Judgment

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 in the petitioners invoked the extra-ordinary 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 that the appellant is not entitled to any more abatement than that was given by the authorities under the Assessment (Agreement?) for Relief or for Avoidance of Double Taxation in India and Ceylon which will be hereinafter referred to as the "agreement". It accordingly dismissed the Writ Petitions but gave a certificate under Art. 133 (1) (c) of the Constitution of India certifying that this is a fit case for appeal to this Court.

2. The appellant is a resident in this country. But he is carrying on business in Ceylon. During the assessment year 1959-60 he earned a gross income of Rs. 39,473/- and in the assessment year 1960-61 he earned a gross income of Rs. 39,067/-. He had only a house in India whose annual rental value was Rs. 38/-. The entire assessable income of his was that what he earned in Ceylon. On his income in Ceylon, he was taxed in a sum of Rs. 5,919/- for the assessment year 1959-60 and in a sum of Rs. 6,036/- for the assessment year 1960-61. For the same income in India under the Indian Law his tax was computed for the assessment year 1959-60 at Rupees 10,282.62 P and for the assessment year 1960-61 at Rs. 9,521.35 P. 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. 9,889/- in the assessment year 1959-60 and Rs. 9,983/- in the assessment year 1960-61. But in view of section 45(2) 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.

3. Two questions arising for decisions 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.

4. Mr. Ramachandran appearing for the assessee contended firstly that in view of the Agreement entered into between India and Ceyon as provided in Section 49A 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 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. 10,282,62 p. in the assessment year 1959-60 and Rs. 9,521.35 p. in the assessment year 1960-61.

5. In order to consider the correctness of the contentions advanced by Mr. Ramachandran, we will now turn to the relevant provisions of the Agreement . That Agreement was notified in Notification 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 excess of the amount calculated according to the percentages specified in columns 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 n