PHILIPS ELECTRICAL COMPANY LTD. VS THE COMMISSIONER OF TAXES (SOUTH) ZONE, DHAKA, 1993 PTD-DHAKA-HIGH-COURT 1152 (1992)

(a) Income Tax Act (XI of 1922)---

----S.2(14AA)---Assessment on the income accruing during the previous year ending on 31-12-1970 to an assessee in Bangladesh even though the same income had already been assessed in Pakistan was not justified.

In the present case the assessee was a person and was a resident in the taxable territories for the previous year ending on 31-12-1970 as the control and management of the affairs of the assessee-company was situated wholly in Pakistan, which according to definition given in the Act was taxable territory as the previous year ended before March 26, 1971 on which date Bangladesh emerged as an independent State. Under section 4(1) of the Act the assessee was liable to be taxed for the income of the previous year which ended on 31-12-1970 as the total income of the assessee included all income, profit and gains from whatsoever source derived and the income accrued in Pakistan for the previous year was deemed to be income by fiction of law accrued in the taxable territory and was assessable for the assessment year 1971-72. Although the assessee-company was a resident in the taxable territory and income earned was subject to taxation as enjoined under section 4(1) of the Act, 1922 yet it was not correct that the DCT was justified in making the assessment on the income of the assessee of the previous year ending on 31-12-1970.

An income if taxed once 4t the hand of one person, the same income cannot be taxed again at the hand of .the said person. If that is done, it tantamount to double taxation which is not conceived in taxing statute. The assessee in the present case had already been taxed for the income of the previous year ending on 31st December, 1970 in Pakistan. Therefore where an income of an assessee had already been taxed, the same income again cannot be taxed in the taxable territory on the ground that the assessee is resident in the taxable territory namely Bangladesh.

Imperial Tobacco Company of India Ltd. v. CIT PLD 1958 SC 125; CIT v. Express Newspapers Ltd. 40 ITR 38 and RKB Motors and Timber (P) Ltd. v. CIT 1968 ITR 794 distinguished.

Inland Revenue v. Sanderson 8 TC 38 ref.

(b) Income-tax---

----Circular by C.B.R.---Absence of reference in the Circular about the authority on the strength of which the same was issued---Effect.

Conspicuous absence of reference in the circular about the authority on the strength of which the circular is issued leads one to hold that this circular could not be equated with statutory law as it was not made-by the Parliament or by a competent law-making authority.

CIT v. M/s. Pakistan Match Co. Ltd. (1978) 6 BTD 130 ref.

Rafiqul Huq with Muhammad Mustifa Adil for Applicant.

Muhammad Moksudur Rahman for Respondent.

JUDGMENT

A.M. MAHMUDUR RAHMAN, J.---This reference application under section 66(1) of the Income Tax Act, 1922 is at the instance of the Assessee-applicant. The applicant by this application refers the following questions for our answer:--

"(1)Whether in the facts and circumstances of the case the Tribunal was legally justified in holding that the DCT had jurisdiction to assess the applicant for the assessment year 1971-72?

(ii)Whether in the facts and circumstances of the case the Tribunal was legally justified in setting aside the order of annulment of the AJCT and maintaining the order of assessment passed by the DCT?"

2. The assessee was assessed to tax for the assessment year 1971-72 under section 23(4) of the Income Tax Act, 1922 although a nil return was filed on 23rd May, 1977 by Philips Bangladesh Limited: The assessee carried on business in manufacturing and sales of electric bulbs, radio sets and televisions for the previous year and earned income. The Deputy Commissioner of Taxes in absence of books of accounts estimated sales at Tk. 70,00,000.00. He also took GPO 20% on the estimated sales and determined GP at Tk. 14,00,000.00. After allowing expenses on estimate he computed the total income of the assessee at Rs. 9,33,334.00 and made assessment therein. The assessee took appeal before the Appellate Joint Commissioner of Taxes on the ground that during the previous year the assessee was a Pakistani Company with its registered Head Office in Pakistan and on emergence of Bangladesh on 26th March, 1971 the Deputy Commissioner of Taxes had no jurisdiction to assess the assessee for the income of the previous year ending on 31-12-1970. The Appellate Joint Commissioner of Taxes held that as Bangladesh was declared as an independent State on March 26, 1971 and section 1, the Income Tax Act, 1922, was made to apply on and from 26-3-1971 to the whole of Bangladesh the taxing authorities in Bangladesh had no lawful jurisdiction to tax the income, profit and gains of the previous year of the assessee which ended on 31-12-1970. He further observed that the total income of a person cannot be made to suffer tax twice for the same previous year. So holding, he annulled the order of the assessment. The Department took appeal before the faxes Appellate Tribunal, Additional Bench, Bangladesh, Dhaka.

