that section by the Finance Act, 1953  with effect  from  1st April 1953, there  were  other  provisions giving  relief  in  respect of Part B  States  and  Dominion income-tax and agreement for avoidance of double taxation in India,  Pakistan  or  U.K. apart from s.  49  which  granted relief  in  respect  of income-tax-.  In 1948  s.  49  which granted relief in respect of income taxed both in India  and in U.K. was omitted and s. 49-A as it then was, was  amended to   enable   Central  Government  to  make   provision   by notification  to grant relief in respect of income on  which both India and United Kingdom levied tax.  Under the amended s.  40-A  the Income-tax Double Taxation in  United  Kingdom Rules were made.  It would appear on the relevant provisions an assessee can claim double taxation relief if he can  show that he has paid tax on the same income both in India and in the  foreign country.  In order to obtain the relief it  was also  necessary  to  show that  the-income  must  have  been charged to tax in both countries.  Where a resident of India earns income in a foreign country with which the  Government of India has no arrangement for relief against or  avoidance of double taxation, relief has been afforded to him under s. 49-D. We  may point out that for the first time relief in  respect of  tax  charged  in a country which did  not  provide,  for relief  in  respect  of the British  Indian  income-tax  was granted  under  the said section introduced  by  the  Indian Income-tax (Amendment) Act 1939 in the Act of 1922.  To this an  Explanation was added by Amendment Act 23 of 1941  which makes  it clear that the relief extends both  to  income-tax and  to  super-tax.   Thereafter, a  new  section  49-D  was

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substituted by the Amendment Act, 1953 with effect  665 from 1st April 1952 and by the Finance Act, 1956 sub-ss. (3) and (4) were inserted.  Since the last two sub-sections deal with  income  of  a  resident  in  the  taxable  territories accruing or arising to him during that year in Pakistan they do  not assume any relevance for the purposes of this  case. We  give below in juxta position s. 49-D as it was prior  to the  amendment  in  1953  and  that  inserted  by  the  1953 Amendment Act:- Prior to Amendment Act, 1953 After Amendment Act, 1952 49D.    Relief in respect of tax in 49D. (1) If  any  person who  is country not providing for relief in resident in  the taxable  territories respect of Indian Income-tax-if in  any year proves that, in respect any person who has paid by  de- of  his income which accrues or duction or otherwise  Indian In arises during that year without come-tax for any year  in respect  the  taxable territories (and which of  any  income arising without the is not deemed to accrue or arise taxable territories in a country the in the taxable territories), he has  laws  of which do not provide for paid in  any  country with  which  any relief in respect of income-  there  is  no reciprocal arrangement tax charged in the taxable terri- for relief  or avoidance of doubler tories provided that he  has paid   taxation,  income-tax,  by  deducin   income-tax   by deduction  or other- tion or otherwise, under the  law  wise under  the  laws of the said in force in  that  country,  he shall country in respect of the same in- be entitled to  the deduction from come, he shall be entitled to the the  Indian income-tax payable by deduction from the Indian In- him of a sum  calculated  on such, come-tax payable of  a  sum  equal double taxed income at the Indian to one-half of such Indian income- rate of tax or the rate of tax of tax or to one-half of such tax pay- the said country, whichever is the. able in the said country, which- lower. ever is less.            (2) The Central Government Explanation-The  expression  may,  by  notification  in  the Official ’Indian Income-tax in this section Gazette, declare that the provi-means income-tax and super-taxa sions of sub- section (1) shall also charged in accordance with the  apply in  relation  to  any such inprovisions of  this  Act.  come accruing or arising in the 666                              United  Kingdom and  chargeable                              under  this  Act for  the  year                              ending  on  the  31st  day   of                              March,  1950, or f or the  year                              ending  on  the 31  st  day  of                              March,  1951, or for  the  year                              ending  on  the 3 1 st  day  of                              March, 1952.                              Explanation-In this section.-                              (i)the  expression "Indian  in-                              come-tax" means income-tax  and                              super-tax charged in accordance                              with  the  provisions  of  this                              Act;                              (ii)the expression "Indian rate                              of   tax"   means   the    rate                              determined   by  dividing   the                              amount  of  Indian   income-tax                              after  deduction of any  relief                              due under the other  provisions                              of  this Act but before  deduc-                              tion  of any relief under  this

