Commissioner of Income Tax vs Dr. K.L. Parikh

V.K. Singhal, J.—The Income Tax Appellate Tribunal has referred the following question of law arising out of its order dated September 25, 1982, in respect of the assessment years 1976-77 and 1977-78 u/s 256(1) of the Income Tax Act, 1961 :

"Whether, on the facts and in the circumstances of the case, the Income Tax. Appellate Tribunal was justified in holding that the assessee was entitled for credit for the entire amount of tax deducted at source in Iran u/s 91(1) of the Income Tax Act, 1961, and not in proportion to the income included in the total income of the assessee after considering the provisions of Section 80RRA of the Income Tax Act ?"

The arguments of both learned counsel have been heard. The question of law referred to this court is covered by the decision in the case of Commissioner of Income Tax Vs. Dr. R.N. Jhanji, wherein the decision of K.V.A.L.M. Ramanathan Chettiar by Lrs. Vs. Commissioner of Income Tax , Madras, was taken into consideration in which the provisions of Section 49D of the Indian Income Tax Act, 1922, corresponding to Section 91(1) of the Income Tax Act, 1961, were interpreted and it was held that prior to the amendment, the benefit was to only one-half of the remission of tax whereas after the amendment the benefit given was of the entire amount of tax paid on the foreign income which was taxed in India. On the basis of this, the court came to the conclusion that the assessee is entitled to double taxation relief u/s 91(1) only of the remission of tax paid on 50 per cent. of the total foreign income.

In Commissioner of Income Tax Vs. Dr. R.S. Bhatt, the judgment of this court in Commissioner of Income Tax Vs. Dr. R.N. Jhanji, was followed.

The question being covered by the two decisions referred to above, we are of the view that the assessee was not entitled u/s 91(1) to credit for the entire amount of tax deducted at source in the foreign country. The decision given by the Income Tax Appellate Tribunal is not in accordance with law.

Consequently, it is held that the Tribunal was not justified in holding that the assessee was entitled to credit for the entire amount of tax deducted at source in Iran u/s 91(1) of the Income Tax Act, 1961, and not in proportion to the income included in the total income of the assessee after considering the provisions of Section 80RRA of the Income Tax Act, 1961.

Accordingly, the reference is answered in favour of the Revenue and against the assessee.