The method of computation of super-tax under Section 17(3) and (4)(a) of the Indian Income-tax Act, 1922 is that the calculation is to be made first under Sub-section (4)(a) and then under Sub-section (3).

1. The short question that requires determination in this reference under Section 66(2) of the Indian Income-tax Act is whether the method of computation adopted by the Tribunal is correct or the one adopted by the assessee is correct. The method adopted by the Tribunal is as follows : "According to Section 17(4), Clause (a), the super-tax payable by the assessee would be the super-tax which would have been payable on his total income, viz., Rs. 77,295 as reduced by the amount of income brought into British India out of the past State profits, viz., Rs. 27,229 (CC), i.e., the super-tax on Rs. 50,066 (AA + BB) which amounts to Rs. 3,762-6-0 multiplied by the fraction 77295/50066. The super-tax payable by the,assessee, applying the provisions of Section 17(4) alone would, therefore, be Rs. 5,859. But the total income of the assessee in this case also included Rs. 27,436 (BB), income which accrued to the assessee in Indian States during the relevant assessment year and exempt from income-tax or super-tax according to Section 14(2)(c). Therefore, applying the provisions of Section 17(3), the super-tax payable by the assessee would be further reduced as follows:

Rs. 5,859 (being the figure arrived at under section 17(4) multiplied by the fraction 77,29527,436=49,859 77,29577,295

2. The method which the assessee insists should be followed is stated below: (a) Super-tax on reduced income is calculated as under:

British India income

--------------------------

Super-tax on 50,066. X British India + India State

income income

= 3762 X 22630

----- = 1700

50066

(b) Super-tax on total income is calculated as under :

Tax on reduced income X Reduced income + Remittance income

----------------------------------

Reduced income

= 700 x 77295

----- = 2625

50056

3 When the matter came up before this court at an earlier stage, my Lord, the Chief Justice and Mr. Justice Khanna passed the following order:

"We have heard Mr. Aggarwal on behalf of the assessee and Mr. Awasthy on behalf of the department, and find that though the order of reference as well as the order of the Tribunal give arithmetical tables of calculation, it is not clear from these orders as to how precisely the different legal provisions have been applied in adopting the method of calculation. Both the counsel are agreed that some assumptions have been made in the two orders but there is a difference between them with regard tptthe actual assumption. In the circumstances we agree with Mr. Awasthy that the reference may be sent back to the Tribunal with the direction that the point of controversy may be made more clear in terms of the different provisions of law having bearing on the subject. We order accordingly."

4. Thereafter, the supplementary statement of the case was submitted by the Tribunal and that is how the matter has been placed before us.

5. On the main facts there is no dispute. The assessee is a Hindu undivided family carrying on. timber business. It does work in the name and style of M/s. Baishno Das Kishori Lal Bhalla at Beas, Phillaur and Abdullapur. Formerly these places were in British India. They also carry on their business at Dhilwan and Doraha. Both these places were situate in the different Indian States. Their head office was at Phillaur in British India. The total income of the assessee during the relevant previous year for the assesssment year 1948-49 was Rs. 77,295. The break up of this figure is as follows :

(i) British Indian income Rs.22,630

(ii) Income accruing in Indian States during the relevant previous year Rs.27.436

(iii) Income which had accrued in the Indian States be