# C.A.P. ANDJAPPAN v. C.1.T. MADRAS & ANR

- **Citation:** [1972] 1 S.C.R. 88
- **Court:** Supreme Court of India
- **Decided:** 1971-08-09
- **Case number:** Civil Appeals Nos. 1689 and 1690 of 1968
- **Bench:** K. S. Hegde, A.N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/c-a-p-andjappan-v-c-1-t-madras-anr-5484
- **Pages:** 6

## Headnote

Income-tax Act (11 of J 922). s. 49A-Agreement between
h1d;a and Ceylon, Art 3, ;rem 8-Scope of-Relief under qey!on
Income-tax Ordinance 1932 s. 45(2)-Abatement to wl11c/1 a!1
assessee res;dent ;,i Ind;a and carry;,1g on business in Ceylon rs
elllitled to.
The appellant was a resident in India and was carrying on business
in Ceylon.
His entire assessable income for the years 1959-60
and
1960-61 was what he earned in Ceylon.
He was liable to be assessed
as a non-resident, but, in view of s. 45(2) of the Ceylon Inco~e-tax
Ordinance, 1932, and of the Agreement for 'Assess~ent for Re!Jef or
for Avoidance of Double Taxation in India and Ceylon' as prov1ded
·in s. 49A of the Indian Income tax Act, 1922, he was taxed as if be was
a resident in Ceylon and assessed to pay a sma11er sum as
ta~. The
Income-tax authorities in India computed the tax under the Ind1an law
.and gave as abatement, t11e tax payable by him in Ceylon as per the
Agreement, and cal1ed upon him to pay the balance.
On the questions: (I) whether be was not liable to be taxed at all
in India, and (2) if he was liable to be taxed in India, what should have
been the proper abatement, the High Court confirmed the order of the
Income-tax authorities.
Jn appeal to th is Court,
A
B
c
D
E
HELD; (1) Article 3 of the Agreement begins with the words 'Each
,country sba11 make an assessment in the ordinary way under its own
F
·1aws.' Therefore, the appellant was liable to be taxed in India. [91E-F]
(2) The Article read with item 8 of the Schedule to the Agreement
shows that from out of the amount ascertained under the first part of
·the Article the tax payable -by the assessee in the other country in respect
of the w~o1e or part of the amount brought to t~x under !he first part
of the Art1c1e, should be deducted.
The word 'attn bu table' In the Article
G
.means 'payable'. In considering what taxes are attributable to the tax
laws of a particular country, one has to take jnto consideration all the
provisions of the statutes levying tax, that is, for determining the tax
.due from an assessee, one has not merely to look to the charging section
but also to the provisions ~roviding exemptions and allowances.
s~
read, the amount of tax attnbutab1e to the Ceylonese law is that which
was ultimately actuaJJy levied on the assessee and not the Jeviable in
H
·Ceylon on a non-resident.
[92B-G]
Ramesh R. Saraiya v. C.1.T. Bombay 55 I.T.R. 699 (S.C.) applied.
A
B
c
ANDIAPPAN v. C.I.T. (Hegde, !.)
89

