# [1973] 2 S.C.R. 650 - **Citation:** [1973] 2 S.C.R. 650 - **Court:** Supreme Court of India - **Decided:** 1972-10-11 - **Bench:** K. S. Hegde, P. ]Aganmohan Reddy, H. R. Khanna, J D . Dua - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1973-2-s-c-r-650-5885 - **Pages:** 27 ## Headnote . ' Income Tax Act (11 of 19.22), s.49·D-Scope of. The assessee was carrying on business in Malaya and was ownin(! rubber plantations. He was also carrying on business in India. in respect of the assessment yea: 1953-~4 he. d•xlared his foreign income from Malaya at Rs. 2,22,532, m<'omc J;rt India at Rs. 39,142 from >ources other than bu•iness and a loss on business in I ndia at Rs. 68,658 The Income-tax Officer allowed double taxation relief on a sum' of Rs. 1,92,816/· by adding the inCO.llll.! in India to the forci!:ll income and deducting thcrc'from the loss in India. The Commissioner,-: in e:ot'!rcise of his powers under s.48 read with s.49·D of the Tncome·ta:t Act, 1922 however, set off the business Toss in India ngaiost the business pmfits i~ Malaya and held that only the resulting income of Rs. 1,53,6i4 from Malaya could be considered to have suffered double taxation and h.er.ce granted double taxation n:lief i.rt respect only of that amount. Th..: Tribunal followed the decision of the Madras High Court in C.I.T. l\fadra.; v. Arunacha!Gm Chettiar, 49 J.T.R. 574, and confirmed the ordl!r of th~ Commi~sioner. The High Court also on r;:f.:!rcnc'e, was of th-.! \i'.!w Cut the relief granted by s.49-D 'on such doubly ta'l:cd income' h:~s rcf-:rcnce to the factual double incidence llnd.::r two lowe.r, IS allowed a1 a deduction from the tax p:tyable umkr the Act .. "t!) su !n forctgn ~ountrH:s wa~ only to give relict nt the full rate of . Indi~ JOcome-tax mstc-,nl of half 6UCh tax, nil that was nccc!lsarv by the arocn.d mc~t wa~ to dclt:te the words "one half' occurring in tb~ sccti-1ll vr.IOt U>. tf'l ~mendnwnt. But the Lcgi~lature haJ r.:draftcd the entire s-lCllDD .1'1 Wt~~ the re~ult th<~t the phr<~se 'such uouhtly taxed income' in the new ~ect10n an~ the phra~.e '~>arne income' in the repealed section do not have the 6ame Import. '01e word'i 'snmc inromc' b the conb:xt \\OUIJ n1ean th~ same kind or ~peci~ or identical income e:1rncJ in a foNign countrY A B c D E F G K.v:A,L.M. CHETTIAR V. C.I.T. (Hegde, ],) 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 incbme which bc:m onoe again the burden of Indian income-tax by its being included i:1 the total income chargeable under s.3 read with s.2( 15) of the Act. Cnder s.4(1) (b) (ii) the income which accrues to an assessee outside the taxable territories is to be included i:n the total income !o that the inc'omc under any of the heads enumerated in s.6 which has accrued or arisen to the assessee outside the taxable territ ## Text _Characters 0–39,892 of 73,497. This is a partial read: ask again with offset=39892 for what follows._ 650 ~. V. A. L. M. RAMANATIIAN CHETTIAR BY L.Rs. v. r '··· . ~ l ,j"· · ... /: . .. ~ ' .\ l ~ . (. \ '{; ' . i .• COMMISSIONER OF INCOME-TAX, MADRAS October 11, 1972 :'JI~ l ( l· .:;~ ~ {K. S. HEGDE, P. ]AGANMOHAN REDDY, H. R. KHANNA AND J D . DUA; JJ.] . ' Income Tax Act (11 of 19.22), s.49·D-Scope of. The assessee was carrying on business in Malaya and was ownin(! rubber plantations. He was also carrying on business in India. in respect of the assessment yea: 1953-~4 he. d•xlared his foreign income from Malaya at Rs. 2,22,532, m<'omc J;rt India at Rs. 39,142 from >ources other than bu•iness and a loss on business in I ndia at Rs. 68,658 The Income-tax Officer allowed double taxation relief on a sum' of Rs. 1,92,816/· by adding the inCO.llll.! in India to the forci!:ll income and deducting thcrc'from the loss in India. The Commissioner,-: in e:ot'!rcise of his powers under s.48 read with s.49·D of the Tncome·ta:t Act, 1922 however, set off the business Toss in India ngaiost the business pmfits i~ Malaya and held that only the resulting income of Rs. 1,53,6i4 from Malaya could be considered to have suffered double taxation and h.er.ce granted double taxation n:lief i.rt respect only of that amount. Th..: Tribunal followed the decision of the Madras High Court in C.I.T. l\fadra.; v. Arunacha!Gm Chettiar, 49 J.T.R. 574, and confirmed the ordl!r of th~ Commi~sioner. The High Court also on r;:f.:!rcnc'e, was of th-.! \i'.!w Cut the relief granted by s.49-D 'on such doubly ta'l:cd income' h:~s rcf-:rcnce to the factual double incidence llnd.::r two lowe.r, IS allowed a1 a deduction from the tax