Delay in obtaining the finality certificate from the Ceylon income-tax authorities

Attention is invited to paragraph 3 of the Board's circular No.79/C.No.25(14)IT/52/dated 24-3-1964 relating to the stay of recovery of tax in respect of incomes taxed both in India and Ceylon, pending conclusion of a double taxation avoidance agreement between the two countries. The relevant portion runs as below:-

"....the assessment orders of Ceylon should ordinarily be accepted subject to such adjustments as may be called for on account of difference in the provisions of the Indian Income-tax Act and the Ceylon Income-tax Law".

Relying on the above instructions, double Income-tax relief under the Double Taxation Avoidance Agreement between India and Ceylon is being allowed by some Income-tax Officers on the strength of notices of assessment or copies of assessment orders without requiring the assesses to produce finality certificates in Form No.50E prescribed by the Ceylon Government. The practice is faulty, because an assessment may be varied as a result of appeal, revision or reference and the final position may not be indicated in the certificates of assessment from Ceylon produced by assesses.

2. Since the Government of Ceylon has prescribed a finality certificate indicating the final figure of income assessed in Ceylon, the Board consider that no Double Income-tax Relief should be granted without reference to the said certificate. If, however, there is delay in obtaining the finality certificate from the Ceylon income-tax authorities beyond the period of one year mentioned in Article V of the Agreement with Ceylon, payment of tax relatable to the doubly taxed income may be kept in abeyance by the Income-tax Officer if the assesse adduces proper evidence to show that failure to produce the relevant certificate did not arise due to any neglect on his part.

3. The Board desire that the above position may please be brought to the notice of all Income-tax Officers under your charge.