Double tax relief under the India-Ceylon agreement is computed by comparing actual tax amounts, not tax rates.

Article III of the India-Ceylon double taxation agreement was construed to require relief by reference to the actual tax amounts attributable to the excess income in each country, not by comparing the respective tax rates. On that interpretation, abatement is determined by the lower of the two tax amounts, and the relief is granted only to that extent. The Madras High Court followed the earlier view that the agreement focuses on tax attributable to the excess income rather than prevailing rate levels, and upheld the Tribunal's computation of double tax relief for the assessee.

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Issues: Whether, for the assessment year 1955-56, the assessee was entitled to double tax relief by reference to the lower of the amounts of tax attributable to the excess in either country under the Agreement for Relief from or Avoidance of Double Taxation between India and Ceylon.

Analysis: The question turned on the proper construction of article III of the Agreement. The Court followed the earlier view that the expression used in the Agreement refers to the amounts of tax attributable to the excess income and not to the rates of tax prevailing in the respective countries. On that reading, the relief had to be worked out by comparing the actual tax amounts and allowing abatement to the extent of the lower amount.

Conclusion: The answer was in favour of the assessee and against the Revenue; the assessee was entitled to the relief as determined by the Tribunal.

Ratio Decidendi: Under article III of the India-Ceylon double taxation agreement, abatement is to be determined by the lower of the tax amounts attributable to the excess income in the two countries, and not by comparing the tax rates.

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