p:tyable umkr the Act .. "t!) su !n forctgn ~ountrH:s wa~ only to give relict nt the full rate of . Indi~ JOcome-tax mstc-,nl of half 6UCh tax, nil that was nccc!lsarv by the arocn.d mc~t wa~ to dclt:te the words "one half' occurring in tb~ sccti-1ll vr.IOt U>. tf'l ~mendnwnt. But the Lcgi~lature haJ r.:draftcd the entire s-lCllDD .1'1 Wt~~ the re~ult th<~t the phr<~se 'such uouhtly taxed income' in the new ~ect10n an~ the phra~.e '~>arne income' in the repealed section do not have the 6ame Import. '01e word'i 'snmc inromc' b the conb:xt \\OUIJ n1ean th~ same kind or ~peci~ or identical income e:1rncJ in a foNign countrY A B c D E F G K.v:A,L.M. CHETTIAR V. C.I.T. (Hegde, ],) 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 incbme which bc:m onoe again the burden of Indian income-tax by its being included i:1 the total income chargeable under s.3 read with s.2( 15) of the Act. Cnder s.4(1) (b) (ii) the income which accrues to an assessee outside the taxable territories is to be included i:n the total income !o that the inc'omc 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 ;;ttracting the levy of charge under the J:ndian Income Tax Act, ::,nd is therefore doubly taxctl. [667C-D; 6720-H; 673C-E 674B-F, G-H; 675A-B] Once it is recogni:.cd 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 an assessee would be entitled would be the amount of tax on the foreign income which by its inc1usio,n in the total income once again bears ta"'\ under the Act. The word 'such' in the phrase 'such doubly taxed incom·~· has reference to the foreign income which is being sub· jected tc tax by ·its inclusion in the computation of income undel\ the Act and :not the ·~arne income' under an identical h~ad of income uhder 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 C'Ountry. The scheme of the Act is that although i:rJCome is classified under different beads and the income under each head is separately computed. in accordan:c with the. pr~visioos de~ling with that particular head of Income, the mcome wh1ch 1s the subJeC:t matter of ta:t under the Act is one income which is the total income. I!ncome-ta:t is only one tax levied on the aggregate of the inC'Ome 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 la;n~uage of s.4~D which, either expressly or by necessary implication, restncts the grant of double taxation relief to incomes under the same head. [67SF-H; 676A·D] Rolls Royce Ltd. v .. Short, 10 T.C. 59, Assam Railway and Tradi11g Co. Ltd. "· The Commissioner of Inland Revenue, 18 T.C. 509, O.A.P. An.iippa1t 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. €./.T., Madras v. Aru11achalam Chettiar, 49 I.T.R. 574, disapproved. (Per Hcgde J. dissenting) : The construction of the section give.t> by the Commissioner, Tribunal and the High Court is the proper construe~ tion, [653G] Under our income·hx law in every assessment year, the tom! income of an a' sessee during the previous year is brought to tax. It is made up of income from various sources set out i,n 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 II ha" accrued or arisen to him in the previous year, outside the taxable territory. In computing ~he total income of the assessee the procedure adopted is that income under each head is first determi:ned after -giving deductions to which the as~essee is entitled under that h~ad. and thereafter, the total income is arrived at for the .purpose of determining the SUPREME COURT REPORTS [1973] 2 S.C.R. :rate. of tax as well as for the quantification of tax due. Section 49-D A 1requi.res that there should be a recalculation of the income which has bec·n .doubly t.:.xed. In making that calculation, the authority computing the tax will have to leave those portions of the income which have not been .doubly taxed. 16540 F: 656A Cl The ·ingredients of s.49-D, which gives double tax~tion relief, o.re : (i) the assesse~ must have been resident in th~ tnable territory in 8 :the year; (ii) that some income must have accrued or arisen to him 0ut~ide ;the taxable territory during that }1.!ar; (iii) in respect of that income he must have paid, by dwuction or •Otherwise, tax under the law i:n force in the country in question; and (iv) if he fulfils all the above ~_onditions he will br.! entitled to deducC tion from the Indian income-tax payable by him of a sum calculated on ~uch doubly Mxed income at the Indian rate of tax or the rate of t:lx of .the said country, whichever is lower. {655C-F] The exprr~ssion "such doubly taxed income" involves two aspect.