civil appellate jurisdiction civil appeals number. 1840 and
1842 of 1972.
appeal by certificate from the judgment and order dated
march 12 1968 of the madras high companyrt in tax case number 202
of 1962  reference number 5 of 1964 . t. desai and t. a. ramachandran for the appellant. sen p. l. juneja b. d. sharma and r. n. sachthey for
the respondents. s. k. sastri and m. s. narasimhan for the intervener. the majority opinion of p. jaganmohan reddy i. d. dua and

r. khanna jj. was delivered by p. jaganmohan reddy j.

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 companystruction 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 companysiderable
difficulty in interpreting that provision but that does number
absolve this companyrt from its duty of properly companystruing that
provision. on a proper companystruction of that provision i am
of the opinion that the companyclusion reached by the
commissioner the tribunal and the high companyrt 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
rs. 222532. 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 companysidered 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. 68858. in this companyntry his income from other
sources amounted to rs. 39142. it mainly companysisted 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. 222532rs. 39142rs. 261674 and from that he
deducted rs. 68658 the business loss suffered by him in
india and taxed him on a total income of rs. 192816. the
commissioner revised that order. he came to the companyclusion
that the income that has suffered double taxation was only
rs. 153674. he accordingly granted double taxation relief
only in respect of that amount. his view was companyfirmed by
the tribunal in appeal and by the high companyrt 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 companyponents 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 companyponents 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 number see what s. 49-d says. it is number 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 companyntry by
deduction or otherwise under the law in force
in that companyntry he shall be entitled to the
deduction from the indian income-tax payable
by him of a sum calcu-
lated on such doubly taxed income at the
indian rate of tax or the rate of tax of the
said companyntry whichever is the lower.  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 companyntries outside india with which our companyntry
has numberreciprocal agreement for relief or avoidance of
double taxation. with the companyntries 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 companycerned
agreement. number turning back to s. 49-d and an sing that
provision we find the following ingredients-

the assessee in question must have been
resident in the taxable territory in any year

that the some income must have accrued
or arisen to him outside the taxable territory
during that year

in respect of that income he must have
paid by deduction or otherwise tax under the
law in force in the companyntry in question and

if he fulfills all the above companyditions
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 companyntry whichever is lower. there is numberdispute that the first three companyditions
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 number
only in the companyntry in which it was earned but also in this
country. from the language of s. 49-d it is clear that it
does number companycern itself with the totality of the income or
even the source of the income. it merely companycerns itself
with that part of the income which has been subjected to
double taxation. 7-l499sup. c. i. /73
the provision requires that there should be a recalculation
of that income which has been doubly taxed. in making that
calculation the authority companyputing the tax will have to
leave those portions of income which have number been doubly
taxed. in companyputing 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 number only to take into companysideration
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 assessees income from property and other
sources amounting to a sum of rs. 39142/- has number been
doubly taxed. hence that income cannumber enter into the
calculation of doubly taxed income of the assessee as that
income companyld number have been included in the return made by
the assessee at malaya. that is number an income earned by the
assessee outside the territories of india. that being so in
calculating the doubly taxed income that companyponent of the
total income has to be kept apart. further the entire
business income of rs. 222532/- earned in malaya though
taxed in malaya has number been taxed in this companyntry. out of
that sum only a sum of rs. 153674/- has been taxed in this
country. the business loss in this companyntry cannumber be said
to have been taxed in this companyntry. a relief given does
number 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. companynsel for the parties rightly
conceded that the- source of income is number 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 companyntry outside
india is to be deducted while companyputing his tax liability in
this companyntry then there was numbernecessity for the
legislature to enact s. 49-a. an agreement under that
provision at the highest companyld have provided for the
deduction from the tax payable in this companyntry by an
assessee the tax paid by him in a foreign companyntry. anything more than that cannumber be companysidered as relief from
double taxation. it would amount to tax companycession-. it is
equally unlikely that the relief given under an agreement
entered into under s. 49-a
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 companyer a field other than that companyered
by s. 49-a. further it is number 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 number 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 companyntry the laws of
which do number 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 companyntry 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 companyntry
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 companycerned there has
been numberchange in the law. the expression the same income
and such doubly taxed income mean the same thing. we are
number companycerned 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 companymittees report relating
to that provision do number 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 companymissioners 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

if the dominion rate of tax does number
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

