K. V. A. L. M. RAMANATHAN CHETTIAR BY L.RS. versus COMMISSIONER OF INCOME-TAX, MADRAS

Citation: [1973] 2 S.C.R. 650 · Decided: 11-10-1972 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Appeal(s) allowed

Judgment (excerpt)

650 
~. V. A. L. M. RAMANATIIAN CHETTIAR BY L.Rs. 
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COMMISSIONER OF INCOME-TAX, MADRAS 
October 11, 1972 
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{K. S. HEGDE, P. ]AGANMOHAN REDDY, H. R. KHANNA AND J D 
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DUA; JJ.] 
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Income Tax Act (11 of 19.22), s.49·D-Scope of. 
The assessee was carrying on business in Malaya and was ownin(! 
rubber plantations. He was also carrying on business in 
India. in 
respect of the assessment yea: 1953-~4 he. d•xlared his foreign income 
from Malaya at Rs. 2,22,532, m<'omc J;rt India at Rs. 39,142 from >ources 
other than bu•iness and a loss on business in I ndia at Rs. 68,658 The 
Income-tax Officer allowed double taxation 
relief 
on 
a 
sum' 
of 
Rs. 1,92,816/· by adding the inCO.llll.! in India to the forci!:ll income and 
deducting thcrc'from the loss in India. The Commissioner,-: in e:ot'!rcise of 
his powers under s.48 read with s.49·D of the Tncome·ta:t Act, 1922 
however, set off the business Toss in India ngaiost the business pmfits i~ 
Malaya and held that only the resulting income of Rs. 1,53,6i4 from 
Malaya could be considered to have suffered double taxation and h.er.ce 
granted double taxation n:lief i.rt respect only of that amount. Th..: Tribu-
nal followed the decision of the Madras High Court in C.I.T. l\fadra.; v. 
Arunacha!Gm Chettiar, 49 J.T.R. 574, and confirmed the ordl!r of 
th~ 
Commi~sioner. The High Court also on r;:f.:!rcnc'e, was of th-.! \i'.!w Cut 
the relief granted by s.49-D 'on such doubly ta'l:cd income' h:~s rcf-:r-
cnce to the factual double incidence llnd.::r two <liffere:nt jurisdictivns of 
tax on identical amounts of income, ond decided -against the a;s.:s;~. 
In appeal to this Court, on the scop~ of th<: expression 'such doubly 
taxed income' in s.49-D of the Act, with respect to which doub!~ t:l.u-
tion relief is given, 
HELD : (Per P. Jaganmohan Reddy, H. R. Khanna anJ L D. D<Ja, 
JJ.) The High Court was in error. 
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By the year 1950, the Gov\!rnmcnt of India was cnt1ouragin; m?r~ 
and more Indian citizens to establish branches in countries with whtch 
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there was no 6pccial agreement for the avoidance of double taxatiJn, nrud 
s.49-D was wbstituted in plao) of the old one, in 1953, for the pu~ 
~f giving doubl~ taxation. relief in respect of taxes on income c!mt'ged 
m any country, hy dcJuct10n .or otherwise, under the law in for~ m that 
country. Th object of the section is that the amount of InJi:m inc'o~· 
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!aJt patd or the amount. of t:~x in the foreign country, which.::,·cr i> lowe.r, 
IS allowed a1 a deduction from the tax p:tyable umkr the Act .. "t!) su<l~ 
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doubly ta.ud incomt', 
Prior to 1953, the 
s~ction afford.:d rc:lid at baU 
the lndi<~n Income t:~x or half tho tax paid in the other countrr. i.'l rts;~ct 
of th~ Stlmc lncom~ ~·hichcvcr i~ less, 
H the conc'cs<ion that wll t:t~.~ 
~Ivcn by th~ new. section for cncourag~ng Indian citizens to -start buSU1~:i'> 
!n forctgn ~ountrH:s wa~ only to give relict nt the full rate of . Indi~ 
JOcome-tax mstc-,nl of half 6UCh tax, nil that was nccc!lsarv by the arocn.d 
mc~t wa~ to dclt:te the words "one half' occurring in tb~ sccti-1ll vr.IOt 
U>. tf'l ~mendnwnt. But the Lcgi~lature haJ r.:draftcd the entire s-lCllDD 
.1'1 
Wt~~ the re~ult th<~t the phr<~se 'such uouhtly taxed income' in the new 
~ect10n an~ the phra~.e '~>arne income' in the repealed section do not have 
the 6ame Import. 
'01e word'i 'snmc inromc' b the conb:xt \\OUIJ n1ean 
th~ same kind or ~peci~ or identical income e:1rncJ in a foNign countrY 
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K.v:A,L.M. CHETTIAR V. C.I.T. (Hegde, ],) 
651 
on which tax has been paid in that country, in respect of which relief is 
being claimed from being again subjected to tax under the Act. But the 
words 'such doubly taxed income' have reference to the foreign incbme 
which bc:m onoe again the burden of Indian income-tax by its being in-
cluded i:1 the total income chargeable under s.3 read with s.2( 15) of 
the Act. 
Cnder s.4(1) (b) (ii) the income which accrues to an assessee 
outside the taxable territories is to be included i:n the total income !o that 
the inc'omc under any of the heads enumerated in s.6 which has accrued 
or arisen to the assessee outside the taxable territory and is subject to 
the tax under the law in force in that country, is included in· his total 
income ;;ttracting the le

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