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                            section, by the total income;                              (iii)the  expression  "rate  of                              tax of the said country"  means                              income-tax    and     super-tax                              actually   paid  in  the   said                              country in accordance with  the                              corresponding laws of the  said                              country after deduction of  all                              relief,    due,   but    before                              deduction of any relief due  in                              the said country in respect  of                              double taxation, divided by the                              whole amount of income assessed                              in the said country;                                667                              (iv)the expression "income  tax                              in relation to any country" in-                              cludes  any excess profits  tax                              or business profits tax charged                              on    the   profits   by    the                              Government of that country  and                              not  by the Government  of  any                              part of that country or a local                              authority in that country. That section as is obvious, grants double taxation relief in respect of taxes on income charged in any foreign country by deduction  or  otherwise  under the law  in  force  in  that country.   The object of the section is that the  amount  of Indian  income-tax  paid or the amount of tax  paid  in  the foreign  country  whichever  is the lower is  allowed  as  a deduction from the tax payable under the Act on such  doubly taxed income.  The words "in respect of the same income"  in the  preamendment  section and "such  doubly  taxed  income" emphasized by us assume importance and will be considered in the  context of the respective sections and the object  with which they were enacted. The  Tribunal thought that the business loss in  India  must first be set off wholly against the business profits  earned in  Malaya and the fact that this results in application  of s.   24(1)  does  not  take  away  the  necessity  for   the limitation.   But  before us the learned  advocate  for  the Revenue  conceded that neither s.24 is applicable nor  would it be necessary to submit that the income on which a tax has been  paid abroad must be under the same head of  income  as that specified in s.6 of the Act.  What he in fact  contends is that the income from interest and from property  assessed in  India  amounting  to Rs. 39,142 did  not  arise  outside India,   as  such  it  cannot  be  taken  into  account   in determining  whether  the  tax paid outside  is  not  doubly taxed.   This  begs  the question.  Indeed  in  his  earlier contentions  he had indicated that the basis upon which  the Revenue  is resisting the claim is that the identity of  the income  is  not the same, that is, for granting  relief  (a) there  must  be numerical identity of the  income  which  is subject  to  tax  both in India and  abroad,  the  numerical identity  being the amount of income on which tax  is  paid, and  (b)  there  should also be the sameness  of  the  head. Secondly,  he contended that relief by way of  deduction  is allowable on such portion of that income which has  actually been subjected to tax twice over after allowing for set  off or deductions if any.  Thirdly, having regard to the  scheme of  the Act and the method of computation of income  arising both  within  and without India, income must  be  considered under separate heads in order to 668

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ascertain whether any income has been actually taxed or not. He  therefore submits that Rs. 39,142/- has no  relation  at all  with the income arising in Malaya and cannot  be  taken into consideration under s.49-D. This would be so, he  says, even  if it came under the same head.  In support  of  these contentions the decisions of the Court of Appeal in  England in  Rolls Royce Ltd. v. Short(1), that of House of Lords  in Assam  Railway and Trading Co. Ltd. v. The  Commissioner  of Inland  Revenue(2)  and  the case of this  Court  in  O.A.P. Andippan  v.  Commissioner  of  Income-Tax,  Madras(2)  were cited.   We  may  at once state  that  these  decisions  are rendered  on  the provisions which are not in  pari  materia with the provisions in s. 49-D. The case of this Court in Andiappan was under s.49-A-A where the  question  was,  whether the assessee  was  entitled  to abatement  in  India under Art.  III of  the  agreement  for relief and avoidance of double taxation in India and  Ceylon read  with item 8 of the Schedule to the agreement.  