K. vs. A. L. M. RAMANATHAN CHETTIAR BY L.RS. versus COMMISSIONER OF INCOME-TAX, MADRAS

CIVIL APPEAL No. 1840/1972Supreme Court[1973] 2 S.C.R. 65011 October 1972Bench: 4 JudgesAuthor: K.S. HEGDE, P. JAGANMOHAN REDDY, I.D. DUA, HANS RAJ KHANNA27 pages
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What did the Supreme Court hold?

The Supreme Court, by a majority, held that the High Court was in error. The Court reasoned that the object of Section 49-D, particularly after its substitution in 1953, was to encourage Indian citizens to establish branches abroad by providing relief for taxes paid in foreign countries. The phrase 'such doubly taxed income' refers to the foreign income that, by its inclusion in the total income under the Indian Income-tax Act, once again bears the burden of Indian income-tax. The Court emphasized that the Act levies a single tax on the total income, not distinct taxes on each head. Therefore, the relief is not restricted to incomes under the same head. The Court disapproved of the decision in C.I.T., Madras v. Arunachalam Chettiar. The appeal was allowed, and the High Court's answer to the reference was discharged and answered in favour of the assessee.

What were the facts?

The assessee, carrying on business in Malaya and India, declared foreign income from Malaya at Rs. 2,22,532, Indian income from non-business sources at Rs. 39,142, and a business loss in India of Rs. 68,658 for assessment year 1953-54. The Income-tax Officer granted double taxation relief on Rs. 1,92,816. However, the Commissioner, under Section 48 read with Section 49-D of the Income-tax Act, 1922, set off the Indian business loss against Malayan business profits, considering only the resulting Rs. 1,53,614 from Malaya as doubly taxed. The Tribunal and the Madras High Court upheld the Commissioner's order, interpreting 'such doubly taxed income' as referring to the factual double incidence of tax on identical amounts of income under different jurisdictions.

What were the issues?

1. Whether the expression 'such doubly taxed income' in Section 49-D of the Income-tax Act, 1922, refers to income from the same head or source, or to foreign income that bears the burden of Indian income-tax by its inclusion in the total income, in the context of double taxation relief? (Question of law) Assessee's Contention: The assessee argued that the relief under Section 49-D should be granted on the foreign income that is included in the total income and thus subjected to Indian tax, regardless of whether it's from the same head or source as the foreign income. The amendment in 1953 aimed to encourage Indian citizens to start businesses abroad by providing full relief. Revenue's Contention: The Revenue contended, and was supported by the Tribunal and the High Court, that 'such doubly taxed income' refers to income from the same head or source that has been taxed in both jurisdictions. They relied on the Madras High Court's decision in C.I.T. Madras v. Arunachalam Chettiar, 49 I.T.R. 574, which interpreted the provision similarly to Section 27 of the UK Finance Act, 1920.

Which sections of the Income-tax Act were involved?

Section 49-D,Section 48,Section 4(1)(b)(ii),Section 3,Section 2(15),Section 6

AI-generated summary — verify with the full judgment below

650 ~. V. A. L. M. RAMANATIIAN CHETTIAR BY L.Rs. v. r '··· . ~ l ,j"· · ... /: . .. ~ ' .\ l ~ . (. \ '{; ' . i .• COMMISSIONER OF INCOME-TAX, MADRAS October 11, 1972 :'JI~ l ( l· .:;~ ~ {K. S. HEGDE, P. ]AGANMOHAN REDDY, H. R. KHANNA AND J D . DUA; JJ.] . '

Income Tax Act (11 of 19.22), s.49·D-Scope of.

The assessee was carrying on business in Malaya and was ownin(! rubber plantations. He was also carrying on business in India. in respect of the assessment yea: 1953-~4 he. d•xlared his foreign income from Malaya at Rs. 2,22,532, m<'omc J;rt India at Rs. 39,142 from >ources other than bu•iness and a loss on business in I ndia at Rs. 68,658 The Income-tax Officer allowed double taxation relief on a sum' of Rs. 1,92,816/· by adding the inCO.llll.! in India to the forci!:ll income and deducting thcrc'from the loss in India. The Commissioner,-: in e:ot'!rcise of his powers under s.48 read with s.49·D of the Tncome·ta:t Act, 1922 however, set off the business Toss in India ngaiost the business pmfits i~ Malaya and held that only the resulting income of Rs. 1,53,6i4 from Malaya could be considered to have suffered double taxation and h.er.ce gra

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