Law:

Section:

Income-tax---Loss--Set-off in same year--Business loss of assessee in India exceeding dividend received from a Pakistani company--Dividend from Pakistan wholly taxable in Pakistan under Agreement for Avoidance of Double Taxation between India and Pakistan, Sched., Arts. IV, VII(A), item No.8 to be set-off against business loss to compute total world loss of assessee--Indian law would not be affected by Agreement, for Avoidance of Double Taxation between India and Pakistan for the purposes of determining total income of assessee and tax liability consequent upon such assessment--Dividend income received from the petitioner-Company, held, was deductible in arriving at the total world loss of assessee. Ramesh R. Saraiya v. C.I.T. (1963) 55 ITR 699 S C ref. JUDGMENT R.S. PATHAK, J.--These appeals by certificate granted by the Delhi High Court are directed against a common judgment of the High Court disposing of two income-tax references relating to the assessment years 1956-57 and 1957-58 on the question whether the assessees dividend income from a Pakistan company was deductible against its business loss in India. The assessee is a public limited company carrying on the business of manufacturing and selling sugar. During the relevant period, it also held some shares in the Premier Sugar Mills & Distiller Co. Ltd., Mardan West Pakistan. The Pakistan company also carried on the business of manufacturing and selling sugar. In the previous year relevant to the assessment year 1956-57, the assessee earned a dividend income of Rs.2,30,832 from its holdings in the Pakistan company. It sustained a loss of Rs.20,30,006 from the business in India. Likewise, in the previous year relevant to the assessment year 1957-58, the assessee received a dividend income of Rs. 3,30,868 from the holdings in the Pakistan company but sustained a loss of Rs.9,11,728 from the business in India. The assessee claimed that the entire loss sustained by it in India in each year should be carried forward and set off against its business profits in India in future years. It contended that the dividend income derived by it from the Pakistan company was not liable to tax in India as it was wholly…

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