~ : •(a) it exclu~ively relates to the income earned outside India, and (b) it ;relates only to that part of the income earned outside India \vhich is D .doubly taxed; that is, the sam'.! income must have been doubly taxed. The income that gets relief under s.49-D, is only that inc:ome-identificd 1inrome-which has been subjected to tax not only in the cou;rrtry in which it \vas 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 whid,h has bee,n subjected to double taxation. [655F-H] If the entire tax paid by the alsessee in a country 'Jutside In~ia is to 'be deducted while computing his tax liability in th1s country, then there is no necessity 'for the Legislature to enact s. 49-A. It is not reasonable to thi;nk 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 con. sidered as reli•.!f from double taxation, but would amount to tax concession. If the relief given under an agreement under s.49-A a;nd the relief given under s.49-D mean the same thing, too Legislature must be held to hav.e indulged in ~n exercise of futility. Section 49-D, being a residuary provision, must be under~tood to c',over a tietd other than that covered by s.49-A. U:nd.!r 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 ilrcome. The two expressions 'the rame income' and 'such doubly tax.cd income' mean the same thing. [656 G-H; 657 A.O. E.G.] Despite the difference in language the se::tion is similar i;n scope ta s.27 of the United Kingdom Finance Act, 1920, and the decisions renoored under the U.K. Act h~:.ve a bearing on the point in controversy. [657G; 658C-D] E G In the prese.nt case, the asses~ec'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 doublv taxed H income of the assessee and that income could not have been included in the retum made by the assessee in Malaya. That being 'O, in calculatiag 1the doubly taxed income, that component of the total inc'ome has to be ,· . .. • A 8 c D E G H K.V.A.L.M. CHETTlAR V. C.I.T. (Hegde, J.) GS 3 kept apart. Further, the cntin .. business income earned in Malaya though taxed in Malaya has not been taxed in th'is country. Out of that sum only a sum of Rs. 1,53,674 has been taxed in this country. The buser.ess Joss in this country cannot be said to have been taxed in this country. A Idief does not amount to a taxation. Double taxation relief should not be mixed up with tax concessions. It is anly 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 R.cilways and Trading Co. Ltd, v. The Commissioners of Jnkmd Revenue, 18 Tax 0\~. 509, applied. Commissioner of lnco~1e•tax v. Arunachalam Cllettiar, 49 I.T.R. 574, approved, Commissioner of Income-tax, Bombay City·ll v. New Citi:.en Bank of India Ltd. and Anr., 58 I.T.R. 468, referred to. CIVIL APPHLfTE JuRISDICTION : Civil Appeals Nos. 1840 and 1842 of 1 ~J72. Appeal by certificate from the judgment and ord..!r 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. Sac/zthey, for the respondents. M. S. K. Sastri and M. S. Narasimhan, for the intervener. The majority ·opinion of P. Jaganmohan ReddyJ 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 inter~ preting that provision but that does not absolve this Court from its duty of properly construing that provision. On a proper construe· tion of that provision, I &m 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 RedJy J. It is needless to repeat those facts in their entirety. It will be sufficient if I set out the material facts relating to the a4\sessment year 1953~54. During the relevant previous year, the deceased assessee who carried on business in Malaya and also owned rubber gardens abroad declared his foreign income as 654 SUPREME COURT REPORTS [1973] 2 s.c.R. 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 him 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 aeducted Rs. 68;658; the busines 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 w::~s 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 i~ broug.it 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 A B c D into the pool, income; profits and gains from whatever sources 1 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 ins. 