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 companytroversy in this case. in rolls royce limited 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 number 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 kings 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
have worked out very simply. but that has number
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 companyntry it
must be shown that the
 1  10 tax cas 59.
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 companyrse 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 number where he has the whole
taxed doubly which obviously cannumber be
intended. when the matter was taken up in appeal to the companyrt of
appeal pollock m. r. set put the companyditions on which the
relief can be given under s. 27. those companyditions 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 company-
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
number induce relief. the basic companydition 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 company
ltd. v. the companymissioners of land revenue 1. the relevant
facts of that case are as follows
 1  18 tax cas 509.
the assessee companypany which was incorporated and companytrolled
in the united kingdom carried on the business of running a
railway working companyl 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 companypany had
issued in the united kingdom debenture stock and the
interest thereon was paid in the united kingdom. in
computing the companypanys liability to united kingdom income-
tax case 1 of schedule d for the years 1928-29 and 1929-30
the debenture interest was number allowed as a deduction and
certain profits from a tea garden were included as a
receipt. the assessments on the companypany to indian incometax
and super-tax for the companyresponding 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 companyputed 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 companymissioners refused the relief
claimed. the house of lords affirmed the decision of the
special companymissioners. it held that the companypany had number
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 number 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 numberdispute that the income from the investments in
england was number to be taken into companysideration 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. 39142/- an income exclusively earned in
india and was number brought to tax in malaya. next deduction
given in india in respect of the interest on debenture loans
was number taken into companysideration while affording double
taxation relief because that portion of the indian income
was number 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 companyntry as business loss  rs. 68858/-  was
number subjected to double taxation. that amount was never
taxed in this companyntry. we should number mix up double taxation relief with tax
concessions. the main judgmentof 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 companynection i do
number 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
income for that year here the words in
respect of as companytrasted with on do number 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 companyparison between two sums of money
which prove to be the same. the companytention of
the appellants is to the companytrary 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 number companye into question
except for the purpose of ascertaining the
rate of tax to be allowed for. i cannumber agree
with this argument. numberdoubt questions of
source as it has been called that is such
questions as where the income companyes 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 companyparison
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 companyrt in
commissioner of income-tax v. arunachalam chettiar 1
correctly lays down the law on the subject. mr. s. t. desai learned companynsel for the assessee placed
considerable reliance on the decision of the bombay high
court in
 1 49 i. t. r. 574.
commissioner of income-tax bombay city-ii v. new citizen
bank of india limited and anr.  1  therein the companyrt was called
upon to interpret an agreement entered into under s. 49-a. in that case the companyrt was number required to interpret the
scope of s. 49-d. there is numberdoubt 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 companyrt in that case did number bring
out companyrectly the-ratio of the decisions in assam railways
and trading company  supra  and rolls royces case  supra . they sought to distinguish those cases on the basis of the
facts of those cases ignumbering 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 companyrt 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
reference are--

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 ? 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 ? whether on the facts and in the circumstances of the case
the tribunal is right in companyfirming the companyputation of
relief as modified by the companymissioner ? in the reference
relating to the last two assessment years the questions
were -

whether on the facts and in the circumstances of the
case the tribunal is right in modifying the order of the
appellate assistant companymissioner ? 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 companyrt the first question on the first
reference w number 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.
reference was number 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 companymissioner and the high companyrt
need alone be companysidered in these appeals. the assessee who is number dead and is succeeded by legal re-
presentatives was doing money lending business in malaya as
well as in this companyntry. he also owned rubber gardens
abroad in respect of the first assessment year 1953-54 the
assessee declared his foreign income as rs. 222532 and
showed a loss on business in india as rs. 68858 and income
from other sources as rs. 39142/-. in the other two
references it is number necessary to refer to the incomes
earned by him abroad and in india except to say that the
appellate assistant companymissioner allowed the appeal in part
holding that the income from all the sources in india have
to be companysidered together just as income from all sources
abroad must be companysidered- 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. 192816/- by adding income from other sources to
the foreign income and deducting from the total thus
computed the loss of rs. 68858. the companymissioner in
exercise of his powers s under s. 48 read with s. 49-d
however held that that companynputation was wrong because
according to him the business loss of rs. 68858 incurred by
the assessee can be set off only against the business
profits of rs. 222532 earned in malaya resulting in a
business income of rs. 153674 being the only income from
malaya which can be companysidered to have suffered double
taxation. in appeal against the order of the companymissioner
the tribunal following the judgment in c.i.t. madras v.
arunachalam chettiar 1  came to the companyclusion 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. companyrt 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.
it is clear that a decision in these appeals will depend on
the companystruction of s. 49-d which bristles with difficulties
and is number 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 companyparison 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 companyld number 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 number lead to satisfactory companyclusion. s. 49-a empowers
the central government to enter into agreements with the
government of any companyntry 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 companyntry 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 companyntry and may by
numberification 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
numberification 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 companyntry. in order to obtain the relief it was
also necessary to show that the-income must have been
charged to tax in both companyntries. where a resident of india
earns income in a foreign companyntry with which the government
of india has numberarrangement 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 companyntry which did number 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
substituted by the amendment act 1953 with effect
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 number 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 companyntry number 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 companye-tax for any year in
respect the taxable territories  and which of any income
arising without the is number deemed to accrue or arise taxable
territories in a companyntry the in the taxable territories  he
has laws of which do number provide for paid in any companyntry
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 companyntry he
shall companyntry in respect of the same in- be entitled to the
deduction from companye he shall be entitled to the the indian
income-tax payable by deduction from the indian in- him of a
sum calculated on such companye-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 companyntry whichever is the. able in
the said companyntry which- lower. ever is less.  2  the central government
explanation-the expression may by numberification 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. companye
accruing or arising in the
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.-

