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CHAPTER – 1 1
1.1 Introduction
Double taxation may arise when the jurisdictional connections, used by different countries, overlap or it may arise when the taxpayer has connections with more than one country. A person earning any income has to pay tax in the country in which the income is earned (as source Country) as well as in the country in which the person is resident. As such, the said income is liable to tax in both the countries. To avoid this hardship of double taxation, Government of India has ente red into Double Taxation Avoidance Agreements (DTAAs) with various countries. DTAAs provide for the following reduced rates of tax on dividend, interest, royalties, technical service fees, etc., received by residents of one country from those in the other. The Double Tax Avoidance Agreement (DTAA) is essentially a bilateral agreement entered into between two countries. The basic objective is to promote and foster e conomic trade and investment between two countries by avoiding double taxation. DTAA stands for Double Taxation Avoidance Agreement. It is an agreement between two countries with an objective to avoid taxation of the same income in both countries. India has comprehensive Double Taxation Avoidance Agreements (DTAA) with 84 countries as of now. Double Taxation Avoidance Agreement (DTAA) also referred as Tax Treaty is a bilateral economic agreement between two nations that aims to avoid or eliminate double taxation of the same income in two countries. Double taxation is the enforced duty of two or more taxes on the same, property or monetary transactions. Double taxation may occur when the legal authority associations, used by different nations, overlap or it may occur when the taxpayer has links with more than one country.
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Objectives –
Protection against double taxation: These Tax Treaties serve the purpose of providing protection
to
tax-payers
against
double
taxation
and
thus
preventing
any
discouragement which the double taxation may otherwise promote in the free flow of international trade, international investment and international transfer of technology;
Prevention of discrimination at international context: These treaties aim at preventing discrimination between the taxpayers in the international field and providing a reasonable element of legal and fiscal certainty within a legal framework;
Mutual exchange of information: In addition, such treaties contain provisions for mutual exchange of information and for reducing litigation by providing for mutual assistance procedure; and
Legal and fiscal certainty: They provide a reasonable element of legal and fiscal certainty within a legal framework.
1.2 Research Objectives
1) To study about Double Taxation Avoidance Agreement in detail. 2) To analyse the DTAA in India in relation to other forei gn countries. 3) To study the recent developments of DTAA with the help of a case law.
1.3 Literature Review Books – Books – 1) Manual of SEBI, Acts, Rules, Regulations, Guidelines, Circulars, etc, 23rd edition, Bharat Publications
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This book lays bare the rules and guidelines under SEBI compiled together, along with detailed explanation of the provisions. It is ambiguous and methodically compiled for easy understanding.
1.4 Research Methodology Given a study of this kind, this research project has been written using the doctrinal or principled method of research, which involves the collection of data from secondary sources, like articles found in journals and websites.
1.5
Source of Data
Accumulation of the information on the topic includes various secondary sources such as books, e-articles, etc. The matter from these sources has been complied and analysed to understand the topic in a better way.
1.6 Scope and Limitation
The project is an attempt to study double taxation and the framework provided to prevent it. The study is limited to India and the development.
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CHAPTER -2
2.1 Double Taxation Avoidance Agreement
A person earning any income has to pay tax in the country in which the income is earned (as Source Country) as well as in the country in which the person is resident. As such, the said income is liable to tax in both the countries. To avoid this hardship of double taxation, Government of India has entered into Double Taxation Avoidance Agreements (DTAAs) with various countries. DTAAs provide for the following reduced rates of tax on dividend, interest, royalties, technical service fees, etc., received by residents of one country from those in the other. Where total exemption is not granted in the DTAAs and the income is taxed in both countries, the country in which the person is resident and is paying taxed, the credit for the tax paid by that person in the other country is allowed.
Where tax relief has been given by one country, the country of residence generally allows credit for the tax so spared, to avoid nullifying the relief. If the rate prescribed in the Indian Income-tax Act, 1961 is higher than the rate prescribed in the Tax Treaty then the rate prescribed in the Tax Treaty has to be applied. In other words, provisions of DTAA or Indian Income-tax Act, whichever are more favourable to an individual would apply. Thus In order to avail the benefits of DTAA, an NRI should be resident of one country and be paying taxes in that country of residence. India has entered into DTAA with around 65 countries. These treaties are based on the general principles laid down in the model draft of the Organisation for Economic Cooperation and Development (OECD) with suitable modifications as agreed to by the other contracting countries.
Thus in case there is a DTAA between India and United States of America, an NRI should be a resident of USA and paying taxes there. In case of income earned in India by NRI, tax paid in India is allowed as credit against tax paid in USA.
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2.2 Who are subjects of such agreement?
A typical DTA Agreement between India and another country usually covers persons, who are residents of India or the other contracting country, which has entered into the agreement with India. A person, who is not resident either of India or of the other contracting country, would not be entitled to benefits under DTA Agreements. International double taxation has adverse effects on the trade and services and on movement of capital and people.
