Appeals Nos 1689 and 1690 of 1968
Appeals from the judgment and order dated January 19 1967 of the Madras High Court in Writ Petitions Nos
1030 and 1031 of 1963
T A Ramachandran for the appellant in both the appeals
section C Manchanda R N Sachthey B D Sharma and section P Nayar for the respondents in both the appeals
The Judgment of the Court was delivered by Hegde J
These appeals by certificate arise from the decision of the High Court of Madras in Writ Petitions Nos
1030 and 1031 of 1963
Therein the petitioner Invoked the extraordinary jurisdiction of the High Court under Article 226 of the Constitution to quash the orders of the Respondents wherein he was not granted the abatement he sought to obtain in the assessment years 1959 60 and 1960 61 The High Court came to the conclusion hat the appellant is not entitled to any in ore abatement than that was given by the authorities under the Assessment for Relief or for Avoidance of double Taxation in India and Ceylon  which will be hereinafter referred to S the agreement
It accordingly dismissed the Writ Petitions but gave a certificate under article 1331c of the Constitution of India certifying that this is a fit case r appeal to this Court
The appellant is a resident in this country
But he carrying on business in Ceylon
During the assessment car 1959 60 he earned a gross income of Rs 39473 id in the assessment year 1 960 61 he earned a gross income of Rs 39047 
He had only a house in India hose annual rental value was Rs 38 
The entire assessable income of his was that what he earned in Ceylon
in his income in Ceylon he was taxed in a sum of Rs 919 for the assessment year 1959 60 and in a sum of section 6036 for the assessment year 1960 61
For the me income in India under the Indian Jaw his tax was computed for the assessment year 1959 60 at Rs 10282 62P id for the assessment year 1960 61 at Rs 9521 35P 90 The tax payable by him in Ceylon was given as abatement and he was called upon to pay only the balance
The tax payable by him in Ceylon as a non resident would have been Rs 9889 in the assessment year 1959 60 and Rs 9983 in the assessment year 1960 61
But in view of section 452 of the Ceylon Income Tax ordinance 1932 and also in view of the Agreement  he was taxed as if he was a resident in Ceylon
Two questions arising for decision are whether he was not liable to be taxed at all in India and if he was liable to be taxed in India what should have been the proper abatement given to him
Mr Ramachandran appearing for the assessee contended firstly that in view of the Agreement  entered into between India and Ceylon as provided in section 49C of the Indian Income Tax Act 1922 he was not liable to be taxed in India at all
In the alternative he contended  that while determining the tax payable by him in this country the department should have deducted the entire tax that he would have had to pay had been taxed as a non resident
For this contention also he relies on the terms of the agreement entered into between India and Ceylon
He does not dispute the fact but for the agreement the assessee would have been liable to pay in this country a tax of Rs 10282 62 p in the assessment year 1959 60 and Rs 9521 35p
in the assessment year 1960 61
In order to consider the correctness of the contention advanced by Mr Ramachandran we will now turn to the relevant provisions of the Agreement 
That Agreement  was notified in Modification SRO 456 dt
the 6th February 1957
The portion of the notification which is relevant for our present purposes is contained in Article 3 and column 8 of the Schedule to that agreement
Article 3 reads Each country shall make assessment in the ordinary way under its own laws and where either country under the operation of its laws charges any income from the sources or categories of transactions specified in column 1 of the Schedule to this Agreement hereinafter referred to as the Schedule in 91 excess of the amount calculated according to the percentages specified in column II and III thereof that country shall allow an abatement equal to the lower of the amounts of tax attributable to such excess in either country SCHEDULE Sources of income or nature of Percentage of income Remarks transaction from which income is which each country derived is entitled to charge under the Agreement
I II III IV 8
Any income derived from a source 100 per cent Nil by or category of transactions not men by the country the other
tioned in any of the foregoing items in which of the Schedule
the income actually ac crues or arises
The first portion of article 3 says that each country shall make an assessment in the ordinary way under its own laws This means to begin with both India and Ceylon were required to assess the assessee in accordance with law prevailing in each of these countries
Thus far it is plain
From this it is clear that first contention advanced on behalf of the assessee has no basis
Hence it must fail
Now we come to the second part of that article to the extent necessary for determining the second contention
It reads   and where either country under the opera tion of its laws charges any income from the sources or categories of transactions specified in column 1 of the schedule to this Agreement  in excess of the amount calculated according to the percentages specified in columns 11 and III thereof that country shall allow an abatement equal to the lower of the amounts of tax attributable to such excess in either country