the expression indian in-
come-tax means income-tax and
super-tax charged in accordance
with the provisions of this
act

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
section by the total income

the expression rate of
tax of the said companyntry 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 companyntry in respect of
double taxation divided by the
whole amount of income assessed
in the said companyntry

the expression income tax
in relation to any companyntry in-
cludes any excess profits tax
or business profits tax charged
on the profits by the
government of that companyntry and
number by the government of any
part of that companyntry or a local
authority in that companyntry. that section as is obvious grants double taxation relief in
respect of taxes on income charged in any foreign companyntry 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 companyntry 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 companysidered in
the companytext 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 number take away the necessity for the
limitation. but before us the learned advocate for the
revenue companyceded that neither s.24 is applicable number 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 companytends
is that the income from interest and from property assessed
in india amounting to rs. 39142 did number arise outside
india as such it cannumber be taken into account in
determining whether the tax paid outside is number 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 number 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 companytended 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 companyputation of income arising
both within and without india income must be companysidered
under separate heads in order to
ascertain whether any income has been actually taxed or number. he therefore submits that rs. 39142/- has numberrelation at
all with the income arising in malaya and cannumber be taken
into companysideration 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 companyrt of appeal in england
in rolls royce limited v. short 1  that of house of lords in
assam railway and trading company limited v. the companymissioner of
inland revenue 2  and the case of this companyrt in o.a.p. andippan v. companymissioner of income-tax madras 2  were
cited. we may at once state that these decisions are
rendered on the provisions which are number in pari materia
with the provisions in s. 49-d.
the case of this companyrt 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 number 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 number 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 number relevant for
the present companysideration. section 27 of the finance act is
as under -