It  was held  on  the terms of that article and the  clause  in  the schedule  that what was attributable to the Ceylon  law  was only  that tax which was ultimately levied on  the  assessee and  demanded, but he was not entitled to abatement  of  tax that he would have to pay before deduction of the  allowance given  by s.45(2) of the Ceylon Income Tax  Ordinance  1932. This  case therefore does not help us in  ascertaining  what ’doubly taxed income’ is for the purpose of s.49-D as it was decided  on  the terms of the provisions of the  Ceylon  law according  to which tax was ultimately levied in respect  of which relief was claimed. The other two English cases dealt with the interpretation of s.  27 of the Finance Act 1920.  The amendment in  1927  was only in respect of the meaning of "-appropriate rate in  the United United Kingdom Income Tax" which is not relevant  for the present consideration.  Section 27 of the Finance Act is as under :-               " (1) If any person who has paid, by deduction               or  otherwise,  or is liable  to  pay,  United               Kingdom  incometax for any year of  assessment               on  any  part  of his  income  proves  to  the               satisfaction of the Special Commissioners that               he has paid Dominion income-tax for that  year               in respect of the same part of his income,  he               shall  be  entitled   to  relief  from  United               Kingdom  income-tax paid or payable by him  on               that  part of his income at a rate thereon  to               be determined as follows :-                (a)if  the  Dominion  rate of  tax  does  not               exceed  one-half  of the appropriate  rate  of               United Kingdom               (1)   10 T. C. 59.     (3)     821. T. R. 876.               (2) 18 T. C. 509.                669               income-tax, the rate at which relief is to  be               given shall be Dominion rate of tax :               (b)in  any  other case the  rate  at  which               relief is to be given shall be one-half of the               appropriate rate of the United Kingdom income-               tax.               *              *              * It  will  be  observed that in this section  the  words  "in respect of the same part of the income" and ’on that part of his  income have significance in understanding  the  English decisions  in respect of the double tax relief given in  the United  Kingdom.   Similar words, viz.  "in respect  of  the same  part of his income" and "on that part of  his  income"

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are  used in the corresponding provision in clause 3 of  the notification of the Government of India issued under s.  49- A. In  the Rolls Royce case a British company trading in  India was  assessed  to and paid Indian income-tax  for  the  year 1920-21  on  a  profit of pound 4,120, the  profits  of  its Indian  branch.   It was also assessed to and  paid  in  the United Kingdom income-tax for the same assessment year under the  law of that country on the average of the whole of  its profits  wherever  made  for  three  preceding  years.   The assessee claimed that as it had paid both United Kingdom tax and  Indian  income-tax for assessment year  on  its  Indian profits for those years, it was entitled to relief under  s. 27 from United Kingdom income-tax.  The claim was  negatived by  Rowlatt, J. as no income-tax was paid in respect of  the Indian  income of 1920-21.  This decision was upheld by  the Court of Appeal.  Rowlatt, J. at p. 67 gave the reasons  for disallowance thus :-               "When  the  Indian  income  in  the  year   of               assessment  calculated  according  to   Indian               methods   is  more  than  the  Indian   income               calculated according to British methods,  then               he  will  only  get  relief  calculated   with               reference  to  the  amount  of  the   English-               calculated  income  upon  which  he  has  paid               English  Income Tax.  Where the Indian  income               calculated  according to the Indian method  is               less than the Indian income calculated for the               United  Kingdom  Income  Tax  in  the   United               Kingdom method, will he be able conversely  to               deduct  the rate from the English  Income  Tax               although  that would be giving him  back  more               tax than he has actually paid in India?"               In the Court of Appeal, Pollock, M.R. said  at               p. 70-               "The  fact of paying a tax in a Dominion  does               not  induce  relief.  The basic  condition  is               that a person has paid tax on his income  over               here-then,  if  some part of  that  income  so               charged and assessed to tax in the United               670               Kingdom  can be identified and proved to  have               paid  Dominion tax, that same part  which  has               suffered dual taxation can be relieved of  the               tax  paid  here, up to the measure  of  relief               given by. the section."               