Double taxation relief requires a consistent income base and full foreign income comparison before abatement is calculated.

Under the double taxation agreement, abatement under article IV had to be computed on the Pakistan income as assessed in India, because the same income figure must be used consistently for the domestic assessment, the excess calculation, and the tax comparison; the lower Pakistan assessment could not replace it. For article V, the full foreign income had to be taken into account for comparison in each Dominion, and only then could one-half of the lower tax be allowed as relief; using only half the Pakistan figure was inconsistent with the agreement. The recalculation was required on these principles, and the assessee succeeded while the Revenue failed.

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Issues: (i) Whether, for abatement under article IV of the double taxation agreement, the Pakistan income had to be taken at the figure assessed in India or at the lower figure assessed in Pakistan; (ii) whether, for abatement under article V, the foreign income had to be taken in full or only to the extent of half the amount assessed in Pakistan.

Issue (i): Whether, for abatement under article IV of the double taxation agreement, the Pakistan income had to be taken at the figure assessed in India or at the lower figure assessed in Pakistan.

Analysis: Article IV requires assessment in the ordinary course under domestic law and then grants abatement on the excess over the Schedule allocation. For the purpose of working out the abatement, a single figure of the relevant income must be adopted consistently for the excess, the total income, and the comparison with the other Dominion's tax. The lower figure assessed in Pakistan could not be substituted where the Indian assessment had already proceeded on the higher Pakistan-income figure.

Conclusion: The abatement had to be computed on the Pakistan income as assessed in India, not on the lower figure assessed in Pakistan, and the point was decided against the Revenue.

Issue (ii): Whether, for abatement under article V, the foreign income had to be taken in full or only to the extent of half the amount assessed in Pakistan.

Analysis: Article V deals with income arising outside the territories of the two Dominions and taxable in both. The comparison under article VI must be made on the basis of the whole doubly taxed income in each Dominion, and only thereafter is one-half of the lower tax payable allowed as abatement. Taking only half the foreign income from the Pakistan assessment was inconsistent with the text of the agreement.

Conclusion: The whole foreign income, and not half of the Pakistan figure, had to be considered for the comparison, and this point was decided against the Revenue.

Final Conclusion: The assessment was rightly quashed and the matter required recalculation of abatement on the correct principles, leaving the assessee substantially successful and the Revenue's appeal unsuccessful.

Ratio Decidendi: Under the double taxation agreement, abatement must be computed on a consistent income base already adopted for the domestic assessment, and for doubly taxed foreign income the full amount must be compared in each Dominion before allowing one-half of the lower tax as relief.

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