… ' ) _,,.. '"(" C. I. T., WEST BENGAL III, CALCUTTA v. CAREW & CO. LTD· September 13, 1979 [N. L. UNTWALIA AND R. S. PATHAK, JJ.] 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. n· c 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 the said loss had to be taken into account and adjusted against the assessee's profit in India. [642 F-G]
c 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 there, then relief in respect of such income could be granted to the resident assessee only in· accordance With sub clause (3) of Section 49-D of the Indian Income Tax ACt, 1922. Such a case would not be covered by any of the Articles of the Agreement for .Avoidance of Dot1ble Taxation in India and Pakistan which was entered into and was followed by notification No. 28: dated 10th December 1947 published in the official gazette. [638 G·H, 639 DJ In the instant case, since in the relevant year no amount of tax was charged or paid in Pakistan by the assessee, e:ither because such income was not chargeable there or because the net figure was a figure of loss, in the matter of calculation of' relief against Double Taxation
&ub·section (3) of sectiOn 49D .was not attracted at all. The loss had simply to be allowed in India, while computing the assessee's total income because, if there were any figure of profit from agricultural lands in Pakistan the same could have been added in the total income of the assessee. [639 D·E]
Section 49D(1) of the Income Tax Act, 1922 is attracted for giVIng relief against double' taxation only if the income derived by the assessee i& from a foreign country with which there is no reciprocal arrangement between that country and India for relief for avoidance of double tamtion. In case of Palislan, there being a reciprocal agreement, the relief has to 'be granted only under it. [639 F-G]
The scheme of the Agreement is (the phraseology of Article IV) quite different and distinct from what is provided in sub-section (1) of Section 49(D) of the Income Tax Act 1922. Therefore the view of the High Court on interpretation of Articles IV and Vl of the Agreement is quite correct. It is significant to note that in Article. IV,
the wording.'i are "where either Dominion under the operation of its laws, charges any income from the source.J or categoriis of transactions specified in column 1 of the Schedule to this Agreement".
The various items in the Schedule clearly indicate that ;c_ c.r.T. v. CAREW & co. if the sources. or categories of transactions are to be clubbed together and not treated separately then ·it will be difficult, almost impossible, to give effect to the Agreement with reference to the Schedule. [640 C, 642 B-D] K. V. Al. '!i.1. Ramanathan Ch~ttiar v. Commissioner of lnco1ne Tax, Madras, 88 IT.R. 169 (S.C.); explained.
Per Pathak]. (Concurring) ( 1) Since agricultural income does not fall within the scope of the Agree- ment for the Avoidance of Double Taxation the loss su'ffered by the respon- dent company in agricultural operations in
Pakistan cannot be set off against the business income arising or accruing in that country for the purpose of determining the abatement due to the respondent under the Agreement. In the absence of such a set off the respondent is entitled to a rebate in respect of the entire business income from Pakistan. [644 A-C] (2) Article IV of the Agreement in view of Article I must be construed as relating to assessments made in the two countries under the Indian Income Tax Act, the Excess Profits Tax Act and the Business Profits Tax Act only. For the purpose of abatement under Article IV of the Agreement, the primary condition is that tax under these enactments should be
leviable in both countries. on income from the sources or categories or transaction specified in the Schedule to the Agreement. In the present case, which relates to an aassessment in India under the Indian Income Tax Act for the assessment year 1.956-57, in respect o.f that assessment year agricultural income· arising in Pakistan \Vas not lin.ble to tax in Pakistan under the Indian Income Tax Act as applied in that country. Consequently, any agricultural income arising c
or accruing in Pakistan cannot be considered for the purpose of abatement under the Agreement for the Avoidance of Double Taxation. [643 D-F] (3) When statutory provisions are referred and cases are cited before the Court on a point involving double taxation, the distinction between
the two concepts of "avoidance of double· taxation" and the "relief against double taxation" evidenced by the two clauses of Section 49 A of the Indian Income Tax Act, and the difference in same degree from each other of these two concepts as embodied in the respective schemes must be borne in mind. One important feature distinguishing the two concepts lies in this, that in the case· of avoidance of double taxation the assessee does not have· to pay the tax first and then apply for relief in the form of refund, as he would be obliged to do under a provision for relief against double taxation. [644 C~E]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2097 of 1978, From the Judgment and Order dated 8-7-1971 of the Calcutta lligh Court in I.T.R. No. 35/67. S. C. Manchanda, S. P. Nayar and Miss A. Subhashini for the t\ppellant.