## Text

C.A.P. ANDJAPPAN
v.
C.1.T. MADRAS & ANR
August 9, 1971
[K. S. HEGDE AND A.N. GROVER, JJ.]
Income-tax Act (11 of J 922). s. 49A-Agreement between
h1d;a and Ceylon, Art 3, ;rem 8-Scope of-Relief under qey!on
Income-tax Ordinance 1932 s. 45(2)-Abatement to wl11c/1 a!1
assessee res;dent ;,i Ind;a and carry;,1g on business in Ceylon rs
elllitled to.
The appellant was a resident in India and was carrying on business
in Ceylon.
His entire assessable income for the years 1959-60
and
1960-61 was what he earned in Ceylon.
He was liable to be assessed
as a non-resident, but, in view of s. 45(2) of the Ceylon Inco~e-tax
Ordinance, 1932, and of the Agreement for 'Assess~ent for Re!Jef or
for Avoidance of Double Taxation in India and Ceylon' as prov1ded
·in s. 49A of the Indian Income tax Act, 1922, he was taxed as if be was
a resident in Ceylon and assessed to pay a sma11er sum as
ta~. The
Income-tax authorities in India computed the tax under the Ind1an law
.and gave as abatement, t11e tax payable by him in Ceylon as per the
Agreement, and cal1ed upon him to pay the balance.
On the questions: (I) whether be was not liable to be taxed at all
in India, and (2) if he was liable to be taxed in India, what should have
been the proper abatement, the High Court confirmed the order of the
Income-tax authorities.
Jn appeal to th is Court,
A
B
c
D
E
HELD; (1) Article 3 of the Agreement begins with the words 'Each
,country sba11 make an assessment in the ordinary way under its own
F
·1aws.' Therefore, the appellant was liable to be taxed in India. [91E-F]
(2) The Article read with item 8 of the Schedule to the Agreement
shows that from out of the amount ascertained under the first part of
·the Article the tax payable -by the assessee in the other country in respect
of the w~o1e or part of the amount brought to t~x under !he first part
of the Art1c1e, should be deducted.
The word 'attn bu table' In the Article
G
.means 'payable'. In considering what taxes are attributable to the tax
laws of a particular country, one has to take jnto consideration all the
provisions of the statutes levying tax, that is, for determining the tax
.due from an assessee, one has not merely to look to the charging section
but also to the provisions ~roviding exemptions and allowances.
s~
read, the amount of tax attnbutab1e to the Ceylonese law is that which
was ultimately actuaJJy levied on the assessee and not the Jeviable in
H
·Ceylon on a non-resident.
[92B-G]
Ramesh R. Saraiya v. C.1.T. Bombay 55 I.T.R. 699 (S.C.) applied.
A
B
c
ANDIAPPAN v. C.I.T. (Hegde, !.)
89
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos.
1689 and 1690 of 1968.
Appeals from the judgment and order dated January
19, 1967 of the Madras High Court in Writ Petitions
Nos. 1030 and 1031 of 1963.
T. A. Ramachandran, for the appellant (in both the
appeals).
·
S. C. Manchanda, R. N. Sachthey, B. D. Sharma and
S P. Nayar, for the respondents (in both the appeals).
The Judgment of the .Court was delivered by
Hegde, J. These appeals by certificate arise from ·
the decision of the High Court of Madras in Writ Petitions
Nos. 1030 and 1031 of 1963. Therein the petitioner
invoked the extraordinary jurisdiction of the High Court
D under Article 226 of the Constitution to quash the orders
of the Respondents wherein he was not granted the abatement he sought to obtain in the assessment years 1959-60
and 1960-61
The High Court came to the conclusion
that the appellant is not entitled to any more abatement
E than that was given by the authorities under the 'Assessment for Relief or f~r Avoidance of double Taxation
in India and Ceylon' -Which will be hereinafter referred to
as the "agreement". It accordingly dism~sed the Writ
Petitions but gave a certificate under article 133(l)(c) of
the Constitution of India certifying that this is a fit case
F for appeal to this Court.
· The appellant is a resident in this country. But he
is carrying on l;rnsiness in Ceylon. During the assessment
year 1959-60 he earned a gross income of Rs. 39,473/-
and in the assessment year 1960-61 he earned a gross
G income of Rs. 39,047/-. He had only a house in India
whose annual rental value was Rs. 38/-. The entire
assessable income of his was that what he earned in Ceylon.
On his income in Ceylon, he was taxed in a sum of Rs .
. 5,919/- for the assessment year 1959-60 and in a sum of
Rs. 6,036/- for the assessment year 1960-61. For the.
H same income, in India, under the Indian law his tax was
computed.for the assessment year 1959-60 at Rs. I0,282·62P
a11d
for the assessment year 1960-61 at Rs. 9,521 ·35P
90
SUPREME COURT REPORTS
[1972] l S.C.R.
The tax payable by him in Ceylon was given as abatement
and he was called upon to pay only the balance. The
tax payable by him in Ceylon as- a non-resident would
have been Rs. 9,889/- in the assessment year 1959-60 and
Rs. 9,983/- in the assessment year 1960-61.
But in view
of section 45(2) of the Ceylon Income Tax ordinance
1932 and also in v\ew of the 'Agreement' he was taxed as
if he was a resident in Ceylon.
'
Two questions arising for decision are whether he was
not liable to be taxed at all in India and if he was liable
to be taxed in India, what should have been the proper
abatement given to him.
Mr. Ramachandran appearing for the assessee contended firstly that in view of the 'Agreement' entered
into between India and Ceylon as provided in section
49C of the Indian Income Tax Act, 1922 he was not liable
to be taxed in India at all. In the alternative, he contended
that while determining the tax payable by him in this
country, the department should have deducted the entire
tax that he would have had to pay had been taxed as a
non-resident. For this contention also he relies on the
terms of the agreement entered into between India and
Ceylon. He does not dispute the fact but for the agreement the assessee would have been liable to pay in this
country a tax of Rs. 10,282 ·62 p. in the assessment year