Taxation of the same income by two or more countries would constitute a prohibitive burden on the tax-payer. The domestic laws of most countries, including India, mitigate this difficulty by affording unilateral relief in respect of such doubly taxed income (Section 91 of the Income Tax Act). But as this is not a satisfactory solution in view of the divergence in the rules for determining sources of income in various countries, the tax treaties try to remove tax obstacles that inhibit trade and services and movement of capital and persons between the countries concerned. It helps in improving the general investment climate.
2.3 Need for DTAA
The need for Agreement for Double Tax Avoidance arises because of conflicting rules in two different countries regarding chargeability of income based on receipt and accrual, residential status etc. As there is no clear definition of income and taxability thereof, which is accepted internationally, an income may become liable to tax in two countries. Double taxation occurs when an individual is required to pay two or more taxes for the same income, asset, or financial transaction in different countries. Double taxation occurs mainly due to overlapping tax laws and regulations of the countries where an individual operates his business.
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In such a case, the two countries have an Agreement for Double Tax Avoidance, in which case the possibilities are:
The income is taxed only in one country.
The income is exempt in both countries.
The income is taxed in both countries, but credit for tax paid in one country is given against tax payable in the other country.
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CHAPTER – 3
3.1 Types of DTAA under Income Tax Act, 1961
In India, Under Section 90 and 91 of the Income Tax Act, relief against double taxation is provided in two ways:
1) Unilateral relief –
Under Section 91, an individual can be relieved from double taxation by Indian Government irrespective of whether there is a DTAA between India and the other country concerned. Unilateral relief to a tax payer may be offered if:
The person or company has been a resident of India in the previous year.
In India and in another country with which there is no tax treaty, the income should have been taxed.
The tax have been paid by the person or company under the laws of the foreign country in question.
2) Bilateral relief –
Under Section 90, the Indian government offers protection against double taxation by entering into a DTAA with another country, based on mutually acceptable terms.
Such relief may be offered under two methods:
EXEMPTION METHOD: This ensures complete avoidance of tax overlapping.
TAX CREDIT METHOD This provides relief by giving the tax payer a deduction from the tax payable in India.
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DTAA can be of two types –
Comprehensive. Limited.
Comprehensive DTAAs are those which cover almost all types of incomes covered by any model convention. Many a time a treaty covers wealth tax, gift tax, surtax, etc. too. Limited DTAAs are those which are limited to certain types of incomes only, e.g. DTAA between India and Pakistan is limited to shipping and aircraft profits only. When an Indian person makes a profit or some other type of taxable gain or receives any income in another country, he may be in a situation where he will be required to pay a tax on that income in India, as well as in the country in which the income was made. To protect Indian tax payers from this unfair practice, DTAA ensures that India's trade and services with other countries, as well the movement of capital are not adversely affected. The provisions of DTAA override the general provisions of taxing statute of a particular country. It is now well settled that in India the provisions of the DTAA override the provisions of the domestic statute. Moreover, with the insertion of Sec. 90(2) in the Indian Income Tax Act, it is clear that assessee have an option of choosing to be governed either by the provisions of particular DTAA or the provisions of the Income Tax Act, whichever are more beneficial. For example under DTAA between Indian and Germany, tax on interest is specified @ 10% whereas under Income Tax Act it is 20%. Hence, one can follow DTAA and pay tax @ 10%. Further if Income tax Act itself does not levy any tax on some income then Tax Treaty has no power to levy any tax on such income. Section 90(2) of the Income Tax Act recognizes this principle.
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3.2 Models of DTAA
There are different models developed over a period of time based on which treaties are drafted and negotiated between two nations. These models assist in maintaining uniformity in the format of tax treaties. They also serve as checklist for ensuring exhaustiveness or provisions to the two negotiating countries. OECD Model, UN Model, the US Model and the Andean Model are few of such models. Of these the first three are the most prominent and often used models. However, a final agreement could be combination of different models.
1) OECD Model
Organization of Economic Co-operation and Development (OECD) Model Double Taxation Convention on Income and on Capital, issued in 1977, 1992 and 1995. OECD Model is essentially a model treaty between two developed nations. This model advocates residence principle, that is to say, it lays emphasis on the right of state of residence to tax.
2) UN Model
United Nations Model Double Taxation Convention between Developed and Developing Countries, 1980. The UN Model gives more weight to the source principle as against the residence principle of the OECD model. As a correlative to the principle of taxation at source the articles of the Model Convention are predicated on the premise of the recognition by the source country that –
(a) taxation of income from foreign capital would take into account expenses allocable to the earnings of the income so that such income would be taxed on a net basis, that (b) taxation would not be so high as to discourage investment and that
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(c) it would take into account the appropriateness of the sharing of revenue with the country providing the capital.
In addition, the United Nations Model Convention embodies the idea that it would be appropriate for the residence country to extend a measure of relief from double taxation through either foreign tax credit or exemption as in the OECD Model Convention. Most of India’s treaties are based on the UN Model.
