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Agreement with Foreign Countries for double taxation relief

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Agreement with foreign countries or specified territories (Bilateral Agreement) -Section 90(1)

The Central Government may enter into an agreement with the Government of any country outside India or specified territory outside India,—

(a)  for  granting of relief in respect of—

(i)  income on which have been paid both income-tax under this Act and income-tax in that country or specified territory, or

(ii)  income-tax chargeable under this Act and under the corresponding law in force in that country or specified territory to promote mutual economic relations, trade and investment, or

(b)  for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country or specified territory or

(c)  for exchange of information for the prevention of evasion or avoidance of income-tax chargeable under this Act or under the corresponding law in force in that country or specified territory or investigation of cases of such evasion or avoidance, or

(d)  for recovery of income-tax under this Act and under the corresponding law in force in that country or specified territory

and may, by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement.

DTAA to override the Act, Act applicable if more beneficial-Section 90(2) Where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India under sub-section (1) for granting relief of tax or avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee.

GAAR provisions to override DTAA-Section 90(2A) Notwithstanding anything contained in sub-section (2), the provisions of Chapter X-A of the Act shall apply to the assessee even if such provisions are not beneficial to him.

  • Sub-section (2) provides that if the provisions contained in I.T.Act is more beneficial to assessee then provisions of the Act shall apply instead of provisions of DTAA.
  • But, sub-section (2A) overrides sub-section (2) to the extent provisions of Chapter X-A of the Act is applicable even if such provisions are not beneficial to him.

Meaning of terms not defined in the Act or DTAA-Section 90(3) Any term used but not defined in this Act or in the agreement referred to in sub-section (1) shall, unless the context otherwise requires, and is not inconsistent with the provisions of this Act or the agreement, have the same meaning as assigned to it in the notification issued by the Central Government in the Official Gazette in this behalf.

As per Explanation 3, where any term is used in any agreement entered into under sub-section (1) and not defined under the said agreement or the Act, but is assigned a meaning to it in the notification issued under sub-section (3) and the notification issued thereunder being in force, then, the meaning assigned to such term shall be deemed to have effect from the date on which the said agreement came into force.

Certificate of Residency and other Documents-Section 90(4) & 90(5) An assessee, not being a resident, to whom an agreement referred to in sub-section (1) applies, shall not be entitled to claim any relief under such agreement unless a certificate of his being a resident in any country outside India or specified territory outside India, is obtained by him from the Government of that country or specified territory. (Inserted by the F.A. 2012 w.e.f. 01-04-2013)

Sub-section (5) The assessee shall also provide such other documents and information, as may be prescribed. (Inserted by the F.A. 2013 w.e.f. 01-04-2013)

Explanation 1.— Charge of tax in respect of a foreign company at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such foreign company.

Explanation 2.—For the purposes of this section, “specified territory” means any area outside India which may be notified as such by the Central Government.

Certificate for claiming relief under an agreement referred to in sections 90 and 90A-Rule 21AB

(1) Subject to the provisions of sub-rule (2), for the purposes of sub-section (5) of section 90 and sub-section (5) of section 90A, the following information shall be provided by an assessee in Form No. 10F, namely:—

(i)     Status (individual, company, firm etc.) of the assessee;

(ii)   Nationality (in case of an individual) or country or specified territory of incorporation or registration (in case of others);

(iii) Assessee’s tax identification number in the country or specified territory of residence and in case there is no such number, then, a unique number on the basis of which the person is identified by the Government of the country or the specified territory of which the asseessee claims to be a resident;

(iv) Period for which the residential status, as mentioned in the certificate referred to in section 90(4) or section 90A(4), is applicable; and

(v)   Address of the assessee in the country or specified territory outside India, during the period for which the certificate, as mentioned in (iv) above, is applicable.

 

(2) The assessee may not be required to provide the information or any part thereof referred to in sub-rule (1) if the information or the part thereof, as the case may be, is contained in the certificate referred to in section 90(4) or section 90A(4).

(2A) The assessee shall keep and maintain such documents as are necessary to substantiate the information provided under sub-rule (1) and an income-tax authority may require the assessee to provide the said documents in relation to a claim by the said assessee of any relief under an agreement referred to in section 90(1) or section 90A(1), as the case may be.

 

 

Specified Territory

“Specified territory” means any area outside India which may be notified as such by the Central Government for the purposes of this section.

  • Name of some of the notified specified territory

Sint Maarten (a part of Kingdom of Netherlands),

Hong Kong Special Administrative Region of the People’s Republic of China,

Bermuda,

British Virgin Islands,

Cayman Islands,

Gibraltar,

Guernsey,

Isle of Man,

Jersey,

Netherlands Antilles,

Macau.

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