Law:

Section:

Section 90 of the Income-tax Act, 1961 (Corresponding to section 49-A of Indian Income-tax Act, 1922) - Double taxation relief - Where agreement exists - Assessment year 1958-59 - ITO by making reassessment, awarded reduced relief on basis that Under Article III of inter-country agreement Ceylon rate of tax only should be basis to reckon relief and not total income relatable to a particular source or sources - Tribunal set aside ITO's order holding that revenue's reckoning of relief on basis that lower of rates of tax should be taken into consideration while granting relief was wrong- Whether since according to agreement, country was obliged to allow an abatement equal to lower of amounts of tax attributable to such excess in either country, ITO ought to have taken entire amount of tax paid by assessee or payable by assessee in both these countries and granted an abatement equal to lower of amounts of tax attributable to such excess, in either country - Held, yes - Whether this being true formula on which double taxation relief was to rest, Tribunal had come to right conclusion - Held, yes FACTS For the assessment year 1958-59, the ITO by way of reassessment granted a reduced relief to the assessee under Article III of the Double Taxation Avoidance Agreement with Ceylon, on the theory that under article III of the inter-country agreement, the Ceylon rate of tax only was the basis to reckon the relief and not the total income relatable to a particular source or sources. The assessee objected to the re-opening of the assessment and also questioned the procedure latterly adopted by the ITO in the matter of the grant of relief under the Double Taxation Avoidance Agreement with Ceylon. The AAC held that the assessee was entitled to relief in respect of the amounts taxed in both the countries at the lower of the two rates of tax in Ceylon and in India. On second appeal, the Tribunal held the revenue's reckoning of the relief on the basis that the lower of the rates of the tax should be taken into consideration while granting the relief was wrong and that the assessee was entitled to relief as originally worked out. On reference : HELD On a prima facie reading of the…

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