Warrington, L. J. observed at p. 71-72:--               "Having  regard  to  the  different  modes  of               assessment  prevailing  in England  and  India               respectively,   the  profits  of  the   Indian               business  chargeable in the two countries  can               never  be  identical  in  amount,  and  it  is               therefore  clear that in separating  from  the               entire income the part of the income to  which               section  27 is applicable, regard must be  had                             to the source from which it is derived  and  not               to  its amount.  In this case the part of  the               income to be considered is the profits of  the               Indian branch." In Assam Railways & Trading Company case the House of  Lords were  considering  the case of an  assessee,  company  which earned profits in India amounting to pound 186,808 which sum was  liable  to United Kingdom income-tax.   By  the  Indian Income-tax  Act the assessee was allowed to deduct  interest

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on  debentures  and other items which deducted  the  profits assessable  to Indian incometax to pound 129,365 upon  which the  same tax was paid in India.  The company  claimed  that its  total  income assessable to tax in the  United  Kingdom could  be treated as having borne income-tax in  India.   It was  held that the Company had not borne double taxation  on that  part  of its income which was applied  in  payment  of debenture  interest  or on the garden profits  and  was  not entitled  to  relief in respect thereof.   Lord  Blanesburgh while pointing out that the more the question raised in  the appeal  is  considered  the greater  is  the  difficulty  it presents said he was inclined to agree with the construction placed  by Lord Warrington who in his speech  indicated  the reasoning  for  the particular construction placed  by  him. The observations of Lord Warrington were stated at pp.  534- 535 thus :-               "On   the   question   of   construction   the               contention  of the Appellants was  that  "that               part of his income" refers only to the  source               from which the income is derived.  The  source               in  this case was the Indian business  of  the               company, and it was contended that inasmuch as               the  whole of that income was taxed to  United               Kingdom  Income  Tax  in  the  sum  of   pound               186,750,  it  is in respect of that  sum  that               relief  should he given.  I cannot agree  with               this  contention.  The word "part" is  not  in               any  sense  a  word of  art  with  a  peculiar               meaning  derived  from the subject  matter  in               connection with which it is used.  We are here               dealing with a sum of money referred to as in-               come.   "Part" of a sum of money means in  its               ordinary                671               signification  so many pounds,  shillings  and               pence  out of a larger amount.  If the  income               is  pound  1 00, a small sum,  say  pound  50,               would properly be described as a part thereof.               In the present case the part of his income  on               which the taxpayer has paid tax in England  is               pound 186,750.  In India he has paid tax on  a               smaller  part numerically of the same  income.               To obtain relief. he has to prove that he  has               paid  Dominion  tax on the same  part  of  his               income as that on which he paid United Kingdom               tax.  He can only prove this in respect of the               smaller  sum.   I see no reason why,  for  the                             purpose  of identification, any  other   meaning               should  be given to the word "part"  than  the               numerical  meaning.  "Double taxation" is  not               in  terms mentioned in the section, but it  is               obvious that the object of the provision is to               obtain pro tanto the avoidance of that result.               The tax payer has paid Dominion Income Tax  in               respect of Ex of his income; he is entitled to               relief in respect of pound x part of the  same               income and to no more." Section  27 of the Finance Act and the earlier cases on  the interpretation of that section were again considered by  the House  of  Lords--a  case not cited  at  the  Bar-in  Inland Revenue  Commissioners v. National Mortgage and Agency  Co., of  New  Zeland.   It was again pointed out  that  the  true construction and effect of section 27, a difficult  section, had led to arguments and differences of opinion in the Court

