Case: Commissioner Of Income-Tax, Delhi And Rajasthan Vs. M/S. Bharat Carbon And Ribbon Manufacturing Co

assessment, even after setting off the tax paid under S. 18-A of Rs. 47,513 still an amount of Rs. 20,000 was still due from this assessee. The amount under S. 18-A has, therefore, been adjusted by the Pakistan authorities towards the payment of tax and the assessee cannot take credit for this amount again. Under these circumstances, it must be held that there was no balance of tax paid under S. 18-A left to be adjusted by the Income-tax Officer for the Indian assessment."6. The assessee filed an appeal before the Appellate Tribunal. The Tribunal allowed the claim on the ground that the language of S. 18-A (11) was mandatory, and it was the duty of the Income-tax Authorities to give credit for the amount paid by the assessee as advance tax in the regular assessment made under the Indian Income-tax Act. It observed:"What the Income-tax Authorities would do or may have done to the advance tax paid to the Income-tax Officer, Lahore, is entirely immaterial."7. At the instance of the Commissioner of Income-tax a reference was made to the High Court. The High Court held that if the direction contained in S. 18-A (11) had to be obeyed, credit had necessarily to be given to the assessee at the time of regular assessment. In reply to the argument of the learned counsel for the Commissioner of Income-tax that no adjustment was possible because the Pakistan authorities had already raised a demand against the assessee on January 28, 1948, and in part satisfaction of that demand wiped out the amount standing to the credit of the assessee, the High Court observed:"It is, however, obvious that what may have been done by the Pakistan authorities in January, 1948, cannot be called a proceeding under the Indian Income-tax Act and the fact that the money paid by the assessee under the Indian Income-tax Act may have been seized by the Pakistan Authorities or disposed of in some other manner, can in no way affect the right of the assessee under the Indian Income-tax Act."In the result, the High Court answered both the questions in the affirmative.8. Mr. A. V. Viswanatha Sastri, the learned counsel for the appellant, contends before us that by virtue of S. 18 (3) of the Indian Independence Act, the Income-tax Act as it existed before the coming into force of the Indian Independence Act, applied both to the Dominion of Pakistan and the Dominion of India, and the result of this simultaneous application to both the Dominions was that the advance tax paid by the assessee was liable to be adjusted against the assessments made both in Pakistan and in Indian, and Pakistan having made the adjustment there was no money left to be adjusted against the assessment in India.9. The learned counsel for the respondent relies on the reasoning of he High Court and on Dwarka Dass v. Income-tax, Officer, Kanpur, (1956) 29 ITR 60 (All) and says it was the obligation of the Government of India under S. 9 of the Indian Independence (Rights, Property and Liabilities) Order, 1947, either to refund the money paid as advance tax or to give credit in the assessment in India.10. Section 18 (3) of the Indian Independence Act reads as follows:"Save as otherwise expressly provided in this Act, the law of British India and of the several parts thereof existing immediately before the appointed day shall, so far as applicable and with the necessary adaptations, continue as the law of each of the new Dominions and the several parts thereof until other provision is made by laws of the Legislature of the Dominion in question or by any other Legislature or other authority having power in that behalf."11. In our opinion the effect of S. 18 (3) of the Indian Independence Act was to change the incidents of the advance tax paid. Previously the advance tax was to be adjusted towards a single regular assessment to be made by British India. After the Indian Independence Act the advance tax was liable to be adjusted against two regular assessments, one by India and one by Pakistan. In Pakistan, under S. 18-A (11), the Pakistan Government was entitled to adjust the advance tax paid by the assessee against its demand. Similarly, the Government of India was entitled to adjust the amount against its demand. It follows that if the assessee has been given credit for the advance tax by the Pakistan Government, he cannot claim that credit should be given to him by the Indian Income-tax Authorities. The effect of the Indian Independence Act was not to double the advance money the assessee had paid. The amount of money he paid as advance tax remained the same. Having been given credit by the Pakistan Government he could not claim that there was any amount left on which S. 18-A (11) could operate. Dwarka Dasss case, (1956) 29 ITR 60 (All) relied on by the learned counsel for the assessee is distinguishable because that case proceeded on the assumption that no regular assessments had been made in Pakistan for the relevant years and only some assessment proceedings were pending. It was also common ground that excess payments had been made by the petitioner in that case under S. 18-A of the Indian Income-tax Act in Lahore in respect of the years 1946-47 and 1947-48, and it was only these excess payments that the Allahabad High Court had directed should be set off against the assessments of the subsequent years. But the facts in the present case are different. Here the Pakistan Authorities had made a regular assessment and had adjusted the advance tax paid by the assessee.12. In this view it is not necessary to consider the interpretation of S. 9 of the Indian Independence (Rights, Property and Liabilities) Order, 1947. By virtue of the simultaneous application of the Indian Income-tax Act in both the Dominions, there was a statutory modification of the incidents of the advance tax paid by the assessee.13

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]11. In our opinion the effect of S. 18 (3) of the Indian Independence Act was to change the incidents of the advance tax paid. Previously the advance tax was to be adjusted towards a single regular assessment to be made by British India. After the Indian Independence Act the advance tax was liable to be adjusted against two regular assessments, one by India and one by Pakistan. In Pakistan, under S. 18-A (11), the Pakistan Government was entitled to adjust the advance tax paid by the assessee against its demand. Similarly, the Government of India was entitled to adjust the amount against its demand. It follows that if the assessee has been given credit for the advance tax by the Pakistan Government, he cannot claim that credit should be given to him by the Indian Income-tax Authorities. The effect of the Indian Independence Act was not to double the advance money the assessee had paid. The amount of money he paid as advance tax remained the same. Having been given credit by the Pakistan Government he could not claim that there was any amount left on which S. 18-A (11) could operate. Dwarka Dasss case, (1956) 29 ITR 60 (All)  relied on by the learned counsel for the assessee is distinguishable because that case proceeded on the assumption that no regular assessments had been made in Pakistan for the relevant years and only some assessment proceedings were pending. It was also common ground that excess payments had been made by the petitioner in that case under S. 18-A of the Indian Income-tax Act in Lahore in respect of the years 1946-47 and 1947-48, and it was only these excess payments that the Allahabad High Court had directed should be set off against the assessments of the subsequent years. But the facts in the present case are different. Here the Pakistan Authorities had made a regular assessment and had adjusted the advance tax paid by the assessee.12. In this view it is not necessary to consider the interpretation of S. 9 of the Indian Independence (Rights, Property and Liabilities) Order, 1947. By virtue of the simultaneous application of the Indian Income-tax Act in both the Dominions, there was a statutory modification of the incidents of the advance tax paid by the assessee.