Double tax relief under India-Ceylon treaty is limited to the lower foreign tax on the same income.

Under the India-Ceylon double taxation agreement, each country may assess the same income under its own domestic law, and the Schedule operates only to compute relief. The abatement mechanism is confined to the lower tax attributable to the common income in the other country; it does not exclude the foreign income from Indian assessment or allow credit for the full Indian tax on that income. The text and scheme of Article III therefore support only limited relief by reference to the lower foreign tax payable on the same income.

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Issues: Whether, under article III of the Agreement for Avoidance of Double Taxation between India and Ceylon, the assessee was entitled to exclude the Ceylon income altogether from the Indian assessment or to claim abatement of the full Indian tax attributable to that income, rather than abatement limited to the lower tax payable in Ceylon.

Analysis: Article III permits each country to make assessment in the ordinary way under its own laws. The Schedule does not restrict the power to assess the income in either country; it operates only for determining the amount of abatement. The relevant inquiry is the tax attributable to the common income in each country, and the relief is confined to the lower of the two tax amounts. The assessee's reliance on the agreement as excluding the Ceylon income from Indian assessment was therefore inconsistent with the text and scheme of the agreement.

Conclusion: The assessee was not entitled to exclude the Ceylon income from the Indian assessment or to claim abatement of the full Indian tax on that income; abatement was limited to the lower tax payable in Ceylon, and the answer to the reference was in the affirmative against the assessee.

Ratio Decidendi: Under the India-Ceylon double taxation agreement, each country may assess income under its own law, and the Schedule serves only to compute relief by allowing abatement limited to the lower tax attributable to the same income in the other country.

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