.; K. Sen, D. N. Gupta and T. A. Ramachandran for the Respon- den! The following Judgments were delivered : UNTWALIA, J. This is an appeal by certificate and in it is involved an important question of law as to the interpretation of Article IV of the "Agreement for Avoidance of Double Taxation in India . and Pakistan", hereinafter called the Agreement. The only case on the point decided by ally Court in India so far brought to our notice is !hoe decision of the Calcutta High Court, which is under apl'eal, re- ported in Commissioner of Income-Tax, West Bengal Ill v. Carew & Co. Ltd.(')
Carew & Company Ltd., the respondent in this appeal, was resi- C , dent in India ·having its Registered Office in Calcutta .. The concerned assessment year is 1956-57. The correspondmg previous year of the Company ended on June 30, 1955. During the relevant period the sources of income of the respondent company were from (a) business in India and interest earned in India o'n securities; (b) manufactur- ing business in Pakistan and ( c) agricultural properties in Pakistan. For the relevant year the assessee's Indian income as computed by the I'ncome-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 was computed at Rs. 3,26,368/-. In respect of the agri- cultural property, however, there was loss and it was determined at Rs. 3,20,839/c-. The Income-Tax Officer deducted by way of set-off the agricultural loss of Rs. 3,20,839/- against the profit of the manu- facturing 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 fignre 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. Initially, the assessee asked for abatement of tax on Rs. 5,529/- but subsequently by filing a revised retutn it claimed abatement 011 the entire profit from its 'manufacturing business in Pakistan i.e. Rs. 3,26,368/- claim- ing at the same time a set-off of the whole amount of Rs. 3,20,839/- from the total income determined in India. The Appellate Assistant Commissio~er affirmed the decision of the Income-Tax Officer, as in his opinioh, Article IV of the Agreement permitted relief only on the amount of net profit of Rs. 5,529/- from which, of course, the statu- tory deduction of Rs. 4,500/- had to be made. The assessee Com- pany, however, succeeded when it took the matter in second appeal to ff
the Appellate Tribunal. It was held by the Tribunal that the assessee was entitled to abatement of tax nnder the Agreement on the entire (1) 87 l T. R. 459. C.I.T. v. CAREW & co. (Untwalia, !.)
profit from manufacturing business earned in Pakistan during the rele- vant year. Since the agricultural income of the assessee in respect of its agricultural properties in Pakistan was to be treated as taxable in- come in India, the loss was allowable under the Indian I'ncome-tax Act, 1922, hereinafter called the Act.
The final conclusion drawn by the Tribunal was in these terms :- "Now, therefore, the position is that the assessce has : ( 1) income from business in Pakistan, which is taxed 100
per cent there; (2) loss in agriculture, which is not taxed there. Therefore, whereas relief has to be given on the taxed business incom~ in Pakista'n under the aforesaid Agreement for Avoidance of Double Taxation, no
question of relief arises on the loss in agricultural income. In this view of the matter, the rebate granted only ou the difference between the business profit and agricultural loss in Pakistan amounts to negation of the assessee's right to receive abatement of tax on income taxed in Pakistan.
In our opinion, therefore, income-tax relief has to be given on the Pakistan business income i'n accordance with the provisions of the aforesaid agreement without setting it off against the agricultural loss."
At the instance of the Commissioner, Income-tax, Bengal the Tribunal referred the following question of law to the High Court for its opinion. "Whether, on the facts and in the circumstances of the
case, the Tribunal was right in holding that relief should be given to the assessee on its Pakistan business income in accordance with the provisions of the Agreement for Avoid- ance of Double Taxatio'n between the Government of India
and Pakistan without setting off against it the loss in agricnl· tural operations in Pakistan ?" c In agreement with the .conclusions arrived at by the Appellate Tribu- nal the High Court answered the references in favour of the assessee. Hence this appeal by the department.
It could not be and was not disputed that while computing the total income of the assessee the income or the loss, as the case may be, from agricultural property in oa 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 (v) of Section 6 of the Act. So also the assessee's income from business in c [1980] 1 S.C.R, Pakistan had to be added to the figure of his profits and gains of busi- ness in India. The statutory deduction of Rs. 4,500 /- had to be gran- ted under the third proviso to section 4 ( l) of the Act.
The exclu- sion of agricultural income as mentioned in clause (viii) of sub-section (3) was to be ,granted nlny if it was an agricultural income as defined in section 2(1). Otherwise not.
