Foreign tax relief and salary standard deduction are limited by taxable income attribution and aggregate salary computation.

Foreign tax relief under section 91(1) is confined to the tax attributable to the income assessable in India and does not extend to the entire tax deducted abroad on gross foreign salary. Standard deduction under section 16(1) is computed on the aggregate salary received from all employers, because the retrospective Explanation 1 bars separate deductions from each employer and caps the allowance at the prescribed limit.

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Issues: (i) Whether the assessee was entitled to relief under section 91(1) of the Income-tax Act, 1961 for the full amount of tax deducted in the foreign country on foreign salary earned abroad; (ii) Whether, under section 16(1) of the Income-tax Act, 1961, standard deduction was separately admissible in respect of salary received from each employer.

Issue (i): Whether the assessee was entitled to relief under section 91(1) of the Income-tax Act, 1961 for the full amount of tax deducted in the foreign country on foreign salary earned abroad.

Analysis: The question was answered on the same footing as the connected reference decided on identical facts. The relief under section 91(1) was confined to the tax attributable to the foreign income assessable in India, and not to the entire tax deducted abroad on the gross foreign salary.

Conclusion: The issue was decided against the assessee and in favour of the Revenue.

Issue (ii): Whether, under section 16(1) of the Income-tax Act, 1961, standard deduction was separately admissible in respect of salary received from each employer.

Analysis: Explanation 1 inserted retrospectively by the Taxation Laws (Amendment) Act, 1984 declared that where salary is due from or paid by more than one employer, the deduction is to be computed with reference to the aggregate salary and cannot exceed the prescribed limit. The statutory amendment removed any basis for claiming separate standard deduction from each employer.

Conclusion: The issue was decided against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered wholly in favour of the Revenue, and both questions were answered against the assessee on the basis that foreign tax relief is limited to the permissible attributable amount and standard deduction is computable only on aggregate salary from all employers.

Ratio Decidendi: Where a retrospective statutory explanation declares that salary from multiple employers must be aggregated for standard deduction, the deduction is limited to the aggregate salary and cannot be claimed separately from each employer; similarly, foreign tax relief is restricted to the amount legally attributable to the income assessable in India.

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