Advance tax credit under section 18A requires assessment credit and refund if excess, despite foreign appropriation.

Advance tax paid pursuant to the statutory advance-payment mechanism must be credited in the regular assessment under the statutory provision treating such sums as tax paid for the relevant year; where credited payments exceed tax found due the statutory scheme permits a refund. A foreign authority's subsequent appropriation of the amount does not extinguish the statutory right to credit or the entitlement to refund under the domestic provision. The Tribunal's direction for refund out of the advance tax paid is therefore legally supported by the statutory text and precedent.

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Issues: (i) Whether an assessee is entitled to adjustment of advance tax paid under section 18A in Lahore against a demand raised by Indian income-tax authorities for the same assessment year 1947-48; (ii) Whether the Tribunal's order directing refund to the assessee out of the advance tax paid in Lahore is legal and valid.

Issue (i): Whether an assessee is entitled to adjustment of advance tax paid under section 18A in Lahore against a demand raised by Indian income-tax authorities for the assessment year 1947-48.

Analysis: At the time of payment the Indian Income-tax Act applied to Lahore and the payment was made pursuant to section 18A. Sub-section (11) of section 18A provides that sums (other than penalty or interest) paid under that section shall be treated as payment of tax for the previous year corresponding to the next financial year and credit shall be given in the regular assessment. The Pakistan authorities' subsequent adjustment or appropriation of the amount under their proceedings does not constitute a proceeding under the Indian Income-tax Act and does not affect the statutory right to credit under section 18A(11). The Tribunal's conclusion followed the plain language of section 18A(11) and is supported by precedent relied upon by the Tribunal.

Conclusion: The assessee is entitled to adjustment of the advance tax paid under section 18A in Lahore against the demand raised by the Indian income-tax authorities for assessment year 1947-48.

Issue (ii): Whether the Tribunal's order directing refund to the assessee out of the advance tax paid in Lahore is legal and valid.

Analysis: Given that credit must be given under section 18A(11) and the advance tax paid exceeded the tax found due on regular assessment, the statutory scheme requires allowance of credit and, where excess payment exists, a refund. The fact that the amount may have been appropriated under foreign proceedings does not negate the entitlement to refund under the Indian statutory provision.

Conclusion: The Tribunal's order directing a refund to the assessee out of the advance tax paid in Lahore is legal and valid.

Final Conclusion: Section 18A(11) of the Income-tax Act requires that advance tax payments made pursuant to that section be credited in the regular assessment and, where such payments exceed the tax found due, a refund is permissible; accordingly the assessee's claim succeeds and the Tribunal's refund direction is upheld.

Ratio Decidendi: Section 18A(11) of the Income-tax Act, 1922, treats sums paid under section 18A as payments of tax for the relevant assessment and mandates credit in the regular assessment, entitling the assessee to refund where such payments exceed the tax due.

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