The Calcutta High Court in the case of Kumar Jagdish Chandra Sinha v. Commissioner of Income-Tax, · West Bengal(') had rightly held that income from agricultural lands situated in Pakistan was not agricultural income within the meaning of Indian Income-Tax Act.
Income-tax was, therefore, chargeable on the said income. This view of the law is beyond any dispute or pale of attack. Similarly if there is a figure of loss from agricultural lands sitooted in Palcistan, it has got to be deducted while computing the total income of the resident assessee in India.
In the Act of 1922 were inserted sections 49A, 49B, 49C and 49D by the Indian Income-tax (Amendment) Act, 1939, Act 7 of 1939. Subsequently was inserted section 49AA which became section 49A with effect from the 1st April, 1953 by virtue of section 3 of the Finance Act, 1953. The marginal note of section 49A reads-"Agree- ment for granting relief in respect of double taxation or for avoidance thereof." It provides :-
"The Central Government may enter into an agreement- ( a) with the Government of any country outside India for the granting of relief in respect of income on which have been paid both income-tax (including super-tax)
under this Act and income-tax in that country, Dr (b) with the Government of any country outside India for the avoidance of double taxation of income, profits and gains under this Act and under the correspond-
ing law in force in that country; and may, by notification in the official' Gazette, make such provisions as may be necessary for implementing the agree- ment." The Agreement for Avoidance of Double Taxation in India and Paki- stan was entered into and was followed by notification No. 28 dated the 10th December, 1947 published in the official Gazettec In section 49D there were no sub-sections prior to the Amendment Act of 1953 but after its amendment new provisions were added and the said sec- tion thereafter ·consisted of four sub-sections. For the purposes of this (I) 28 I. T. R. 732.
C.I.T. v. CAREW & co. (Untwalia, /.) appeal I shall read only sub-section (3). It runs as follows :- "If any person who is resident in the taxable territories in any year proves that in respect of his income which accrues or arises to him during that year in Pakistan he has paid in that country, by deduction or otherwise, fax payable tc:i the Gov- ernment under any law for the time being in force in that
country relating to taxation of agricultural income, he shall be entitled to a deduction from the Indian income-tax payable by him- ('a) of the amount of the tax paid in Pakistan under any
law aforesaid on such income which is liable to tax under this Act also; or (b) of a sum calculated on that income at the Indian rate of tax; whichever is less." It should be noticed that if the assessee's agricultural income in Pakistan was chargeable to tax there, then relie.f in respect of such income could be granted to the assessee only in accordance with sub-section (3). Such a case would not be covered by any of the Articles of the Agreement. Since in the relevant year no amount of tax was charged or paid in Pakistan by the assessee, either because such income was not chargeable there or because the net figure was a figure of loss, in the matter of calculation of relief against Double Taxation sub-section (3) of section 49D was not attracted at all.
The loss had simply to be allowed in India while computing tbe assessee's toial income, be- cause, if there were any figure of profit from agricultural lands in Pakistan the same could have been added in the total income of the assessee.
Section 49D(l) is attracted for giving relief against double taxation only if the income derived by the assessee is from a foreign country with which there is no· reciprocal arrangement between that country and India for relief for avoidance of double taxation. In case of Pakistan there being a reciprocal agreement the relief has to be granted only under it.
Article IV of the Agreement provides : ···- "Each Dominion shall make assessment in the ordinary way under its own laws; and, where either Dominion under the operation of its laws charges any income from the sour- ces or categories of transactions specified in column 1 of the Schedule to this Agreement (hereinafter referred to as the c
.c t> .E ·F [1980] l S.C.R. Schedule) in excess of the amount calculated according to the percentage specified in column 2 and 3 thereof, that Dominion shall allow an abatement equal to the lower
amount of tax payable on such excess in their Dominion as provided for in Article VI." The method of calculation of the amonnt of abatement of the tax is indicated in the latter part of Article IV read with Article VI and the Schedule appended to the Agreement. There are four columns in the Schedule. The heading of column 1 is "Source of income or nature of transaction from which income is derived" and that of columns 2 and 3 "Percentage of income which each Dominion is entitled to charge under the Agreement." The fourth column is a "remarks" column only. The Scheme of the Agreement, it would be noticed, is quite different and distinct from what is provided for in sub-section (1) of Section 49D.
