Income Tax Act, 1961– s.90– Agreement with foreign countries or specified territories – Double Tax Avoidance Agreement (DTAA)– Notification u/s.90, if mandatory to give effect to a DTAA or any Protocol changing its terms/conditions– “is” occurring in the DTAAs – Interpretation – Bilat-eral treaties between India and Netherlands, France, and Switzerland, respectively– Plea of as-sessee that having regard to the Protocol to the India-Franwce DTAA, the more restrictive defini-tion of ‘fees for technical services’ appearing in the India-UK DTAA, must be read as forming part of the India-France DTAA as well– Disagreed by Authority for Advance Ruling– Reversed by High Court– In another appeal, relating to the India-Netherlands DTAA, the assessees contended that regard being had to the phraseology of the DTAA and the subsequent Protocol, the relevant event relied upon- the provisions of the DTAA and the Protocol, obliged the revenue to extend the lower rate of withholding tax at 5%– In case of Nestle, the provisions of the India-Switzerland DTAA and its three protocols considered– Writ petitions allowed by High Court:
Held: A notification u/s.90(1) is necessary and a mandatory condition for a court, authority, or tribunal to give effect to a DTAA, or any protocol changing its terms or conditions, which has the effect of altering the existing provisions of law – The fact that a stipulation in a DTAA or a Protocol with one nation, requires same treatment in respect to a matter covered by its terms, subsequent to its being entered into when another nation (which is member of a multilateral organization 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 the first nation, which entered into DTAA with India – In such event, the terms of the earlier DTAA require to be amended through a separate notification u/s.90 – Further, the interpretation of the expression “is” has present signification and it derives meaning from the context – Therefore, for a party to claim benefit of a “same treatment” clause, based on entry of DTAA between India and another state which is member of OECD, the relevant date is entering into treaty with India, and not a later date, when, after entering into DTAA with India, such country be-comes an OECD member, in terms of India’s practice – Impugned orders set aside – International Convention/Treaties. [Paras 88, 51]
International Convention/Treaties – Constitution of India – Article 253, 73 – Treaty making power:
Held: The terms of a treaty ratified by the Union do not ipso facto acquire enforceability – The Union has exclusive executive power to enter into international treaties and conventions under Article 73 r/w corresponding Entries- Nos. 10, 13 and 14 of List I of the VIIth Schedule to the Constitution of India and Parliament, holds the exclusive power to legislate upon such conventions or treaties; Parliament can refuse to perform or give effect to such treaties – In such event, though such treaties bind the Union, vis-a-vis the other contracting state(s), leaving the Union in default – The application of such trea-ties is binding upon the Union – Yet, they “are not by their own force binding upon Indian nationals” – Law making by Parliament in respect of such treaties is required if the treaty or agreement restricts or affects the rights of citizens or others or modifies the law of India – If citizens’ rights or others’ rights are not unaffected, or the laws of India are not modified, no legislative measure is necessary to give effect to treaties – In the event of any ambiguity in the provision or law, which brings into force the treaty or obligation, the court is entitled to look into the international instrument, to clear the ambiguity or seek clarity – Income Tax Act, 1961– s.90. [Para 44] International Law – International Convention/Treaties – Treaty practice of India, in relation to Double Tax Avoidance Agreements and their Protocol – Practices of Netherlands, France and Switzerland – International perspectives and practices – Discussed. International Law – International Convention/Treaties – Vienna Convention on Law of Treaties – Articles 31 and 32 – International Law Commission Draft Conclusions on Subsequent Agreements and Subsequent Practice in relation to the Interpretation of Treaties – ILC Draft Conclusions – Discussed.
LIST OF CITATIONS AND OTHER REFERENCES
Gramaphone Co. of India Ltd v. Birendra Bahadur Pandey & Ors. [1984] 2 SCR 664; Union of India (UOI) & Ors. v. Azadi Bachao Andolan & Ors. [2003] Supp 4 SCR 222; Ram Jethmalani v. Union of India [2011]
339 ITR 107 (SC); Union of India of India v. Agricas LLP [2020] 14 SCR 372; Engineering Analysis Centre of Excellence P. Ltd. v. CIT (2021) 432 ITR 471(SC); State of W.B. v. Jugal Kishore More [1969] 1 SCR 320; State of Gujarat v. Vora Fiddali Badruddin Mithibarwala [1964] 6 SCR 461; V.O. Tractoroexport v. Tarapore & Co. [1970] 3 SCR 53 : (1969) 3 SCC 562; Union of India (UOI) & Ors. v Azadi Bachao Andolan & Ors. [2003] 4 (Supp) SCR 222; Jagir Kaur v. Jaswant Singh [1964] 2 SCR 73; P. Anand Gajapati Raju v. P.V.G Raju [2000] 2 SCR 684 : (2000) 4 SCC 539; Vijay Kumar Prasad v. State of Bihar (2004) 5 SCC 196 – referred to. Steria (India) Ltd. v. Commissioner of Income-Tax [2016] 386 ITR
390 (Delhi): Judgment dated 22.04.2021 passed by the Delhi High Court in WP (C) No. 9051/2020 and connected matters; Apollo Tyres Ltd. v. Commissioner of Income Tax, International Taxation [2018] 92 Taxmann. com 166 (Karnataka); EPCOS Electronic Components S.A. v. Union of India; 2019 SCC OnLine Del 9113; Nestle SA v. Assessing Officer Circle (International Taxation) W.P. (C) No. 3243 of 2021 decided on 04.06.2021; Sanofi Pasteur Holding SA v. Department of Revenue [2013] ITR 354 (AP HC); SCA Hygiene Products AB v. DCIT ITA No. 7315/Mum/2018; ITAT Delhi decision in Mitsubishi Electric India Pvt Ltd. v. Commissioner of Income Tax ITA No. 3336/Del/2018; Director of Income Tax v. New Skies Satellite BV (2016) 382 ITR 114; Maganbhai Ishwarbhai Patel & Ors. v. Union of India & Ors. [1970] 3 SCR 53; Gramaphone Co. of India Ltd. v. Birendra Bahadur Pandey & Ors.; Commissioner of Income Tax v. Visakhapatnam Port Trust [1983]144ITR146(AP); Commissioner of Income Tax v. Davy Ashmore India Ltd. [1991]190 ITR 626 (Cal); Leonhardt Andra Und Partner, Gmbh v. Commissioner of Income Tax [2001] 249 ITR 418 (Cal); Commissioner of Income Tax v. R.M. Muthaiah [1993]202 ITR 508 (KAR); Arabian Express Line Ltd. of United Kingdom & Ors. v. Union of India [1995] 212 ITR 31 (Guj) – referred to.
