Law: Income Tax Act, 1922

Section: 66

Income-tax-----Double taxation avoidance---Money-lending transaction in India--­Amount utilised in Pakistan---Interest on money borrowed---Benefit of Cl. 5(t) of Art. IV of Avoidance of Double Taxation Agreement available--­Agreement for Avoidance of Double Taxation between India and Pakistan, Art.IV, Cls.5(f) & 9. The assessee, which was the managing agent of two sugar mills in East Pakistan, lent money to the managed companies which were brought from Calcutta to East Pakistan. The Tribunal held that the interest derived by the assessee from the moneys lent on interest and brought into Pakistan fell within the ambit of clause 5(f) of the Schedule to Article IV of the Agreement for the Avoidance of Double Taxation between India and Pakistan and the assessee was entitled to the benefit of that clause. The High Court, on a reference, upheld the decision of the Tribunal [see (1981) 130 ITR 917]. On appeal to the Supreme Court: Held, affirming the decision of the High Court, that clause 9 of the Agreement was not attracted to this case clause 5(f) covered the matter. CIT v. Soorajmull Nagarmull (1981) 130 ITR 917 affirmed. ORDER This appeal, by certificate granted by the Calcutta High Court under t section 66A(2) of the Indian Income-tax Act, 1922, arises out of reference made by the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal") wherein the following question was referred for the opinion of the High Court (page 919): "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs.l lakh was income derived from money lent at interest and brought into Pakistan in cash or in kind within the meaning of item No.5(f) to the Schedule to the Agreement for Avoidance of Double Taxation between India and Pakistan?" The High Court has answered the said question against the Revenue and in favour of the assessee. It relates to the assessment year 1949-50. The facts, briefly stated, are that the assessee was the managing agent of two sugar mills situated in East Pakistan. The assessee had lent moneys to the managed companies in East Pakistan which was brought from Calcutta to East Pakistan for the…

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