 The language employed in this part of the article is quite confusing
That part of the article has to be read with the 92 schedule
On a proper reading of that provision alongwith the schedule which means in the present case item 8 of the schedule it appears to us that what it says is From out of the amount ascertained under the first part of the Article deduct the tax payable by the assessee in the other country in respect of the whole or any portion of the amount brought to tax under the first part of article
The word attributable  in that Article merely means payable Applying the principle mentioned above to the facts of the present case the following result is reached
The tax payable under the Indian law as seen earlier was Rs 1028262p
in the assessment year 1959 60
The tax payable under the Ceylonese law in that year was Rs 5919 
That has to be deducted from the tax computed under the Indian law
The balance alone is leviable
Similarly in the assessment year 1960 61 the tax computed under the Indian law is Rs 9521 35 p and the tax levied under the Ceylonese is being Rs 6036 
In levying tax in this country the tax payable in Ceylon has to be deducted
It was urged by Mr Ramchandran that what we have to take into consideration is not the actual tax levied in Ceylon but the tax leviable in Ceylon on a non resident
He says that the deduction given under section 45 2 of the Ordinance promulgated in Ceylon is only an allowance
Hence the same does not form part of the actual taxation
We are unable to accede to that contention
In considering what taxes are attributable to the tax laws of a particular country one has to take into consideration all the provisions of the statutes levying tax
In other words for determining the tax due from an assessee we have not merely to look to the charging section but also to the provisions providing exemptions and allowances
If so read it is quite clear that the amount of tax attributable to the Ceylonese law is that which was ultimately levied on the assessee
The agreement that was entered into between India and Pakistan is similar in terms with the agreement with which we are concerned in these appeals except that in article 4 therein which corresponds to article 3 in the agreement before us in the place of the word attributable  the word payable  is used
But this change does not make any difference in substance
Interpreting that 93 agreement this Court in Ramesh R Saraiva vs Commissioner of India Tax Bombay City 11 held that article IV of the Indo Pakistan Agreement for the avoidance of Double Taxation clearly shows that each Dominion can make an assessment in the ordinary way regardless of the Agreement
The restriction which is imposed on each Dominion under the Agreement is not on the power of assessment but on the liberty to retain the tax assessed
Nor does the Schedule to the Agreement limit the power of each Dominion to assess in the normal way all the income that is liable to taxation under its laws
The Schedule has been appended only for the purpose of calculating the abatement to be allowed by each Dominion
The ratio of this decision in our opinion governs the facts of this case
We also do not see any reason for treating the appellant in a manner different from other assessees who are resident in this country
In the result these appeals fail and the same are dismissed
No costs
VPS Appeals dismissed


Summary:
The appellant was a resident in India and was carrying on business in Ceylon
His entire assessable income for the years 1959 60 and 1960 61 was what he earned in Ceylon
He was liable to be assessed as a non resident but in view of section 452 of the Ceylon Income tax Ordinance 1932 and of the Agreement for Assessment for Relief or for Avoidance of Double Taxation in India and Ceylon  as provided in section 49A of the Indian Income tax Act 1922 he was taxed as if he was a resident in Ceylon and assessed to pay a smaller sum as tax
The Income tax authorities in India computed the tax under the Indian law and gave as abatement the tax payable by him in Ceylon as per the Agreement and called upon him to pay the balance
On the questions 1 whether he was not liable to be taxed at all in India and 2 if he was liable to be taxed in India what should have been the proper abatement the High Court confirmed the order of the Income tax authorities
In appeal to this Court HELD 1 Article 3 of the Agreement begins with the words Each country shall make an assessment in the ordinary way under its own laws  Therefore the appellant was liable to be taxed in India
91E F 2 The Article read with item 8 of the Schedule to the Agreement shows that from out of the amount ascertained under the first part of the Article the tax payable by the assessee in the other country in respect of the whole or part of the amount brought to tax under the first part of the Article should be deducted
The word attributable  in the Article means payable 
In considering what taxes are attributable to the tax laws of a particular country one has to take into consideration all the provisions of the statutes levying tax that is for determining the tax due from an assessee one has not merely to look to the charging section but also to the provisions providing exemptions and allowances
So read the amount of tax attributable to the Ceylonese law is that which was ultimately actually levied on the assessee and not the leviable in Ceylon on a non resident
92B G Ramesh B Saraiya vs CIT Bombay applied 89