Foreign tax deducted abroad and livestock depreciation under income-tax law: retained precedent excludes deducted tax, while mares are not plant.

Foreign tax deducted at source on dividend and interest income received from the United Kingdom was not includible in total income where the governing precedent treated the deducted amount as of assessment. The retrospective amendment to section 43(3), excluding livestock from the definition of "plant", also meant stallions and mares could not be treated as plant for depreciation purposes under section 32. The article therefore notes two rules: foreign tax deducted abroad does not form part of taxable total income on the stated footing, and livestock is excluded from plant after the statutory amendment.

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Issues: (i) Whether tax deducted at source outside India from foreign dividend and interest income was includible in the assessees' total income under the Income-tax Act, 1961. (ii) Whether stallions and mares constituted "plant" within the meaning of section 43(3) of the Income-tax Act, 1961 for the purpose of depreciation under section 32.

Issue (i): Whether tax deducted at source outside India from foreign dividend and interest income was includible in the assessees' total income under the Income-tax Act, 1961.

Analysis: The assessees' foreign income consisted of dividend and interest received from the United Kingdom, where tax had already been deducted at source. The question was whether the gross amount or only the net amount was to be brought to tax in India. The issue stood covered by the earlier decision relied upon by the Court, under which the foreign tax deducted amount was not part of the assessees' total income for assessment.

Conclusion: The issue was answered against the Revenue and in favour of the assessees.

Issue (ii): Whether stallions and mares constituted "plant" within the meaning of section 43(3) of the Income-tax Act, 1961 for the purpose of depreciation under section 32.

Analysis: The Court noted the amendment to section 43(3) of the Income-tax Act, 1961 by which tea bushes and livestock were excluded from the definition of "plant" with retrospective effect from 1 April 1962. In view of that amendment, the question whether mares could be treated as plant did not survive for adjudication on the earlier footing.

Conclusion: The issue was answered in favour of the Revenue and against the assessees.

Final Conclusion: The reference was disposed of by rejecting the assessees' claim on the depreciation issue while affirming that foreign tax deducted at source outside India was not includible in the assessees' total income.

Ratio Decidendi: Foreign tax deducted at source outside India on dividend and interest income is not includible in total income where the governing precedent so holds, and livestock is excluded from the statutory definition of "plant" after the retrospective amendment to section 43(3).

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