Supreme Court: Double Taxation Avoidance Agreement Cannot Be Enforced Unless Notified By Centre Under Section 90 Of Income Tax Act

The Supreme Court in the case Assessing Officer Circle (International Taxation) New Delhi v. M/s Nestle observed and 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 as stated under Section 90 of the Income Tax Act.

The court in the case observed and has held that until the Government of India issued the notification as per Section 90, the DTAA treaty is not enforceable per se in Indian courts.
The bench comprising of Justice S Ravindra Bhat and Justice Dipankar Datta in the case observed and has held while allowing the batch of appeals moved by the Income Tax Department against the judgments of the Delhi High Court.

The bench headed by Justice Ravindra Bhat in its order stated that this court have discussed the arguments which relates 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 the Article 31 (3)(b) of the Constitution of India.

Further, it has been stated by the said court 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.

The court is of the opinion that the treaty is not enforceable per se in Indian Courts.
The bench of Justice Bhat stated that the notification under section 90 of the Income Tax Act is a necessary and is the 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 court in the case stated that the fact that the 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 which extends the same benefit in regard to a matter covered in the DTAA of first nation which enter into DTAA with India.

Therefore, in such events, the terms of the earlier DTAA required to be amended through a separate notification under Section 90 of the Act. The Supreme Court in the case observed and has set aside the judgment delivered by the Delhi High Court on 22.04.2021 in the case Concentrix Services Netherlands B V v/s. Income Tax Officer TDS & Anr and also the subsequent judgments which were delivered by the High Court following Concentrix Services.