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and  had come more than once before the House of Lords.   In that  case  it  was  ultimately held  that  when  a  company controlled  in the United Kingdom carries on business  in  a Dominion the relief from the United Kingdom Income-tax under s.27(1)  in respect of that business is to be determined  by ascertaining the assessable income following the legislative directions in those respective countries as to allowances or deductions   and  thereafter  without   scrutinizing   those allowances or deductions by an individual comparison with  a different  system in other part of the Commonwealth,  relief should be granted to the extent of the smaller amount. there was no need to record anything else except the two statutory incomes  of  the business taking care to  see  that  neither includes  income  from any other source.  In  this  case  no deduction was permissible in respect of debenture  interest’ for  the  purpose  of  United  Kingdom  assessment  but  the Dominion  Law  excluded from the assessable income  the  sum paid  in  respect of the debenture interest to  the  company under the Dominion law as agent of the debenture holders was assessable in respect of the debenture interest with a right to recoup itself from the debenture’ holders for the tax  so paid.   In fact it was unable to exercise that right as  the contracts under which the interest was payable were made  in the U.K. and therefore though the company was assessed (1) [1935] A. C. 524. --L499Sup.  C. I. /73 672 on the debenture interest in the Dominion and duly paid  the tax  ultimately  the  burden of that  tax  rested  upon  the company.  This special circumstance alone was therefore held to be sufficient for holding that the relief claimed for  an adjusted  sum  of pound-633,609 paid by  the  company  under s.27(1)  of the Act of 1920 was justified.  The decision  of the Court of Appeal was affirmed subject to a difference  as to  the ground on which the question of  debenture  interest should preferably be decided.  The Lord Chancellor agreed in all  respects with Romer L. J. on principle namely (1)  that the  word  ’income’ in the section does not  mean  the  real income  but  the statutory or notional income  by  means  of which  tax is calculated; (2) That if this statutory  income in  the  Dominion is pound A and in the United  Kingdom  the statutory income from the same source is pound (A+B)  relief will be given in respect of pound A. (3) That an analysis of the  two statutory incomes for the purpose of comparing  for example   the   respective   allowances   for   repairs   or depreciation is inadmissible.  Lord Macmillan pointed out at pp. 554-555 -               "The principle of section 27 is that the  same               fund of income shall not bear the full  burden               of both the United Kingdom and Dominion income               tax  and in the present instance it  is  clear               that pound 3 3,609 debenture interest has both               here  and in New Zeland been subjected  though               under different schemes to the full burden  of               incometax.  " These  cases  show  that  (1) the actual  tax  paid  on  the Dominion  income  statutorily  determined  would  alone   be considered  for relief (2) that the relief which under  s.27 can  be  claimed  is the statutory income  of  the  Dominion derived  from  the  same source which has  been  taken  into account  in  the United Kingdom from the same  source.   The word  ’source’ has been differently understood by  different law  Lords  but in effect, as Lord Wright  observed  in  the Assam Railway case, the words "the same part of his  income" are   apt  to  include  both  elements  of  comparison   and

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identification.  In our view, we can derive no benefit  from these, cases unless we hold that "such doubly taxed  income" in  s.49-D  as being equivalent to "the same  part"  of  the assessee’s  income in section 27 or "in respect of the  same income" in the notification under s.49-A. It may be pointed out that s.49-D prior to amendment in 1953 afforded relief calculated at half of the Indian  income-tax on the income in question or half of the tax payable in  the country  in  respect  of  the same income  in  the  year  of assessment in which the income arose whichever is less.   It may  be mentioned that after the Income-tax (Amendment)  Act 1939  the  residents of India became liable annually  to  be taxed  on their world income which naturally would bring  to tax  income which has accrued in a foreign country  and  has been subjected to tax there and would also be subject to tax under the Act.  Immediately after the amendment 673 of  the  Act  second  World War broke  out  and  the  Indian citizens  earning  income outside  the  taxable  territories became  the  victims  of aggression.  In  many  cases  their assets suffered damage and they had to leave their  business and property and return to India.  After the close of war in 1946  conditions in the erstwhile countries in  which  these citizens were engaged in earning incomes remained  unsettled and  uncertain.  It took time even for conditions to  settle down  and become normal and even then the change of  outlook in those countries had to be faced particularly in the field of fiscal laws before our citizens could have the confidence to  re-invest  in  ventures abroad.   Our  own  country  was troubled  with partition upheavals.  