The interpretation of sub-section ( 1) came up for consideration· of this Court in K. V. Al. M. Ranw.nathan Chettiar v. Commissioner of Income-Tax, Madras('). In the majority opinion of the Court the view expressed at page 191 runs as follows:-
" …. what commends to us most is that once it is reco- gnised that the section we are interpreting does not make the basis of relief the tax paid on the income from the same head or source, as we have shown that the change in the langu-
age does not, then the relief to which an assessee would be entitled would be the amount of tax paid on the foreign income which by its inclusion in the total income once again bears tax under the Act.
The word "such" in the phrase "such doubly taxed income" has reference to the foreign in- come which is again being subjected to tax by ils inclusion in the computation of the income under the Act and not the
same income under an identical head of income under the Act. The income from each head under section 6 is not under the Act subjected to tax separately, unless the legislature has used words to indicate a comparison of simi- lar incomes but it is the total income which is computed and assessed as such, in respect of which tax relief is given for the inclusion of the foreign income on which tax had been
paid according to the law in force in that country. The scheme of the Act is that although income is classified under diffe- rent heads and the income under each head is separately
(1) 88 I. T. R. 169 (S.C.) •1 … r _, C.I.T. v. CAREW & co. (Untwalia, J.) computed in accordance with the provisions dealing with that particular head of income, the income which is the subject- matter of tax under the Act is one income which is the total income.
The income tax is only one tax levied on the aggre- gate of the income classified and chargeable under the diffe- rent heads; it is not a collection of distinct taxes levied sepa- rately on each head of income. In other words, assessment
to income-tax is one whole and not group of assessments for different heads or items of income." Learned counsel for the Revenue heavily relied upon his decision to assail the correctness of the High Court judgment under appeal. In
Ramanathan Chettiar's case (supra) the assessee, a resident in India, was doing money-lending business in Malaya·as well as in India. For the assessment year 1953-54 the assessee's income in Malaya was
Rs. 2,22,532/-, the assessee had incurred a business loss in India of Rs. 68,858/-. In India he hacl income from other sources to the extent of Rs. 39,142/-. The Income-Tax Officer added the income from other sources to the foreign income and, deducting from the total thus com- puted the loss in India of Rs. 68,858/-, he granted double taxation relief under section 49D of the Income-tax Act, 1922, on the balance of Rs. 1,92,816/-. The Commissioner in revision took the view that the entire business loss of Rs. 68,858/- was to be adjusted aga.inst the assessee's business income in Malaya which was to the tune of Rs. 2,22,532/- and only the balance of this being Rs.
1,53,674/- could be held to have suffered double taxati9n. High Court affirmed this view. This Court differed and held that the assessee was entitled to double toaxation relief in respect of the sum of Rs. 1,92,816/- as granted by the Income-Tax Officer. It is to be noticed that in section c
49D, as it stood prior to amendment in 1953, the expression used was "tbe same income" while after the amendment the wordings of sub- section (1) were "such doubly taxed income". And that made all the difference in the interpretation and the total income of the oassessee determined by computation in India was Rs. 1,92,816/- and the whole of it, although coming from different sources, was held to have been subjecterl to tax in Malaya irrespective of the fact that the income of the oassessee in that country was only from business .
In the judgment under appeal the High Court has said at page 467 :- "Thus, for purposes of abatement, income from each source or category of transactions specified in the Schedule has to be separately considered and doolt with .. If a particular item of income comes from a source or category which is not c
[1980] l S.C.R. specified in the Schedule it cannot be the .subject-matter of the Agre_ement and no abatement in respect thereof can be allowed. In our view, the agricultural income in Pakis1'an is one of such excepted sources or categories."
If there were no differences in the phraseology of Section 49D(l) of the Act and Article IV of the Agreement the view expressed by the High Court could have been successfully challenged.
But the view of the High Court on interpretation of Articles IV and VI of the Agreement is quite correct and I approve of the same. I have already said that the question of giving double taxation relief in case of agri- cultural income in Pakistan could only be dealt with under sub- section ( 3) of Section 49D of the Act and not under the Agreement. It is .significant to note that in Article IV the wordings are "where either Dominion 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".
(Emphasis supplied). It would be seen further that the various it'ems in the Schedule clearly indicate that if the sources cir categories of transactions l!fe to be clubbed together and not! treated separately then it will be difficult, almost impossible, to give effect to the Agreement with reference to the Schedule. To illU.Strate my view point I may take clause (g) of item 7 providing that in the case of Metal ores, minerals etc. extracted in one Dominion and sold in the other without any fnrther manufacturing process and ;without selling establishment or .a regular agency 75 per cent of the profits is to be charged by the Dominion in which minerals are ex- tracted and 25 % by the Dominion in which goods are sold. Although in the Dominion in which the goods are sold it would be the assessee's income from business, under the Agreement the profit chargeable to tax in a particular Dominion has to fit in by a separate calculation under item 7 (g).
