Treaty-based double taxation abatement is not statutory relief under the Income-tax Act for Indian rate computation.

Section 49A, as amended, distinguishes statutory relief for double taxation from treaty-based avoidance of double taxation. Abatement under an agreement for avoidance of double taxation with Pakistan was treated as a separate mechanism, not a relief due under the other provisions of the Indian Income-tax Act, 1922 for purposes of Explanation (ii) to section 49D(3). The Indian rate of tax therefore had to be computed without deducting that abatement, and the construction of the charging and relief provisions was applied strictly in favour of the taxpayer.

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Issues: Whether, for determining the Indian rate of tax under Explanation (ii) to section 49D(3), the abatement allowable under the Agreement for Avoidance of Double Taxation with Pakistan had to be deducted from Indian income-tax as a relief due under the other provisions of the Act.

Analysis: Section 49A, as amended, treated relief in respect of double taxation and avoidance of double taxation as distinct statutory concepts. Relief contemplated by clause (a) concerned cases where tax had already been paid in both countries, whereas clause (b) dealt with avoidance of double taxation through an agreement mechanism before duplication of tax occurred. The Court held that the Act itself did not provide a relief of the kind represented by the abatement under the avoidance agreement, and such abatement was not a relief due under the other provisions of the Act within Explanation (ii) to section 49D(3). The distinction between relief and avoidance was material, and any ambiguity in the charging and relief provision had to be construed strictly in favour of the taxpayer.

Conclusion: The abatement under the agreement with Pakistan was not deductible while computing the Indian rate of tax under Explanation (ii) to section 49D(3), and the answer to the referred question was in the affirmative in favour of the assessee.

Ratio Decidendi: An abatement granted under an agreement for avoidance of double taxation is not a statutory relief due under the other provisions of the Indian Income-tax Act, 1922 for the purpose of computing the Indian rate of tax under section 49D(3).

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