By 1950  things  became more  settled  and the Government of India with  a  view  to encourage  more  and  more  Indian  residents  to  establish branches  in  countries  with  which  there  is  no  special agreement for the avoidance of double taxation, by its Press Note, Finance Department, New Delhi dated May 20, 1950, made it known that certain proposals were being considered by  it in  that behalf and in accordance with that Press  Note  the Income-tax  Amendment Bill 1952 was introduced to amend  the section  with  effect from the assessment year  ending  31st March 1950 covering its operations unilaterally even to  the United   Kingdom.    That  Bill  as  stated   earlier,   was subsequently enacted by the substitution of a new s.49-D for the  old one.  The objects and reasons for the amendment  of s.49-D  of  the Act and Clause 25 of the Amendment  Bill  of 1952 gives the following reasons:--               "The  provision  as  proposed  to  be  amended               secures  that this unilateral relief  will  be               increased  from one-half to the  abatement  of               tax  at  the  full Indian  rate  or  the  full               foreign   rate  whichever  is   lower.    This               amendment implements the concession  announced               in  a  Press Note on the 20th  May,  1950  and               would  encourage persons resident in India  to               establish    branch   business   in    foreign               countries.  As respects the income accruing or               arising in the U.K. the Central Government  is               empowered  to  make this unilateral  basis  of               relief  applicable,  if  necessary,  for   the               assessment  years 1949-50, 1950-51  and  1951-               52." The  Select Committee added the words "but before  deduction of  any relief due in the said country in respect of  double taxation"  in Explanation (iii) and also  added  Explanation (iv).  In respect of these amendments it stated :-                "Apart  from  a  clarification  amendment  in

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             section  49-D (2) Explanation (iii) the  other               amendment is to remove one source of hardship.               Generally  the  Excess  Profits  Tax  or   the               Business  Profits  Tax would be allowed  as  a               deduction   in   the   foreign   country    in               determining  the income liable to tax in  that               country but not so in India.               674               Therefore  if  the  tax were  not  taken  into               account   the   combined  relief   on   income               allowable to take in India and in the  foreign               country would not be adequate." In interpreting the amended s.49-D where the assessee is en- tided to the deduction from Indian income tax payable by him under  the Act, the tax paid in a foreign country are we  to give  the same meaning to the words "of a sum calculated  on such  doubly taxed income" as that which has to be given  to the  words "in respect of the same income’  occurring  under the  repealed  s.49D"? In other words, is the  phrase  ’such doubly taxed income of similar import as the "same  income". In  our  view  the  word "same" would  connote  that  it  is ’identical though in all cases it may not mean that.  It may also mean not different.  It frequently means of the kind or species or corresponding to and therefore the same income in the context would mean the same kind or species or identical income  earned  in a foreign country on which tax  has  been paid  in  that country in respect of which relief  is  being claimed from being again subjected to tax under the Act.  If the  concession  that was being given by the  amendment  for encouraging  Indian residents to start business  in  foreign countries,  was  only  to give relief at the  full  rate  of Indian income-tax instead of half of such tax, all that  was necessary was to delete the words "one half of" occurring in s.49-D  as it was prior to its amendment.  But that  is  not what the legislature has done.  It has re-drafted the entire section  with  a different emphasis and this  advantage  was also  afforded unilaterally under sub-s.(2) in  relation  to any income accruing or arising in U.K. and chargeable  under the  Act  for  the period specified  therein.   Apart,  from giving full relief at the Indian rate of tax or the rate  of tax of the said country whichever is the lower the  assessee has  to  satisfy certain prerequisites before his  claim  to double tax relief can be accepted.  He must show (a) that he is  a  resident in the taxable territories in  the  year  in which relief is claimed-, (b) that in respect of his  income on which relief is claimed that it had accrued or arisen  to him without the taxable territories and (c) that he has paid in  that country income-tax by deduction or otherwise  under the  law  in force in that country.  If he  satisfies  these requirements  he will be entitled to the deduction from  the Indian income-tax payable by him of a sum calculated on such doubly taxed income at the Indian rate of tax or the rate of tax  of  the said country which-, ever is  the  lower.   The words  "such doubly taxed income" can have reference to  the tax which the foreign income bears once again the burden  of Indian income-tax by its being included in the total  income chargeable  under s.3 read with s.2(15) which defines it  as the total amount of income, profits and gains referred to in sub-(1) of s.4 computed in the manner laid down in the  Act. A  reference to s.4 (1) (b) (ii) would show that the  income which  accrues or arises to an assessee without the  taxable territories during such year is  675 to be included in the total income so that the income  under any  of  the heads enumerated in s.6 which have  accrued  or

