COMMISSIONER OF INCOME TAX Vs. SAUDI ARABIAN AIRLINES

JUDGEMENT

(1.) THE assessee's Indian income was computed in accordance with the provisions contained in r. 10 (ii). For this purpose, the world income of business of the assessee was required to be computed. At that stage, the ITO applied the limitation to head office expenses contained in S. 44C which was inserted by the Finance Act, 1976, w.e.f. June 1, 1976. When this limitation was applied, the world profits stood enhanced, which resulted in enhancement of Indian income when the proportion was worked out. The assessee, aggrieved by the application of S. 44C to this method of computation of income, carried the matter further and succeeded both before the CIT (A) and the Tribunal. The CIT very positively stated that the application of S. 44C to the calculations was under a misconception of the legal position, and the Tribunal has upheld this approach substantially. Mr. Dastur took us through the provision and we are of the opinion that the application of S. 44C in the circumstances was not at all warranted where the computation is made under r. 10(ii). If that be so, the rule in the instant case has to be discharged. Order accordingly. Parties to bear their own costs.