# RAJASTHAN v. M/S. BHARAT CARBON AND RIBBON MANUFACTURING CO

- **Citation:** [1966] 3 S.C.R. 170
- **Court:** Supreme Court of India
- **Decided:** 1965-12-17
- **Case number:** Cjvi! Appeal No. 106 of 1965
- **Bench:** K. Subba Rao, J. C. Shah, S. M. Sikri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/rajasthan-v-m-s-bharat-carbon-and-ribbon-manufacturing-co-3688
- **Pages:** 6

## Headnote

Indian Independence Act (10 & 11 Geo Vic. 30), 18(3) and Income
Tax Act ( l l of 1922), s. I 8A ( l l )-Advance tax-Adjusted by Pakistan
Oovenunent~lf could also be adiust.ed by Indian Govf!rnment.
Between June 1946 and March 1947 the assessee,.company1 which then
C
l1ad its head office at Lahore, paid advance tax to the Income.tax Officer,
Lahor.e,, under s.
,l 8-A of the Indian Income-tax Act, 1922.
For the
:assessn1ent year J 947-48, the assessment was completed by 'the Pa)cistan
Jncome4ax Officer on 28th January 1948 after adjus!ing the advance income-tax paid.
The Income-tax Officer, New Delhi, assessed the tax for
the
same year 1947-48 in 1952. The assessee
contended that credit
'.3hOuld be given to him .. of the'""a~ance tax paid by him in Lahore under
)
s. 18-A(ll). The. claim was disaflmved_by the Appellate Assistant Commissioner but the Appellate Tribunal, <1nd-the High Court on a reference,
D'
I
held in favour of the p.ssessee.
In app_eal to this Court,
'HELD: The effect of s. 18(3) of the Indian In"dependence Act was
to change the incidents of the advance tax paid.
Previously it was to be
--=:; d
adjusted to\vards a single regular assessment to be made. by British India ..... ~
After the Independence Act, the advance tax was ,liable to be adjusted
E
.against t\vo regular aS<Se6sments, one by India and one by Pakistan. Jn
·
Pakistan, under s. 1SA(11). the Pakistan Government was enti11ed to
adjust the advance tax paid by the assessee against its demand. Similary,
the Government of India was entitled to
adjust
the amount against
its demand. It follows that if --the assessee had' been given cred:t for the
_.
advance tax, by the Pakistan Government, he cannot claim that credit
'8hould be given to him by the Indian income-tax authorities. [174 B-D]
D•varka Das v. Income-t~x Officer, 'Kanpur, 29 I.T.R. 60 refCrred to.
F

## Text

•
COMMISSIONER .OF INCOME-TAX; DELHI Ac"ID
A
RAJASTHAN
v.
M/S.
BHARAT
CARBON
AND
RIBBON
MANUFACTURING CO.
December 17, 1965
[K. SUBBA RAO, J. C. SHAH AND S. M. SIKRI, JJ.J
Indian Independence Act (10 & 11 Geo Vic. 30), 18(3) and Income
Tax Act ( l l of 1922), s. I 8A ( l l )-Advance tax-Adjusted by Pakistan
Oovenunent~lf could also be adiust.ed by Indian Govf!rnment.
Between June 1946 and March 1947 the assessee,.company1 which then
C
l1ad its head office at Lahore, paid advance tax to the Income.tax Officer,
Lahor.e,, under s.
,l 8-A of the Indian Income-tax Act, 1922.
For the
:assessn1ent year J 947-48, the assessment was completed by 'the Pa)cistan
Jncome4ax Officer on 28th January 1948 after adjus!ing the advance income-tax paid.
The Income-tax Officer, New Delhi, assessed the tax for
the
same year 1947-48 in 1952. The assessee
contended that credit
'.3hOuld be given to him .. of the'""a~ance tax paid by him in Lahore under
)
s. 18-A(ll). The. claim was disaflmved_by the Appellate Assistant Commissioner but the Appellate Tribunal, <1nd-the High Court on a reference,
D'
I
held in favour of the p.ssessee.
In app_eal to this Court,
'HELD: The effect of s. 18(3) of the Indian In"dependence Act was
to change the incidents of the advance tax paid.
Previously it was to be
--=:; d
adjusted to\vards a single regular assessment to be made. by British India ..... ~
After the Independence Act, the advance tax was ,liable to be adjusted
E
.against t\vo regular aS<Se6sments, one by India and one by Pakistan. Jn
·
Pakistan, under s. 1SA(11). the Pakistan Government was enti11ed to
adjust the advance tax paid by the assessee against its demand. Similary,
the Government of India was entitled to
adjust
the amount against
its demand. It follows that if --the assessee had' been given cred:t for the
_.
advance tax, by the Pakistan Government, he cannot claim that credit
'8hould be given to him by the Indian income-tax authorities. [174 B-D]
D•varka Das v. Income-t~x Officer, 'Kanpur, 29 I.T.R. 60 refCrred to.
F
CIVIL APPELLATE JURISDICTION : Cjvi! Appeal No. 106 of
1965.
Appeal by special leave frollf the judgment and order, dated
November 13, 1962 of the Punjab High Court (Circuit Bench)
at Delhi in Income-tax Reference Case No. 3 of 1959.
A. V. Viswanatha Sastri, Gopal Singh and R. N. Sachthey,
for the appellant.
B. L. Khanna and K. K.- Jain, for the respondent.
The. Judgment of the Court was de~ivered by
Sikri, .T.
This appeal by special leave is directed against the
judgment of the High Court of Punjab, at Chancligarh in· a
reference made to it under s. 66 ( 1) of the-Income Tax Act, 1922,
G

