Judgment

HIDAYATULLAH J.: Messrs. McGregor and Balfour, Ltd., Calcutta (hereinafter called the Company) is a Company incorporated in the United Kingdom. Its head office is also there. It, however, does business in India also. In some of the previous years, the Company was required to pay excess profits tax both in England and in India. When it did so, it obtained deduction of the amounts from its profits and gains for purposes of the Indian Income-tax Act, under S. 12(2) of the Indian Excess Profits Tax Act.

2. In the assessment year 1947-1948 which corresponded to the accounting year of the Company ending on October 31, 1946, it obtained a repayment of Rs. 2,31,009 out of the excess profits tax paid in England. This was under S. 28(1) of 4 & 5, Geo. VI, Ch. 30. For purposes of the levy of the Indian income-tax, this sum was included in the taxable profits of the Company by the Income-tax Officer. He purported to act under S. 11(14) of the Indian Finance Act, 1946 (hereinafter called the Act). The income of the Company in India was held to be Rs. 6,34,937 including the sum of Rs. 2,31,009) while the income outside the taxable territory was held to be Rs. 4,29,620. Applying S. 4A (c)