Double taxation relief fails where foreign-taxed income does not satisfy the statutory test of income arising outside taxable territories.

Relief from double taxation under the Indian Income-tax Act, 1922 depended on the amount falling within the statutory category of income arising without the taxable territories. The Calcutta HC held that Burma trading results from goods manufactured in India and sold in Burma could not, on the facts, be treated as such income merely because they were also taxed in Burma. Applying the principle that manufacturing profits accrue at the place of manufacture and sale profits at the place of sale, the Court found the amount did not satisfy section 49D and the Indian assessment had treated the Burma result as a loss. Relief was therefore denied and the reference was answered against the assessee.

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Issues: Whether the assessee was entitled to relief from double taxation under section 49D of the Indian Income-tax Act, 1922 on the footing that the amount assessed in Burma represented income arising without the taxable territories and was also taxed in India.

Analysis: The assessee's Burma operations related to goods manufactured in India and sold in Burma. The governing principle drawn from the Supreme Court authorities was that manufacturing profits accrue or arise at the place of manufacture, while sale profits arise at the place of sale, and that income may have to be apportioned according to the business operations from which it springs. On the facts found, the sum assessed in Burma could not be treated as income arising without the taxable territories within the meaning of section 49D merely because it was also brought to tax in Burma. The Indian assessment had treated the Burma trading result as a loss, and the amount in question did not answer the statutory description required for relief.

Conclusion: The assessee was not entitled to relief under section 49D. The question referred was answered in the affirmative and against the assessee.

Final Conclusion: The reference was disposed of by holding that the claimed double-taxation relief failed because the relevant amount was not income arising without the taxable territories under the Act.

Ratio Decidendi: For relief under section 49D of the Indian Income-tax Act, 1922, the income must fall within the statutory description of income arising without the taxable territories, and manufacturing profits are attributable to the place of manufacture rather than the place of sale.

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