COMMISSIONER OF INCOME TAX Vs. S K SRINIVASAN

JUDGEMENT

(1.) THE assessee is a chartered accountant. In respect of the assessment year 1958-59, accounting year ending on March 31, 1958, his total independent income was determined at Rs. 38, 490. Since the assessee was assessed as "resident and ordinarily resident", he was granted relief under article III of the Double Taxation Avoidance Agreement with Ceylon. THE Income-tax Officer worked out the relief as under INDIA CEYLONRs. RsTotal income 38, 490 46, 172Tax paid 10, 094.52 8, 280Ceylon income 38, 430 46, 112Proportionate tax on Ceylon income 10, 094 X 38, 430 8, 280 X 46, 11238, 490 46, 172=10, 060.81 =8, 269.11THE assessment, in fact, was completed on July 31, 1959, and relief was granted on the above basis to the extent of Rs. 8, 269.11. Later, the Income-tax Officer, on the basis that the relief granted was in excess of the correct relief which ought to have been granted, re-calculated the same and ultimately awarded relief to the assessee in the sum of Rs. 6, 891. THE basis on which such a reduced relief was granted was worked out on the theory that under article III of the inter-country agreement, the Ceylon rate of tax only was the basis to reckon the relief and not the total income relateable to a particular source or sources.

(2.) THE assessee objected to the re-opening of the assessment and also questioned the procedure latterly adopted by the Income-tax Officer in the matter of the grant of relief under the Double Taxation Avoidance Agreement with Ceylon. THE revenue overruled the objection of the assessee and held that the assessee was entitled to relief in respect of the amounts taxed in both the countries at the lower of the two rates of tax in Ceylon and in India. Having been unsuccessful even before the Appellate Assistant Commissioner, the assessee took up the matter on second appeal to the Tribunal who held the reveuue's reckoning of the relief on the basis that the lower of the rates of tax should be taken into consideration while granting the relief was wrong, and it held that the assessee was entitled to relief in the sum of Rs. 8, 269.11 as originally worked out. Regarding the other question, it was of the view that the initiation of the proceedings under section 147 of the Income-tax Act, 1961, was valid. THE Commissioner of Income-tax applied under section 256(1) to refer the other question of law said to arise out of the Tribunal's order. Whilst this application for reference was pending, the assessee also, by an independent application for the purpose, requested the Tribunal to refer another question of law as well for an answer to be rendered by this court. THE result is, the following two questions of law, the first at the instance of the Commissioner of Income-tax, Madras, who has regularly applied for such a reference, and the second at the instance of the assessee, who did not make any such application in accordance with law, have been referred to us for our decision "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee was entitled to double tax relief of Rs. 8, 269.11 under the Agreement for relief from or Avoidance of Double Taxation between India and Ceylon (S. R. 456 dated 6th February, 1957)?.2. Whether, on the facts and in the circumstances of the case, the initiation of the proceedings under section 147 are valid in law?" *A preliminary objection was rightly taken by Mr. Balasubrahmanyan, learned counsel for the revenue, that the second question which has been referred by the Tribunal cannot be gone into by this court as the procedure expressly prescribed by statute for such a reference has not been availed of by the assessee.