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arisen to the assessee without the taxable territory and  is subject to the tax under the law in force in that  country,. is  included  in  his total income attracting  the  levy  of charge  under the Act.  This would again be taxed under  the Act  and  would therefore be doubly taxed  income.   Or,  it could mean that the income from the same or similar head  or source  which  accrued or arose to him outside  the  taxable territories during such year and upon which tax was paid  by him, can be considered to be doubly taxed if under the  head it  is  again  chargeable to tax under the  Act.   In  other words,  is the criteria for determining an income as  doubly taxed income, the head or source of income under the Act  to be  considered  with the same head or source  of  income  in respect  of which tax was paid under the foreign law, or  is the emphasis on the tax paid by deduction or otherwise under the  law in force in a foreign country in respect  of  which relief  is  being given by reason of the inclusion  of  that income  in the total income of the assessee which  is  again subjected to tax under the Act. In Arunachalam Chettiar’s case the Madras High Court gave  a similar interpretation to s.49-D as was given by the English cases  to s.27 of the United Kingdom Finance Act,  1920  for holding  that "such doubly taxed income" really purports  to indicate that it is only that portion of the income on which tax  has in fact been imposed and been paid by the  assessee that  is exigible for the double tax relief."  The  decision did  not take into consideration the legislative history  or the  change  in the language of the amended s.49-D  nor  the concession  which  was  sought  to  be  given  to  encourage residents  in  India  to earn  income  outside  the  taxable territories.   We  do  not  say  that  the  question  to  be determined  is  easy  to  resolve and  in  this  we  are  in distinguished  company  of  Judges  who  have  felt  similar difficulties,  but in our view, what commends to us most  is that  once  it  is  recognised  that  the  section  we   are interpreting does not make the basis of relief the tax  paid on the income from the same head or source, as we have shown that the change in the language does not, then the relief to which  an assessee would be entitled would be the amount  of tax paid on the foreign income which by its inclusion in the total  income once again bears tax under the Act.  The  word ’such’  in  the  phrase  ’such  doubly  taxed  income’   has reference  to  the  foreign  income  which  is  again  being subjected to tax by its inclusion in the computation of  the income  under  the  Act and not the  same  income  under  an identical  head  of income under the Act.  The  income  from each  head under s.6 is not under the Act subjected  to  tax separately,  unless  the  legislature  has  used  words   to indicate a comparison of similar incomes but it is the total income which is computed and assessed as such, in respect of which tax relief is given for the inclusion of the foreign 676 income  on which tax had been paid according to the  law  in force  in  that  country.  The scheme of  the  Act  is  that although income is classified under different heads and  the income under each head is separately computed in. accordance with  the  provisions dealing with that particular  head  of income, the income which is the subject matter of tax  under the Act is one income which is the total income.  The income tax  is only one tax levied on the aggregate of  the  income classified  and chargeable under the different heads; it  is not a collection of distinct taxes levied separately on each head of income.  In other words, assessment to income-tax is one  whole and not group of assessments for different  heads or items of income.  In order, therefore, to decide  whether

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the  assessee  is  entitled to  double  taxation  relief  in respect of any income, the consideration that the income has been  derived  under a particular head would not  have  much relevance.   There  is  indeed nothing in  the  language  of section   49-D  which  either  expressly  or  by   necessary implication restricts the grant of double taxation relief to incomes under the same head.  In this view, we discharge the answers  given  by the High Court, and answer  them  in  the negative and in favour of the assesssee. An application for intervention on behalf of the Indian Bank Madras has been filed as an identical question is stated  to be  pending  before the income-tax authorities.   Though  we permitted the intervention the learned advocate did not urge any new argument. In the result the appeals are allowed with costs here and in the High Court. V.P.S.                                   Appeal allowed. 677