1959-60 and Rs. 9,521 ·35p. in the assessment year 1960-61.
In order to consider the correctness of the contentions
advanced by Mr. Ramachandran, we will
now turn to
the relevant provisions of the 'Agreement'. That 'Agreement' was notified in Modification SRO 456 dt. the 6th
February, 1957. The portion of the notification which
is relevant for our present purposes is contained in Article
3 and column 8 of the Schedule to that agreement. Article
3 reads
"Each country shall make assessment in the
ordinary way under its own laws; and where
either country under the operation of its
laws charges any income from the sources
or categories of transactions specified in
column 1 of the Schedule to this Agreement
(hereinafter referred to as the Schedule) in
A
B
c
D
E
F
G
H
A
B
c
D
ANDIAPPAN v. C.I.T. (Hegde, J.)
excess of the amount calculated according
to the percentages specified in column II
and III thereof, that country shall allow an
abatement equal to the lower of the amounts
of tax attributable to such excess in either
country."
SCHEDULE
Sources of income or nature of
transaction from which income is
derived
I
Percentage of
income
Remarks
which
each
country
is entitled to charge
under the Agreement.
II
Jll
IV
8. Any income derived from a source 100 per cent Nil by
or category of transactions not menby the country the other.
tioned in any of the foregoing items in
which
of the Schedule.
the
income
actuaIJy accrues
or
arises.
91
The first portion of article 3 says that "each country
shall make an assessment in the ordinary way under its
E own laws." This means to begin with both India and
Ceylon were required to assess the assessee in accordance
with law prevailing in each of these countries. Thus far it
is plain. From this it is clear that first contention advanced
on behalf of the assessee has no basis. Hence it must
fail.
Now we come to the second part of that article to
F the extent necessary for determining the second contention.
G
ff
It reads :
"and where either country under the operation of its laws charges any income from the
sources or categories of transactions specified
in column I of the schedule to this Agreement. ... in excess of the amount calculated
according to the percentages specified in
columns II and III thereof, that country shall
allow an abatement equal to the lower of
the amounts of tax attributable to such
excess in either country."
The language employed in this part of the article is quite
confusing. That part of the article has to be read with the
92
SUPREME COURT REPORTS
[1972] l S.C.R.
A
schedule. On a proper reading of that provision alongwith the schedule, which means in the present case, item
8 of the schedule, it appears to μs that what it says is :-
From out of the amount ascertained under the first
part of the Article deduct the tax payable by the assessee
in the other country in respect of the whole or any portion
B
of the amount brought to tax under the first part of
article. The word 'attributable' in that Article merely
means 'payable'. Applying the principle mentioned above
to the facts of the present case, the following result is
reached. The tax payable under the Indian law as seen C
earlier was Rs. 10,282 ·62p. in the assessment year 1959-60.
The tax payable under the Ceylonese law in that year was
Rs. 5,919/-.
That has to be deducted from the tax
computed under the Indian law. The balance alone is
leviable. Similarly in the assessment year 1960-61 the
tax computed under the Indian law is Rs. 9,521 ·35 p. and
D
the tax levied under the Ceylonese is being Rs. 6,036/-.
In levying tax in this country the tax payable in Ceylon
has to be deducted. It was urged by Mr. Ramchandran
that what we have to take into consideration is not the
actual tax levied in Ceylon but the tax leviable in Ceylon
on a non-resident. He says that the deduction given
E
under section 45 (2) of the Ordinance promulgated in
Ceylon is only an allowance.
Hence the same does not
form part of the actual taxation. We are unable to
accede to that contention. In considering what taxes
are attributable to the tax laws of a particular country,
one has to take into consideration all the provisions of the
F
statutes levying tax. In other words for determining the
tax due from an assessee, we have not merely to look to
the charging section but also to the provisions providing
exemptions and allowances. If so read, it is quite clear
that the amount of tax attributable to the Ceylonese law
is that which was ultimately levied on the assessee.
G
The agreement that was entered into between India
and Pakistan is similar in terms
with the agreement,
with which we are concerned in these appeals, except
that in article 4 therein which corresponds to article 3
in the agreement be.f qre us in the place of the word 'attribuH
table' the word 'payable' is used.
But this change does
11ot make any difference in si.ibstance. Interpreting that
ANDIAPPAN v. C.I.T. (Hegde, J.)
93
A agreement this Court in, Ramesh R. Saraiva v. Commissioner
of India Tax, Bombay City-11 held that article IV of the IndoPakistan Agreement for the avoidance of Double Taxation
clearly shows that each Dominion can make an assessment
in the ordinary way regardless of the Agreement. The
B restriction which is imposed on each Dominion under the
Agreement is not on the power of assessment but on the
liberty to retain the tax assessed.
Nor does the Schedule to
the Agreement limit the power of each Dominion to assess
in the normal way all the income that is liable to taxation
under its laws. The Schedule has been appended only for
c the purpose of calculating the abatement to be allowed
by each Dominion. The ratio of this decision, in our
opinion, governs the facts of this case.
We also do not see any reason, for treating the appellant in a manner different from other assessees, who
0
are resident in this country.
In the result these appeals fail and the same are
dismissed.
No costs.
V.P.S.
Appeals a1s1111s,ed.
(I) 55 l.T.R. 699.