Law:

Section:

Section 90 of the Income-tax act, 1961-Double taxation relief-article vi(b) of double avoidance agreement between India and Pakistan-assessee's income included income earned in Pakistan-ITO computed gross tax demand and after adjustment of advance tax kept net demand in abeyance-Whether, in view of double taxation agreement between India and Pakistan, correct method was to keep estimated tax demand in respect of Pakistani income in abeyance and adjust only tax demand in respect of Indian income against advance tax paid-held, yes-Whether assessee entitled to refund of advance tax in excess of tax demand in respect of its Indian income-Held, on facts, yes Facts For the assessment year 1964-65, the assessee's total income included business income derived in Pakistan. Article VI(b) of the Agreement for Avoidance of Double Taxation between India and Pakistan provides that where the tax payable on the total income in Pakistan is not known, for collection of taxes in India, the estimated tax on the Pakistan income would be kept in abeyance for a period of one year, within which necessary claim papers and documents should be filed by the assessee so as to be allowed double taxation relief. However, in the assessee's case, the ITO computed the gross tax demand (including the tax attributable to Pakistan income) and, after giving credit for advance tax paid, observed that the net demand be kept in abeyance for one year. The assessee contended (i) that from the gross demand, first the estimated tax on Pakistan income had to be deducted and only the balance of tax demand had to be adjusted against advance tax paid; and (ii) that the excess advance tax paid by him with reference to the balance demand was refundable to him with interest. This contention of the assessee was rejected by the AAC but was upheld by the Tribunal. On reference: Held Aplain reading of the relevant clause in the Agreement for Avoidance of Double Taxation makes it clear that what was held in abeyance was the immediate collection of the estimated tax demand in respect of Pakistan income. The Tribunal was thus right in holding that the estimated tax demand in respect of Pakistan income should be…

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