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Unit 14: Advance Tax Planning and Tax Relief

exchange of information for the prevention of evasion or avoidance of income- Notes
tax, or
recovery of income-tax.

Section 90A(1) provides that an agreement may be entered into by any specified
association in India with any specified association in the specified territory outside
India which may be adopted by the Central Government by way of notification in
the Official Gazette, for granting relief of tax or, as the case may be, for avoidance of
double taxation. The Central Government has, vide Notification No.90/2008 dated
28.8.2008, notified that where such an agreement provides that any income of a
resident of India may be taxed in the other country then, such income shall be
included in his total income chargeable to tax in India in accordance with the
provisions of the Income-tax Act, 1961, and relief shall be granted in accordance
with the method for elimination or avoidance of double taxation provided in such
agreement.

(ii) In relation to any assessee to whom the said agreement applies, the provisions of
the Income-tax Act, 1961 shall apply to the extent they are more beneficial to that
assessee.
(iii) Any term used but not defined in the Income-tax Act, 1961 or in the said agreement
shall have the same meaning as assigned to it in the said notification, unless the
context requires otherwise, and it is not inconsistent with the provisions of the Act
or the said agreement. The meaning assigned would be deemed to have come to
effect from the date on which the said agreement came into force and not from the
date of the said notification.
(iv) The DTAAs under section 90A are intended to provide relief to the taxpayer, who is
resident of one of the contracting country to the agreement. Such tax payer can claim
relief by applying the beneficial provisions of either the treaty or the domestic law.
However, in many cases, taxpayers who were not residents of a contracting country
also resorted to claiming the benefits under the agreement entered into by the
Indian Government with the Government of the other country. In effect, third party
residents claimed the unintended treaty benefits.
Therefore, sub-section (4) has been inserted in section 90A to provide that the non-
resident to whom the agreement referred to in section 90A(1) applies, shall be
allowed to claim the relief under such agreement if a Tax Residence Certificate
(TRC) obtained by him from the Government of that country or specified territory
is furnished, containing such particulars as may be prescribed, declaring his residence
of the country outside India or the specified territory outside India, as the case may
be. The submission of TRC containing prescribed particulars shall be a necessary
but not sufficient condition for availing benefits of the agreements referred to in
these sections. In effect, further conditions can be stipulated for claiming treaty
benefits, in addition to the requirement of submission of TRC.

(v) The charge of tax at a higher rate for a company incorporated in the specified territory
outside India as compared to a domestic company would not be considered as less
favourable charge or levy of tax in respect of such company.
(vi) For the purpose of this section, the ‘specified association’ means any institution,
association or body, whether incorporated or not, functioning under any law for the
time being in force in India or the laws of the specified territory outside India and
which may be notified as such by the Central Government and ‘specified territory’
means any area outside India which may be notified by the Central Government.

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