Submission of a tax
residency certificate is a necessary but not sufficient condition for claiming
DTAA benefit
Section 90 of the Income Tax Act empowers the
Central Government to enter into an agreement with the Government of any
foreign country or specified territory outside India for the purpose of –
(i) granting relief in respect of avoidance of
double taxation,
(ii) exchange of information and
(iii) recovery of taxes.
Further section 90A of the Income-tax Act
empowers the Central Government to adopt any agreement between specified
associations for above mentioned purposes.
In exercise of this power, the Central
Government has entered into various Double Taxation Avoidance Agreements
(DTAAs) with different countries and has adopted agreements between specified
associations for relief of double taxation. The scheme of interplay between
DTAA and domestic legislation ensures that a taxpayer, who is resident of one
of the contracting country to the DTAA, is entitled to claim applicability of
beneficial provisions either of DTAA or of the domestic law. Sub-section (4) of
sections 90 and 90A of the Income-tax Act inserted by Finance Act, 2012 makes
submission of Tax Residency Certificate containing prescribed particulars, as a
condition for availing benefits of the agreements referred to in these
sections.
It is proposed to amend sections 90 and 90A in
order to provide that submission of a tax residency certificate is a necessary
but not a sufficient condition for claiming benefits under the agreements
referred to in sections 90 and 90A. This position was earlier mentioned in the memorandum
explaining the provisions in Finance Bill, 2012, in the context of insertion of
sub-section (4) in sections 90 & 90A.