3. Before the Tribunal the Department contended that the DCT had full jurisdiction to assess income of the previous year of the assessee in Bangladesh in view of the provisions of sections 3, 4, 4A(C) and 2(14AA) of the Income tax Act, 1922. The assessee, on the other hand, urged before the Tribunal that the Deputy Commissioner of Taxes had no jurisdiction to tax the assessee for the previous year ending on 31-12-1970 and cited the decisions in the cases of the Imperial Tobacco Company of India Ltd. v. CIT PLD 1958 SC 125, CIT v. Express Newspapers Ltd., 40 ITR 38 and RKB Motors and Timber (P) Ltd. v. CIT 1968 ITR 794. The Tribunal did not apply the principle laid down in those cases on the view that the facts of those cases are distinguishable from the facts of the present case. In view of the provisions of sections 10 (9) and 2(14AA) we agree with the view of the Tribunal that the assessee is a person and was a resident in the taxable territories for the previous year ending on 31-12-1970 as the control and management of the affairs of the assessee-company was situated wholly in Pakistan, which according to definition given it the Act is taxable territory as the previous year ended before March 26, 191 on which date Bangladesh emerged as an independent State. We also appeal with the view of the Tribunal that under section 4(1) of the Act the assessee is liable to be taxed for the income of the previous year which ended on 31-1;1970 as the total income of the assessee includes all income, profit and gains from whatsoever source derived and the income accrued in Pakistan for The previous year was deemed to be income by fiction of law accrued in the taxable territory and was assessable for the assessment year 1971-72. Although the assessee-company is a resident in the taxable territory and income earned is subject to taxation as enjoined under section 4(1) of the Act, 1922, yet we hold that the Tribunal is not correct in holding that the DCT was justified in making the assessment on the income of the assessee of the previous year ending on 31-12-1970 for the reasons to be recorded presently.

4. Mr. Rafiqul Huq, first submits that the assessment of the income for the previous year ending on 31-12-1970 was without jurisdiction as the same was made beyond territorial jurisdiction of the DCT. He secondly, submits that as the Tribunal found on facts the income assessed to tax had already suffered tax in Pakistan and was illegally assessed in Bangladesh. He cited the cases of Imperial Tobacco Co. of India Ltd. and Express Newspapers Ltd. We have gone through the decisions carefully. We find that the facts of those cases are distinguishable from the facts of the instant case and as such we are not willing to apply the principle laid down therein to the facts of the instant case and the principle laid down is not directly on the point before us also.

5. Now, let us examine whether the income in question, on the strength of section 2(14AA) of the Income Tax Act, 1922 can again be assessed where the same income had already been taxed at the hand of the assessee in Pakistan as found by the Tribunal. We do not find any reason to hold so. Rewlatt, J. in case of Inland Revenue v. Sanderson, 8 TC 38 observed that an income if taxed once at the hand of one person, the same income cannot be taxed again at the hand of the said person. If that is done, it tantamount to double taxation which is not conceived in taxing statute. The assessee in the present case had already been taxed for the income of the previous year ending on 31st December, 1970 in Pakistan. Therefore we are of the opinion that where an income of an assessee had already been taxed, the same income again cannot be taxed in the taxable territory on the ground that the assessee is resident in the taxable territory meaning, here, Bangladesh.

6. Mr. Moksudur Rahman appearing for the Revenue very, strenuously urged, placing reliance on the Circular No. IIT(75)(C) No. 2(3).19/IT, dated Dhaka the 23rd January, 1975, that the DCT had authority to tax the assessee for the income in question. The Circular runs as follows:

"Circular No. IIT of 1975

Subject: Assessment proceedings in respect of Banks Insurance Companies and other business house having head offices in Pakistan---Assessment year 1971-72.

Instruction regarding.

Reference is invited to NBR's Circular No. 5 IT of 1973 issued under its C No.2 (3)-19-IT/72/7150, dated 6-12-1973 on the above subject.

The issue of finalisation of assessment proceedings for the assessment year 1971-72 in respect of Banks, Insurance Companies and other business houses whose head offices were located in Pakistan has been examined by the Board and it has been decided that assessment for this year should be completed forthwith. The demand so created should be entered into the Demand and Collection Register, i.e. Register IV, with a qualifying remark, i.e. "P" for Pakistan. It has further been decided that the collection for the demand so created may be kept in abeyance for one year from the date of creation of such demand, if the assessee so request.

(2)This cancels Board's instructions contained in Circular No. 5 IT of 1973, dated 6-12-1973.".

7. From perusal of the Circular we do not find any reference to any law on the strength of which it was made. Conspicuous absence of reference m the circular about the authority on the strength of which the circular is issued leads us to hold that this circular cannot be equated with statutory law as it was not made by the Parliament or by a competent law-making authority and in the light of the observation made in the case of CIT v. M/s. Pakistan Match Co. Ltd. (1978) 6 BTD 130 we hold that circular is no substitute for legislation by which tax can be levied. From the circular we also do not find that it authorises assessment on the income accruing during the previous year ending on 31-12-1970 to an assessee in Bangladesh even though the same income had already suffered tax in Pakistan. As we hold that the same income cannot be taxed twice contrary to the principle of Taxation, we are not inclined to consider the arguments on tax on the successor. Moreover, the question of succession does not attract the present case as the tax has not been assessed on the Philips Bangladesh Limited, a company incorporated in Bangladesh on July 1, 1973, rather it has been taxed on the assessee M/s. Philips Electric Co. Ltd. Accordingly, we answer the questions referred to us in the negative and against the Revenue.

Parties are to bear their respective costs althrough.

M.B.A./2380/TOrder accordingly.