RUSSA H. MEHTA TRUST, BOMBAY vs COMMISSIONER OF INCOME-TAX, BOMBAY CITY I

The Supreme Court ruled that the Merged States (Taxation Concessions) Order, 1949 does not grant tax exemptions to residents of British India for income accrued in merged States. Specifically, the Court held that under Paragraph 4 of the Order, the concession applies only to income that would have been exempt under Section 14(2)(c) of the Income-tax Act had the Taxation Laws Extension Act not been enacted. The Court affirmed the High Court's decision that the assessee was not entitled to a rebate on dividend income received from Baroda State, as it was subject to tax under the Income-tax Act.