19 Oct 2023 6:59 AM GMT
The Supreme Court has held that a Double Taxation Avoidance Agreement (DTAA) cannot be given effect to by a court, authority or a tribunal unless it has been notified by the Central Government under Section 90 of the Income Tax Act.
The Court held that until the Government of India issues a notification as per Section 90, the DTAA treaty is not enforceable per se in Indian courts.
A bench comprising Justices S Ravindra Bhat and Dipankar Datta held so while allowing a batch of appeals filed by the Income Tax Department against the judgments of the Delhi High Court.
During the judgment pronouncement, Justice Ravindra Bhat orally said :
"We have discussed the arguments related to the requirement of section 90 and also the treaty practice of India, treaty practice of other countries and in the light of international treaty practice, especially Article 31 (3)(b), we have said that the treaty practice is not bilateral; it can be unilateral. We have said that as long as India issues the notification, the Courts are bound. Till then, we are of the opinion that the treaty is not enforceable per se in Indian Courts."
Justice Bhat further said that the following are the conclusions in the judgment :
A Notification under Section 90 of the Income Tax Act is a necessary and a mandatory condition for a court, authority or a tribunal to give effect to a Double Taxation Avoidance Agreement or any protocol changing its terms and conditions which has the effect of altering the existing provisions of law.
The fact that a stipulation in DTAA or protocol with one nation requires same treatment in a matter covered by its terms subsequent to its being entered into with another nation which is a member of a multilateral organisation such as OECD is given better treatment does not automatically lead to integration of such term extending the same benefit in regard to a matter covered in the DTAA of first nation which enter into DTAA with India. In such event, the terms of the earlier DTAA required to be amended through a separate notification under Section 90.
The Supreme Court thus set aside the judgment delivered by the Delhi High Court on 22.04.2021 in Concentrix Services Netherlands B V v/s. Income Tax Officer TDS & Anr (W.P.(C) 9051/2020) and the subsequent judgments which were delivered by the High Court following Concentrix Services.
Case Title : Assessing Officer Circle (International Taxation) New Delhi v. M/s Nestle SA C.A. No. 1420/2023 + ten connected appeals
(Story to be updated after the judgment is uploaded)