Attorney-General for Canada v. Attorney-General for Ontario & Ors. [1937] A.C. 326; Anglo-Iranian Oil Co. Case (U.K. v. Iran) 1952 I.C.J. 93, 106-07; South West Africa Cases (Ethiopia v. S. Afr.; Liberia v. S. Afr.), 1966 I.C.J. 6, 134; Legal Consequences for States of the Continued Presence of South Africa in Namibia, 1971 I.C.J. 16, 39; Case Concerning Rights of Nationals of the United States of America in Morocco (Fr. v. U.S.), 1952 I.C.J. 176, 211; Asylum Case (Colombia. v. Peru), 1950 I.C.J. 266, 286; Corfu Channel (U.K. v. Alb.), 1949 I.C.J. 4, 25; Case Concerning the Land, Island and Maritime Frontier Dispute (El Salvador v Hondurus) ICJR (1992)
351 - Decision dated 12-09-1992, [General List No. 75]; Case Concerning Kasikili/Sedudu Island- Botswana v Namibia [1999] ICJ Rep 1045; (General List No. 98) – referred to.
Duncan Hollis: Executive Federalism : Forging New Federalist Constraints on the Treaty Power” Legal Studies Research Paper Series; Decision of 28 February 2012, No. IFZ 2012/54M, Tax treaties: India, issued by the Director General, Fiscal Affairs, Kingdom of Netherlands; The State Secretariat for International Financial Matters SIF Section Bilateral tax Issues and double taxation treaties, Swiss Federation, dated 13.08.2021; Klaus Vogel on Double Taxation Conventions; ILC Draft Conclusions on Subsequent Agreements and Subsequent Practice in relation to the Interpretation of Treaties, available at; JL Brierly, The Law of Nations, 6th Ed. (Oxford University Press, 1963), 59; Irina Buga, ‘Subsequent Practice as a Means of Treaty Interpretation’ in Modification of Treaties by Subsequent Practice (Oxford University Press, 2018). See also Report of the International Law Commission covering its 2nd session, UN Doc A/1316 (1950) II YBILC 364, 368; M. Akehurst, ʻCustom as a Source of International Lawʼ (1974-75) 47 BYBIL 1, 43; ME Villiger, Customary International Law and Treaties: A Study of Their Interactions and Interrelations, with Special Consideration of the 1969 Vienna Convention on the Law of Treaties (Brill, 1985), para 19; SM Schwebel, ʻThe Influence of Bilateral Investment Treaties on Customary International Lawʼ (2004) 98 ASIL Proc 27; JE Alvarez, ʻA BIT on Customʼ (2009) 42 NYU J Intl L & Pol 17; ILC, Third Report on the Law of Treaties, UN Doc A/CN.4/167, 59 para 24; See also ME Villiger, Commentary on the 1969 Vienna Convention on the Law of Treaties (Brill, 2009), 431; Danae Azaria, The International Law Commission’s Return to the Law of Sources of International Law, 13 FIU L. Rev. 989 (2019); See for eg., ILC, Reports on Subsequent Agreements and Subsequent Practice in Relation to Treaty Interpretation, by Georg Nolte, Special Rapporteur, UN Doc A/CN.4/660 (2013); UN Doc A/CN.4/671 (2014); UN Doc A/CN.4/683 (2015), UN Doc A/CN.4/694 (2016), UN Doc A/CN.4/715 (2018); Steven Ratner, ‘International Law Rules on Treaty Interpretation’ in The Law and Practice of the Northern Ireland Protocol, edited by Christopher McCrudden, Cambridge: Cambridge University Press (2022), pp. 80-91; James Crawford, ‘A Consensualist Interpretation of Article31(3) of the Vienna Convention on the Law of Treaties’ in Georg Nolte et al (eds.), Treaties and Subsequent Practice (Oxford University Press, 2013), pp. 29, 31; Bruno Simma, ‘Miscellaneous thoughts on subsequent agreements and practice’ in: Georg Nolte (ed.) Treaties and Subsequent Practice (Oxford University Press, 2013), pp 46–51; Anthony Aust, Modern Treaty Law and Practice, (Cambridge University Press, 2013), at p. 194; B. Cheng, ‘Air Law’, Max Planck Encyclopedia of Public International Law (1989), Vol. 11, pp. 8-9; G. Fitzmaurice, ‘The Law and Procedure of the International Court of Justice: Treaty Interpretation and Certain Other Treaty Points’ (1951) 29 British Yearbook of International Law 8; Donald Regan: Understanding What the Vienna Convention Says About Identifying and Using ‘Sources for Treaty Interpretation’ Identifying and Using ‘Sources for Treaty Interpretation’ University of Michigan (2017)<:> (accessed on 14.10.2023) – referred to.
OTHER CASE DETAILS INCLUDING IMPUGNED
ORDER AND APPEARANCES
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.