Section 90 — Agreement with Foreign Countries

Section 90 of the Income-tax Act, 1961 empowers the Central Government to enter into agreements with foreign countries or specified territories for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income. This section is significant as it provides the legal framework for Double Taxation Avoidance Agreements (DTAAs), which help mitigate the risk of the same income being taxed in two jurisdictions. The statutory test involves ensuring that the provisions of the DTAA are applied correctly, often taking precedence over domestic tax laws. The burden of proof typically lies with the taxpayer to demonstrate eligibility for treaty benefits. In practice, Section 90 is crucial for international businesses and individuals with cross-border income, as it facilitates tax relief and promotes global economic cooperation.

Common Litigation Flashpoints

1. Interpretation of DTAA provisions
2. Eligibility for treaty benefits
3. Application of the Most Favoured Nation clause
4. Conflict between domestic law and DTAA

Judgments on Section 90 — Agreement with Foreign Countries

• Vodafone International Holdings B.V. vs Union of India & Anr. — SC,
  Section 9 of the Income Tax Act does not cover indirect transfers of capital assets situated in India.
• The Authority for Advance Rulings (Income Tax) and Others vs Tiger Global International II Holdings — SC,
  The DTAA between India and Mauritius allows capital gains to be taxed only in Mauritius, provided the entity holds a valid TRC.
• Aditya Birla Nuvo Limited vs The Deputy Director of Income-tax — HC,
  The beneficial ownership of shares, despite being registered in the name of a permitted transferee, determines the taxability of capital gains in India.
• Assessing Officer Circle (International Taxation) 2(2)(2) New Delhi vs M/S Nestle SA — SC,
  The MFN clause in a DTAA requires a specific notification to be effective, and mere entry of a third country into OECD does not automatically trigger benefits.
• Union of India and Anr. vs Azadi Bachao Andolan and Anr. — SC,
  The provisions of a Double Taxation Avoidance Agreement, once notified, override the provisions of the Income-tax Act to the extent of inconsistency.