C. I. T., WEST BENGAL III, CALCUTTA versus CAREW & CO. LTD.

Citation: [1980] 1 S.C.R. 633 · Decided: 13-09-1979 · Supreme Court of India · Bench: N.L. UNTWALIA · Disposal: Dismissed

Judgment (excerpt)

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C. I. T., WEST BENGAL III, CALCUTTA 
v. 
CAREW & CO. LTD· 
September 13, 1979 
[N. L. UNTWALIA AND R. S. PATHAK, JJ.] 
633 
Abatement' of tax under the Agreement for Avoidance of Double Taxation 
in India and Pakistan-Set off of loss of income in agricultural properties 
whether allowable under the Indian Incon1e Tax Act, 1922-Sections 49A, 
49D (I) (3) of-Income Tax Act, 1922 read with Articles IV and VI of the 
AgrP.ement-Scope of . 
Respondent, Carew and Co. Ltd., was resident in India having its Registered 
Office in Calcutta. 
During the assessment year 1956-57, for which the corres-
ponding previous year ended on June 30, 1955, the sources of the income of 
the Company \Vere from (a) business in India and interest earned in India 
on securities; (b) manufacturing business in Pakistan and (c) agricultural 
properties in Pakistan. For thei relevant year the 
assessee.). 
Indian income 
as computed by the Income Tax Officer was Rs. 2,01,329 from business and 
Rs. 373 from interest on securities. The 
total 
of the 
two 
items 
was 
Rs. 2,01,702. The profit from assessee's manufacturing business in Pakistan 
v.·as computed at Rs. 3,26,368. In respect of the agricultural property, how-
ever, there was loss and it was determined at Rs. 3,20,839. 
The 
Income 
Tax Officer deducted by way of set off the agricultural loss of Rs. 3,20,839 
against the profit of the manufacturing business amounting to Rs. 3,26,368. 
The net profit of the assessee thus determined in respect of the two sources 
in Pakistan was Rs. 5,529. 
Deducting the statutory figure· of Rs. 4,500 from 
the above net profit of Rs. 5,529 he gave the company relief against double 
taxation on the figure of Rs. 1,029 only_, The assessee by filing a 
revised 
return claimed abatement on the entire profit from its manufacturing business 
in Pakistan i.e. Rs. 3,26,368 and also set off 
of the 
whole 
amount of 
Rs. 3,20,839 from the total income 
determined 
in India. The 
Appellate 
Assistant Commissioner affirmed the decision of the· Income Tax Officer. · But in 
second appeal to the Appellate Tribunal, it was held by the Tribunal that the 
assessee was entitled to abatement of tax under the Agreement on the entire profit 
from manufacturing business earned in Pakistan during the relevant year. Since 
the agricultural income of the assessee in respect of its agricultural properties in 
Pakistan was to be treated as taxable income in India, the loss was allowable under 
the Indian Income Tax Act, 1922. The· High Court on a reference agreed with 
the Tribunal's view. 
Hence the appeal. 
Dismissing the appeal, the Court 
HELD: 
Per Untwalia J. 
A 
n· 
c 
D 
E 
G 
,/-
1. The 
assessee 
was 
entitled to the 
relief against double taxation in 
accordance with the Agreement leaving out of consideration the 
figure 
of 
loss of Rs, 3,20,839/- incurred in its agricultural hctivities in Pakistan, albeit 
H 
the said loss had to be taken into account and adjusted against the assessee's 
profit in India. [642 F-G] 
A 
B 
c 
634 
SUPREME COURT REPORTS 
[1980] 1 S.C.R. 
2. While computing the total income of the assessee, the income or the 
loss, as the 'n~e ma.y be, from agricultural property in a foreign country had 
to be added to or adjusted in the assessee's total income. 
Obviously it will 
be an income "from other .sources" within the meaning of clause (iv) of 
Section 6 of the Income Tax Act, 1922. 
So also the assesree's income from 
business in Pakistan had to be added to the figure of his profits and gains of 
business in India. 
The statutory deduction of Rs. 4,500 had to be granted 
under the third proviso to section 4(1) of the Act. The exclusion of the 
agricultural income as mentioned in clause (viii) of sub section (3) was 
to be granted only if it was an agricultural income as defined in 
Section 
2(1). Otherwise! not. 
Income from agricultural lands situated 
in Pakistan 
was not agricultural income within the meaning of the Indian Income Tax 
Act. Income Tax was, therefore, chargeable on the said income. Similarly 
if there is a figure of loss from agricultural lands situated in Pakistan, it 
has got to be deducted, while computing the total income 
of the 
resident 
assessee in India. [637 G-H, 638 A·CJ 
' 
. 
Kumar Jagdish Chandra Sinha v. Comn1issioner of lncome Tax, 
West 
Bengal, 28 I.T.R. 732 (Calcutta) approved. 
If the assessee's agricultural income in Pakistan was chargee·ble to tax 
D 
there, then relief in respect 

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