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 companymissioners 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 number
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.
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
are used in the companyresponding provision in clause 3 of the
numberification of the government of india issued under s. 49-
a.
in the rolls royce case a british companypany trading in india
was assessed to and paid indian income-tax for the year
1920-21 on a profit of pound 4120 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 companyntry 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 numberincome-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 companyversely 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 companyrt of appeal pollock m.r. said at
p. 70-
the fact of paying a tax in a dominion does
number induce relief. the basic companydition 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. 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 companyntries 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 number
to its amount. in this case the part of the
income to be companysidered is the profits of the
indian branch. in assam railways trading companypany case the house of lords
were companysidering the case of an assessee companypany which
earned profits in india amounting to pound 186808 which sum
was liable to united kingdom income-tax. by the indian
income-tax act the assessee was allowed to deduct interest
on debentures and other items which deducted the profits
assessable to indian incometax to pound 129365 upon which
the same tax was paid in india. the companypany 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 companypany had number borne double taxation on
that part of its income which was applied in payment of
debenture interest or on the garden profits and was number
entitled to relief in respect thereof. lord blanesburgh
while pointing out that the more the question raised in the
appeal is companysidered the greater is the difficulty it
presents said he was inclined to agree with the companystruction
placed by lord warrington who in his speech indicated the
reasoning for the particular companystruction placed by him. the observations of lord warrington were stated at pp. 534-
535 thus -
on the question of companystruction 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 companytended that inasmuch as
the whole of that income was taxed to united
kingdom income tax in the sum of pound
186750 it is in respect of that sum that
relief should he given. i cannumber agree with
this companytention. the word part is number 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
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 186750. 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 numberreason why for the
purpose of identification any other
meaning
should be given to the word part than the
numerical meaning. double taxation is number
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 numbermore. section 27 of the finance act and the earlier cases on the
interpretation of that section were again companysidered by the
house of lords--a case number cited at the bar-in inland
revenue companymissioners v. national mortgage and agency company
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 companyrt
and had companye more than once before the house of lords. in
that case it was ultimately held that when a companypany
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 companyntries as to allowances or
deductions and thereafter without scrutinizing those
allowances or deductions by an individual companyparison with a
different system in other part of the companymonwealth relief
should be granted to the extent of the smaller amount. there
was numberneed 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 companypany
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 companypany was assessed
 1  1935 a. c. 524. --l499sup. c. i. /73
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-633609 paid by the companypany under
s.27 1  of the act of 1920 was justified. the decision of
the companyrt 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 number mean the real
income but the statutory or numberional 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  ab  relief
will be given in respect of pound a.  3  that an analysis of
the two statutory incomes for the purpose of companyparing 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 number bear the full burden
of both the united kingdom and dominion income
tax and in the present instance it is clear
that pound 3 3609 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 companyparison and
identification. in our view we can derive numberbenefit from
these cases unless we hold that such doubly taxed income
in s.49-d as being equivalent to the same part of the
assessees income in section 27 or in respect of the same
income in the numberification 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 companyntry and has
been subjected to tax there and would also be subject to tax
under the act. immediately after the amendment
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 companyditions in the erstwhile companyntries in which these
citizens were engaged in earning incomes remained unsettled
and uncertain. it took time even for companyditions to settle
down and become numbermal and even then the change of outlook
in those companyntries had to be faced particularly in the field
of fiscal laws before our citizens companyld have the companyfidence
to re-invest in ventures abroad. our own companyntry 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 companyntries with which there is numberspecial
agreement for the avoidance of double taxation by its press
numbere finance department new delhi dated may 20 1950 made
it knumbern that certain proposals were being companysidered by it
in that behalf and in accordance with that press numbere the
income-tax amendment bill 1952 was introduced to amend the
section with effect from the assessment year ending 31st
march 1950 companyering 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 companycession annumbernced
in a press numbere 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 companymittee added the words but before deduction
of any relief due in the said companyntry 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
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 companyntry in
determining the income liable to tax in that
country but number so in india. therefore if the tax were number taken into
account the companybined relief on income
allowable to take in india and in the foreign
country would number 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 companyntry 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 companynumbere that it is
identical though in all cases it may number mean that. it may
also mean number different. it frequently means of the kind or
species or companyresponding to and therefore the same income in
the companytext would mean the same kind or species or identical
income earned in a foreign companyntry on which tax has been
paid in that companyntry in respect of which relief is being
claimed from being again subjected to tax under the act. if
the companycession 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 number
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 companyntry 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 companyntry income-tax by deduction or otherwise under
the law in force in that companyntry. 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 companyntry 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 companyputed 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
to be included in the total income so that the income under
any of the heads enumerated in s.6 which have accrued or
arisen to the assessee without the taxable territory and is
subject to the tax under the law in force in that companyntry. 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 companysidered 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 companysidered 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 companyntry 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 chettiars case the madras high companyrt 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 number take into companysideration the legislative history or
the change in the language of the amended s.49-d number the
concession which was sought to be given to encourage
residents in india to earn income outside the taxable
territories. we do number say that the question to be
determined is easy to resolve and in this we are in
distinguished companypany of judges who have felt similar
difficulties but in our view what companymends to us most is
that once it is recognised that the section we are
interpreting does number 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 number 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 companyputation of the
income under the act and number the same income under an
identical head of income under the act. the income from
each head under s.6 is number under the act subjected to tax
separately unless the legislature has used words to
indicate a companyparison of similar incomes but it is the total
income which is companyputed and assessed as such in respect of
which tax relief is given for the inclusion of the foreign
income on which tax had been paid according to the law in
force in that companyntry. the scheme of the act is that
although income is classified under different heads and the
income under each head is separately companyputed 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
number a companylection of distinct taxes levied separately on each
head of income. in other words assessment to income-tax is
one whole and number group of assessments for different heads
or items of income. in order therefore to decide whether
the assessee is entitled to double taxation relief in
respect of any income the companysideration that the income has
been derived under a particular head would number have much
relevance. there is indeed numberhing 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 companyrt and answer them in the
negative and in favour of the assesssee.