172
SUPllEME COUllT REPOllf5
[1966} 3 S.C.ll.
turing Co., hereinafter referred to as the assessee, at Rs. 38,916
and directed that demand notice and chalan be issued. Before the
Appellate Assistant Commissioner one of the points taken up by the
as!CSsee was that credit should be given to him of the advance tax
paid by him in Lahore, under s. 18A( 11) which reads as follows:
"Any sum other than a penalty or interest paid by
or recovered from an assessee in pursuance of the provisions of this section shall be treated as a payment of tax
in respect of the income of the period which would be
the previous year for an assessment for the financial year
next following the year in which it was payable, and
credit therefor shall be given to the assessee in the regular
assessment."
The Appellate Assistant Commissioner disallowed the claim.
He observed :
"I, however, find that the amount under Section 18-A
was paid by the assessee to Income-tax Officer, Lahore.
The same Income-tax Ollicer made an assessment for
this very year on 28th January, 1948 on a total income
of Rs. 1,22,014 for Income tax and Rs.
52,780 for
capital gains. He worked out the total tax payable by
the assessee at Rs. 76,472/6.
As a result of this
assessment, even after setting off the tax paid under
Section 18-A of Rs. 4 7,513 an amount of Rs. 20,000
was still due from this assessee.
The amount under
Section 18-A, has, therefore, been adjusted by the
Pakistan authorities towards the payment of tax and the
assessee cannot take credit for this amount again. Under
these circumstances, it must bo held that there was no
balance of tax paid under Section 18-A left to be adjusted
by the Income-tax Officer for the Indian assessment."
The assessee filed an appeal before the Appellate Tribunal.
The Tribunal allowed the claim on the ground that the language
of '· I RA (I I ) was mandatory, and it was the duty of the Income.
tax authorities to give credit for the amount paid by the asscssec
as advance tax in the regular assessment made under the Indian
Income Tax Act.
It observed :
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"What the Income tax authorities would do or may
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have done to the advance tax paid to the Income-tax
Olficer, Lahore, is entirely immaterial."
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·-·
. .....
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C. I. T. v. BHARAT CARBON CO. (Sikri, /.)
173
At the instance of the Commissioner of Income Tax a reference was made to the High Court.
The High Court held that if
the direction contained in s. 18A ( 11) had to be obeyed, credit had
necessarily to be given to the assessee at the time of regular
assessment.
In reply to the argument of the learned counsel for
the Commissioner of Income Tax that no adjustment was possible
because the Pakistan authorities had already raised a demand
against the assessee on January 28, 1948, and in part satisfaction
of that demand wiped out the amount standing to the credit of
the assessee, the High Court observed :
"It is, however, obvious that what may have been
C
done by the Pakistan authorities in January,
1948,
cannot be called a proceeding under the Indian Income
Tax Act and the fact that the money paid by the assessee
under the Indian Income Tax Act may have been sei;red
by the Pakistan authorities or disposed of in some other
manner, can in no way affect the right of the assessee
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under the Indian Income-tax Act."
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G
H
In the result, the High Court answered both the questions in the
affirmative.
Mr. A. V. Viswanatha Sastri, the learned counsel for the
appellant, contends before us that by virtue of s. 18(3) of the
Indian Independence Act, the Income Tax Act as it existed before
the coming into force of the Indian Independence Act, applied
both to the Dominion of Pakistan and the Dominion of India, and
the result of this simultaneous application to both the Dominions
was that the advance tax paid by the assessee was liable to be
adjusted ~gainst the assessments made both in Pakistan and in
India, and Pakistan having made the adjustment, there was no
money left to be adjusted against the assessment in India.
The learned counsel for the respondent relies on the reasoning
of the High Court and on Dwarka Dass v. Income-tax Officer,
Kanpur(') and says that it was the obligation of the Government
of India under s. 9 of the Indian Independence (Rights, Property
and Liabilities) Order, 1947, either to refund th.e money paid as
advance tax or to give credit in the assessment in India.
Section 18 ( 3) of the Indian Independence Act reads
as
follows:
"Save as otherwise expressly provided in this Act,
the law of British India and of the several parts thereof
(I} 29 I. T.R. 60.