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'. Section 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 previou~ year; o.utside the taxable territory. F · 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 G 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 '}'hich accru~ or arises during that year without the taxab1e territOries. . . . . he has paid in any country ... by deduction or otherwise under the Jaw in force in H that country, he shall be entitled to the deduction from the Indian jncome-tax payable by him of a sum calcu- .. A B c D E F G H • I:.V:,A,L.M. CHBTTIAR V. C,LT. (Hegde, ],) 655 lated on such doubly taxed income at the Indi~n rate ~f tax or the rate of tax of the said country, whic_b,ever lS. the lower.,. temphasts supplled) · Before analysing the ingr~ents o~ this provision, it is ~eces~ sary to mention that s. 49-D gtve~ rehef to the. extent ~e~tton~u in that section in respect of the mcome accrumg or anst~g m countries outside India with which our country has. no rec~procal agreement for relief or avoidance of double ta~at!On. Wtth the countries with which we have reciprocal agreements for the relief from double taxat10n, s. 49-A applies: In cases falling under that section, relief to te granted depends upon the terms of the concerned agreement. Now turnin~ ba~k to ~· 49-D and a.ua!ysrug that provision, we fine\ the followmg mgredtents :- (1) The assessee in question must have been resident in the taxable territory in any year; (2) That the some income must hax_e 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 fulfils all the a\)ove 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 ou_tsidf' 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 incomewhich 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 s11bjected to double taxation. 7-L499Sup. C .I. 173 656 SUPREME COURT REPORTS [1973] 2 S.C,I.. 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 entitlR ed 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 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 hac; _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. 49RD 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 unlilceiy that the relief given under an agreement entered into under s. 49-A A B c D E F G H c D E li K.V.A.L .. M. CHETTIAR V. C.J.T. (Hegde, J.) 657 can be less than the relief available under s. 49-D. If the relief given under an agreement uader 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 reason_. ing is impermissible. Section 49-D.mw:~ 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 tinder an agreement under s. 49-A, s. 49-D bemg a residuary provision. Section 49-D as it now stanrls 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 r.rovide for any relief in respect of income-tax charged in the taxable territories proves that he has paid income-tax by deduction or otherwise under the laws of the said country in res- ,pect 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 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 nN 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 emoloyed 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 Kin~dom income tax for any year of assessment on anv part of his income proves to the satisfaction of the Soedal Commissioners that he has paid Dominion incoJlle-tax for that year in 658 SUPREME COURT RBPORTS [1973] 2 s.c.B.. respect of the same part of his income, he shall be entit:ed to relief {rom Unitt>.d 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 income~ tax in United Kingdom in respeet 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(l)t 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 Umjted Kingdom the sum already paid on that inoome should form a basis of relief, the thing might __ have worked out very simply. But that bas 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 iJ! _this country, it must be shown that the (1) 10 Tax Cas S9. A '"'·· .. B c D E F G H A B c D E F G H K.V.A.L.M. CHETTIAR V, C.I.T. (Hegde, J.) 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 Peen 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.u . When the matter was taken up in appeal to the Court of Appeal Pollock M. R set out the Cbt1ditions on which the relief can be given under s. 27. Th~~conditions, to put it in the words of the Master of Rolls are1: ·• · "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 the satisfaction of the Special.Commissioners that he has paid Dominion Income Tax for that year of assessment "in respect of the same part of his ~ncome" 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 uon 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 sb 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 re1ieved of the tax paid here up to the measure of re1ief given by the Section." The decision whiCh is more appropriate for our present purpose is that rendered in The Assam Railways and Trading Co. Ltd. v. The Comm;ssioners of !and Revenue(~). The relevant facts of that case are as fo11ows · · (I) 18 Tax Cas 509. . ~:.