Page 292 - DCOM508_CORPORATE_TAX_PLANNING

Unit 12: Advance Tax Planning and Tax Relief

4. The DTAAs under section 90 are intended to provide relief to the taxpayer, who is resident Notes
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 benefi ts.
Therefore, sub-section (4) has been inserted in section 90 to provide that the non-resident
to whom the agreement referred to in section 90(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 specifi ed
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.

5. The 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.
However, the 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.
!

Caution However, the above mentioned position is likely to be changed as and when the
General Anti-avoidance Rules (GAAR) becomes effective.

Notes Tax treaties are generally based on certain models. The most common ones are:
1. OECD model (Organisation of Economic Cooperation and Development) - Most of
India’s treaties are based on this model.
2. U.N. models Double Taxation Convention, 1980 between developed and developing
countries.
Double Taxation Relief to be Extended to Agreements (Between Specifi ed
Associations) Adopted by the Central Government [Section 90A]
1. Section 90A provides that any specified association in India may enter into an agreement

with any specified association in the specified territory outside India and the Central

Government may, by notification in the Official Gazette, make the necessary provisions for
adopting and implementing such agreement for -
(a) grant of double taxation relief,
(b) avoidance of double taxation of income,
(c) exchange of information for the prevention of evasion or avoidance of income
tax, or
(d) recovery of income-tax.

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