Law:

Section:

Section 220 of the Income-tax Act, 1961 [Corresponding to section 45 of the Indian Income-tax Act, 1922] - Collection and recovery of tax - When tax payable and when assessee deemed in default - Assessment years 1951-52 and 1952-53 - Petitioner/assessee, a non resident, was assessed to tax on share of profits accruing in partnership firm carrying on business in Ceylon - Demands were made on assessee for relevant assessment years - Subsequently, coercive proceedings were taken for recovery of arrears of tax - Held, yes - Whether in view of second proviso to section 45 of 1922 Act, so long as such prohibition or restriction would continue, ITO would continue to treat assessee as not in default in respect of such part of tax as is on his foreign income not brought into taxable territories - Held, yes - Whether, therefore, coercive proceedings taken against assessee for recovery of tax, were to be quashed- Held, yes - In Ceylon there was prohibition in force in respect of bringing money from there into taxable territories throughout period subsequent to relevant assessment years - Held, yes FACTS The petitioner, a non-resident, was assessed to tax on the share of profits accrued in a partnership firm, in Ceylon. Demands were made on the petitioner in respect of relevant assessment years. Subsequently, the department initiated coercive proceedings against the assessee for the recovery of the tax. On writ: HELD It was not disputed that there was prohibition or restriction in Ceylon in respect of bringing money from there into the taxable territories. The proviso to section 45 of 1922 Act shows that, so long as such prohibition or restriction continues, the ITO shall continue to treat the assessee as not in default in respect of such part of the tax as is on his foreign income not brought into the taxable territories. It is not the case for the revenue that in Ceylon there was no prohibition or restriction in force throughout the period subsequent to the assessment years. There was no proof that the assessee has utilized his share of income for the two years or could have utilized the same for any expenditure actually incurred in Ceylon. There was no constructive…

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