On a careful consideration of the matter, I have come to the conclusion that the assessee was entitled to the relief against double taxation in accordance with the Agreement leaving out of considera- tion the figure of loss of Rs. 3,20,839/- incurred in its agricultural activities in Pakistan albeit the said loss had to be taken into account and adjusted against the assessee's profit in India. The appeal, there- fore, fails and is dismissed with costs.
PATHAK, J. I have had the benefit of perusing the Judgment pro- posed by my learned brother. I would like to say a few words on the question before us. •I "'I •I C.I.T. v. CAREW & CO. (Pathak, J.)
The question is whether for the purpose of abatement of tax under the Agreement for the Avoidance of Double Taxation between the Government of India and the Govermnent of Pakistan the respondent is entitled, in an assessment made in India under the Indian Income Tax Act, to set off the agricultural loss suffered by it in Pakistan against its business income earned in that country.
Towards the end of 1947, the Government of India entered into an Agreement for the Avoidance of Double Taxation with the Govern- ment of Pakistan. Article I of the Agreement explicitly declares that
the taxes which are the subject of the Agreement are "the taxes im- posed in the Dominions of India and Pakistan by the Indian Income Tax Act, 1922 (XI of 1922), the Excess Profits Tax Act, 1940 (XV of 1940) and the Business Profits Tax Act, 1947 (XXI of 1947) as adapted in their respective Dominions". The agreement relates to the taxes imposed by only those three statutes, operating according to
their respective adapted provisions in India and Pakistan separately. The tax imposed by any other enactment has not been included within the purview of the Agreement. Therefore, Article IV of the Agree-
ment, under which the respondent claims benefit, must be construed as relating to assessments made in the two countries under the Indian Income Tax Act, the Excess Profits Tax Act and the Business Profits Tax Act only. For the purpose of abatement under Article IV of the Agreemen~, the primary condition is that tax under those enactments should be leviable in both countries on income from the sources or categories or transactions specified in the Schedule to the Agreement. In the present case, which relates to 'ID assessment in India under the Indian Income Tax Act for the assessment year 1956-57, it is not dis- puted that in respect of that assessment year agricultural income aris- ing in Pakistan was not liable to tax in Pakistan under the Indian Income Tax Act as applied in that country. Consequently, any agri- cultural income arising or accruing in Pakistan cannot be considered for the purpose of abatement under the Agreement for the Avoidance of Double Taxation.
For a period of time, there was no provision of law which gave to an assessee, resident in India, relief against double taxation if he was assessed to tax in Pakistan on his agricultural income accruing or arising there.
In India that income would be liable to tax under the Indian Income Tax Act, which did not exempt, under s. 4(3)(viii) read with s. 2(1), agricultural income from land situated outside India. In Pakistan it would be liable to tax under a law other than the Indian Income Tax Act as applied there. The Agreement for the Avoidance of Double Taxation did not provide for such relief. It was apparently c
[1980] 1 S.C.R, for that reason that Parliament made provision in India by enacting s. 49D(3) in the Indian Income Tax Act for granting relief with effect from April 1, 1956 against double taxation in respect of agricultural income accruing or arising in Pakistan and taxed in that country. c
In my opinion, since agricultural income does not fall within the scope of the Agreement for the Avoidance of Double Taxation the loss suffered by the respondent in agricultural operations in Pakistan cannot be set off against the business income arising or accruing in that country for the purpose of determining the abatement due to the respondent under the aforesaid Agreement.
In the absence of such set off the respondent is entitled to a rebate in respect of the entire business i.ncome from Pakistan. Before parting with this case, it is appropriate to point out that a distinction exists between the avoidance of double taxation and relief against double taxation.
That distinctiou is evidenced by the two clauses of section 49A of the Indian Income Tax Act. One important \. >I. feature distinguishing the two concepts lies in this that in the case of avoidance of double taxation the assessee does not have to pay the tax first and then apply for relief in the form of refund, as he would be obliged to do under a provision for relief against double taxation. The respective schemes embodying the two concepts differ in some dei,>ree from each other, and that needs to be borne in mind when statutory provisions are referred to and cases are cited before the· court on a point im:olving double taxation.
The High Court is right in the view taken by it, and, in the result, the appeal must be dismissed with costs. S.R. A.ppeal dismissed. ' ..