Rajagopalan, J.- In the course of the assessment proceedings for the assessment year 1949-50 the amount of refund of income-tax to which the assessee was entitled was ascertained as Rs. 27,892-11-0. About a month later, on 23rd July, 1953, the assessee applied to the Income-tax Officer for the issue of a refund order. On 12th August, 1953, the Income-tax Officer informed the assessee that the refundable amount of Rs. 27,892-11-0 had been adjusted towards three items of arrears of income-tax; (1) Rs. 12,835-15-0, arrears due for 1940-41; (2) Rs. 7,800, arrears due for 1941-42; and (3) Rs. 7,256-12-0, part of the arrears due for 1947-48. The assessee pointed out that the first two items represented the proportionate tax on foreign income, the income from Kanthoe, for the relevant account periods corresponding to the assessment years 1940-41 and 1941-42, and that as the currency restrictions on remittances from Kanthoe continued, he was entitled to the relief under the Proviso to section 45 of the Act. On 12th November, 1953, the Income-tax Officer finally informed the assessee that the refundable amount would be adjusted towards the arrears of tax. The Inspecting Assistant Commissioner, in effect, confirmed that order on 7th December, 1953.

The assessee applied under Article 226 of the Constitution for the issue of a writ of mandamus or any other appropriate writ to direct the Income-tax officer to refund Rs. 20635-15-0. That sum represented the total of items 1 and 2 mentioned above, the arrears of tax due on the foreign income from Kanthoe, for which the petitioner had been assessed in 1940-41 and 1941-42.

It was on section 49-E of the Act that the respondent relied to justify the adjustment effected by the Income-tax Officer and confirmed by the Inspecting Assistant Commissioner.

Section 49-E runs:

“Where under any of the provisions of this Act, a refund is found to be due to any person, the Income-tax Officer......may in lieu of payment of the refund, set-off the amount to be refunded or any part of that amount against the tax, if any, remaining payable by the person to whom the refund is due.”

The petitioner all along admitted that Rs. 12,835-15-0 and Rs. 7,800 were due from him out of the tax to which he had been assessed in 1940-41 and 1941-42 respectively. It was common ground that this represented the tax on the foreign income from Kanthoe, and that the requirements of the proviso to section 45 having been satisfied, the petitioner could not be treated as an assessee in default in respect of these two sums.

The learned counsel for the respondent contended that, though the petitioner could not be treated as an assessee in default, the arrears of tax remained “payable” by the assessee within the meaning of section 49-E of the Act. Section 45 of the Act specifies the day before which any amount payable under a notice of demand issued under section 29 of the Act should be paid. It further directs that any assessee failing so to pay shall be deemed to be in default. We are not now concerned with the first proviso to the section, which provides for the period during which an appeal preferred against the order of assessment is pending. The second proviso runs:

“Provided further that where an assessee has been assessed in respect of income arising outside the taxable territories in a country the laws of which prohibit or restrict the remittance of money to the taxable territories, the Income-tax Officer shall not treat the assessee as in default in respect of that part of the tax which is due in respect of that amount of his income which by reason of such prohibition or restriction cannot be brought into the taxable territories and shall continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed”.

The learned counsel for the petitioner assessee urged that, if the petitioner could not be deemed to be an assessee in default in respect of the arrears due for the ass

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