· '· 660 SUPREME COURT REPORTS (1973}2 S.C.R.. The assessee company, which was incorporated and controlled in the United Kingdom, carried on the ~usines~ of running a 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 I 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 bs a receipt. The assessme~ts on the company to Indian incometax and"·super-tax for. the correstl<>nding 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 tess only the income arising in England, without any deduction for the debenture interest or the tea garden profits. The Special Commissioners refused the relief c) aimed. 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 arisin,~ 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 v.rhile determining 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 wllile 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 J)Ortion of the Indian incorn<~ was not subjected to double taxation l:>ecause of the relief given under the Indian Income-tax Act. Let us apply that principle t4) 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. B c D E F G H A B c D E F K.V.A.L.M. CHETTIAR V. C.I.T. (Hegde, J.) 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. Analysing s. 27 of the Finance Act, 1920, Lord Wright observed : "The Section requires that the taxpayer should prove ( 1) that he has P.aid tax in the United Kingdom for any year on a certain sum which is part of his income; in this connection, I tlo not think that the word "part'' is us~ 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 income for that year : here the words "in respect of as contrasted with "on" do not, I think, involve any latent distinction, since the worcl "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 ill 3 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 !\OU~e. 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 frl.)m. 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.', G These observations, if I may say so with respect clearly bring out the legal principles bearin~ 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. H Mr. S. T. Desai, learned Counsel for the assessee placed considerable reliance on the decision of the Bombay High Court in (I) 49, I. T. R. 574. ... 662 SUPREME COURT REPORTS [1973] 2 s.c.R .. Commissioner of Income-tax Bombay City-ll v. New Citizen· Bank of India Ltd~ and anr. (~).Therein the court was called upon to inte:rpret an agreement entered into under s. 49-A. In t~at case the coun 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 RoycP.'s case (supra). They sought to distinguish those cases on the basis of the facts of those cases ignoring the legal princ~ples 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 (hc~reinafter called the!Act') pertaining to assessment years 195354, 1954-55 and 1955-56. In the reference relating to the first asS~~sment year three questions in respect of the last two, two questions were referred by the Tribunal. The three questions relatiJlg to the first 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 confinning the computation of relief as modified by the Commissioner? In the reference relating to the last ~wo 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 was 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 assess~. Before us the second question in the first (1) ~8, I. T. R. 468. A B c D E F G H A 8 c D E F G H K.V.A.L.M. CHETTIAR v. C.I..T. (Jaganmohan Reddy, J.) 66 3 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 oi 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 representatives 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 Joss 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 Commis§joner 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 i~ to be determined in these appeals is, on whlt basis should the double taxation relief be afforded to the assessee. It will be sufficient if we take the first assessment a~ illustrative of the problem which is posed in these appeals. The Income-tax. Officer allowed double taxation relief on n 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 under s. 48 read with s. 49-D however held that that computation was wrong because accordlng 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. Arunachalam Chettiar(l) 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 imoosed 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 jurisdictioQs 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. (I) 49 I. T. R.