G.C. Bharuka, J.
1. The assessee is an Indian company registered under the Companies Act, 1956. During the asst. yr. 1982-83, it had derived income from the business carried on both in India as well as outside India, including Malaysia. It was subjected to assessment under s. 143(3) of the IT Act, 1961 (in short 'the Act'), whereunder its claim for deduction on account of dividend paid on preference shares and the tax payable in Malaysia were disallowed. The disallowance was confirmed by the CIT(A) as well as the Tribunal. Under such circumstances, at the instance of the company, the Tribunal has referred the following two questions of law for our opinion under s. 256(1) of the Act :
'(i) Whether, on the facts, the Tribunal was justified in holding that the assessee was not entitled to the deduction of the liability on account of dividend on preference shares
(ii) Whether, on the facts, the Tribunal was right in holding that the assessee was not entitled to the deduction of tax payable in Malaysia, and the provisions of s. 40(a)(ii) of the IT Act, 1961, would be attracted to such tax payable outside India ?'
2. So far as the first question is concerned, references have been made in identical terms for the earlier two years, namely, 1980-81 and 1981-82 in ITRC Nos. 90 and 91 of 1994 (Kirloskar Electric Co. Ltd. vs. CIT, which we have heard and disposed of this day, answering the question against the company by holding that the company is not entitled to claim deduction on account of dividends paid on preference shares. Accordingly, the first question referred to above is answered against the assessee.
3. So far as the second question is concerned, its answer squarely depends on the language employed in s. 40(a)(ii) of the Act. It reads as under :
'40. Amounts not deductible - Notwithstanding anything to the contrary in ss. 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head 'Profits and gains of business or profession', -
(a) in the case of any assessee - ...
(ii) any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains;'.
Sec. 5 of the Act provides for the scope of total income and sub-s. (1) thereof reads thus :
'(1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which -
(a) is received or is deemed to be received in India in such year by or on behalf of such person; or
(b) accrues or arises or is deemed to accrue or arise to him in India during such year; or
(c) accrues or arises to him outside India during such year;
Provided that, in the case of a person not ordinarily resident in India within the meaning of sub-s. (6) of s. 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India.'
4. From the above, it is clear that the income which has arisen to the company in Malaysia was part of the total income of the company under the provisions of the Act, since, as per the provisions of s. 6(3)(i) of the Act, the company is deemed to be a resident in India.
Further, in view of the said provisions, it does not require any elaborate consideration to come to the conclusion that the tax paid by the company in Malaysia on the profits which had accrued to it in that country is not liable to be deducted for computing the taxable income under the provisions of the Act. The reason is that the section in unambiguous terms states that for computing the income chargeable under the head 'Profits and gains of business', the sums paid on account of tax levied on profits or gains of any business cannot be deducted. Therefore, the tax, even paid in Malaysia, cannot be claimed as a deduction. In the said view of the matter, even the second question has to be answered against the assessee.
5. The reference is accordingly disposed of in terms of the answers set out above.