Circular No. 25-Income Tax dated 25-7-1969

Circular dated 25-7-1969 granting stay of recovery of tax under sub-section (7) to assessees having income in Pakistan which cannot be brought into India stands withdrawn

CIRCULAR NO. 25, DATED 25-7-1969 REFERRED TO  IN CLARIFICATION

1. Instances have come to the notice of the Board where Indian nationals, having income in Pakistan were put to considerable hardship in their assessment proceedings in India. After the 1965 hostilities between India and Pakistan, the assessees having income in Pakistan, are finding it almost impossible to repatri­ate their Pakistan income to India.

2. The hardships faced by such assessees are generally of the following types :

1. The Income-tax Officers ask the assessees to pay tax on their Indian income at the rate applicable to the total income which includes income arising in Pakistan. Thus, if the Indian income is Rs. 10,000 and the Pakistan income is Rs.1 lakh, the assessee is required to pay several times more tax than what he would have been  required to pay had there been no income at all in Paki­stan. The tax demanded by the Income-tax Officer is, thus, disproportionate to the assessee’s ability to pay having regard to his income in India.

Under the circumstances, the Board have decided that assessees having income in Pakistan which cannot be brought into India, should be asked to pay tax only on the Indian income by treating it as the total income for the purposes of the Income-tax Act.The balance of the tax should be stayed by the Income-tax Officer under section 220(7).

2. In some cases, it has been found that the tax on the Pakistan income was kept in abeyance for a period of only one year and thereaf­ter the recovery  proceedings were started even though the Paki­stan income had not yet been brought into India. Thus, the provi­sions of section 220(7) were not applied properly.

3. It has also been seen in some cases that when the assessees  having income in Pakistan expressed their inability to produce the assessment orders passed in their cases by the Pakistan income-tax authorities, the Income-tax Officers made assessments which prima facie appears to be rather harsh and unrealistic. The Board disapprove of the tendency to pitch up the assessments in such cases.

It is, therefore, desired that the assessment of the Pakistan income should be made on the basis of the  audited profit and loss account and balance sheets duly certified by the chartered accountants but even when these statements are not available, the estimates should be fair and reasonable.