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of <h1>High Court ruling emphasizes compliance with tax treaty for maintaining relief on foreign income</h1> <h3>Purshotamdas Thakurdas Versus Commissioner of Income-tax</h3> Purshotamdas Thakurdas Versus Commissioner of Income-tax - [1960] 39 ITR 700 (BOM.) Issues:1. Interpretation of tax relief on dividend income from a company operating in multiple jurisdictions.2. Validity of reassessment under section 34(1)(b) regarding the withdrawal of relief on dividend income attributable to a specific jurisdiction.3. Application of the Agreement for Avoidance of Double Taxation between India and Pakistan in the assessment process.Analysis:The judgment by the High Court of Bombay dealt with the interpretation of tax relief on dividend income from a company operating in multiple jurisdictions. The case involved a shareholder of a company with profits in both India and Pakistan. The original assessment included the Pakistan portion of the dividend income in the total income but allowed an abatement for tax paid in Pakistan. The reassessment under section 34(1)(b) questioned the withdrawal of this relief. The court analyzed the relevant provisions of the Double Taxation Avoidance Agreement between India and Pakistan, emphasizing the requirement of producing a certificate of assessment from Pakistan authorities within a specified period to maintain the abatement on Pakistan income.The court considered the argument that the tax amount should have been kept in abeyance until the certificate of assessment was produced, rather than assessing and demanding immediate payment. The court highlighted the specific provisions of the Agreement that necessitated taxing the Pakistan portion of income but allowing an abatement subject to producing the required certificate within the specified period. The court noted the importance of demanding the tax amount without allowing the abatement and holding it in abeyance until the certificate was provided.Regarding the assessment form and notice of demand, the court examined the details of the income, tax, and super-tax mentioned, emphasizing the need to distinguish between total income calculation and actual tax liability. The court rejected the argument that including the Pakistan portion in the total income automatically implied immediate tax liability, stressing the importance of following the Agreement's provisions for maintaining the abatement until the certificate of assessment was produced.Ultimately, the court ruled against the withdrawal of the relief on the Pakistan portion of the dividend income, emphasizing the necessity of complying with the Agreement's requirements for maintaining the abatement. The judgment clarified the distinction between total income calculation and actual tax liability, highlighting the significance of producing the certificate of assessment within the specified period to uphold the relief allowed under the Agreement.
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