3) United States Model Income Tax Convention of September, 1996
The US Model is different from OECD and UN Models in many respects. US Model has established its individuality through radical departure from usual treaty clauses under OECD Model and UN Model.
3.3 General Features of DTAA
Tax Treaties employ standard International language and standard terms. This is done in order to understand and interpret the same term in the same manner by both assessee as well as revenue. Language employed is technical and stereotyped. Some of the terms are explained below:
a) Contracting State - country which enters into Tr eaty b) State of Residence- Country where a person resides c) State of Source- Country where income arises - Enterprise of a Contracting State- Any taxable unit (including individuals of a Contracting State) d) Permanent Establishment - A fixed base of an enterprise in the state of e) Source (usually a branch of a foreign company and in some cases wholly – owned subsidiaries as well) f) Income arising in Contracting state - Income arising in a State of a source. One has to read the treaty carefully in order to understand its provisions in their proper perspective.
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The best way to understand the DTAA is to compare it with an agreement of partnership between two persons. In partnership, the words used are “the party of the first part” and in the DTAA, the words used ar e “the other contracting state”. One can also replace the words” Contracting States” by names of the respective countries and read the DTAA again, for better understanding.
3.4 Overall preview of Model Conventions
In general terms, the Articles of a convention can be divided into six groups for the purpose of analyses:
a) Scope provisions: these include Article 1 (Personal scope), 2 (Taxes covered), 30 (Entry into force) and 31 (Termination). These provisions determine the persons, taxes and time period covered by a treaty.
b) Definition provisions: these include Article 3 (General Definitions), 4(Residence) and 5 (Permanent Establishment) as well as the definitions of terms in some of the substantive provisions (e.g. the definition of “immovable property” in Article 6(2)).
c) Substantive Provisions: these are the Articles between article 6 and 22 which apply to particular categories of income, capital gains or capital and allocate taxing jurisdiction between the two Contracting States.
d) Provisions for elimination of double taxation: this is primarily Article 23. Article 25(Mutual Agreement) could also be placed in this category.
e) Anti-avoidance provisions: these include Article 9 (Associated Enterprises) and 26 (Exchange of information).
f) Miscellaneous Provisions: this final category includes Articles such as 24(Non-Discrimination), 28 (Diplomats) and 29 (Territorial Extension).
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3.5 How to apply DTAA
The process of operation of a double taxation convention can be divided into a series of steps, involving the different types of provisions:
1. Determine if the issue is within the scope of the convention: This involves determining firstly whether the taxpayer is within the personal scope in Article 1- that is, “persons who are residents of one or both Contracting States”. This may involve confirming that the taxpayer is a “person” within in the definition of Article 3(1)(a); it will involve confirming that the taxpayer is resident of a Contracting State according to Article 4(1).
2. Check that the treaty applies to the tax in issue- is it a tax listed in Article 2 (or a tax substantially similar to such a tax).
3. Thirdly, check that the treaty is in operation for the taxable period in issue – that the treaty is in force (Article 29) and has not been terminated (Article 30).
4. Apply the relevant definitions: At this stage the relevant definition provisions (if any) can be applied. Thus, for example, if the taxpayer is a resident of both Contracting States, the tiebreakers in Article 4(2) and (3) have to be applied to determine a single residence for treaty purposes, similarly, if it is necessary to decide whether the taxpayer has a permanent establishment in a state, then Article 5 is relevant.
5. Determine which of the substantive provisions apply: The substantive provisions apply to different categories of income, capital gains or capital; it is necessary to determine which applies. This is a process of characterization. In many cases this may be straightforward; in others the task may not be easy. For example, payments, which are referred to as “royalties”, may in fact fall under
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Article 7 (Business Profits), 12 (Royalties), 13 (Capital Gains) or 14 (Independent Personal Services). Assistance in characterizing the items can be gained from the Commentaries, case law and reports of the Committee on Fiscal Affairs.
5. Apply the substantive article: Substantive articles generally take one of three forms:
a) The state of source may tax without limitation. Examples are: income from house property situated in that state, and business profits derived from a permanent establishment there. b) The state source may tax up to a maximum: here the treaty sets a ceiling to the level of taxation at source. Examples in the OECD Models are: dividends from companies resident in that state and interest derived from there. c) The state of source may not tax: here, the state of residence of the tax payer alone has jurisdiction to tax. Examples in the OECD Model are: business profit where there is no permanent establishment in the state of source.
6. Apply the provisions for the elimination of double taxation Everyone of the substantive articles must be considered along with article 23 which sets out the methods for the elimination of double taxation.
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CHAPTER – 4 4.1 Role of Tax Treaties in International Tax Planning
It facilitates investment and trade flow, preventing discrimination between tax payers; Adds fiscal certainty to cross border operations; Prevents international evasion and avoidance of tax;
Facilitates collection of international tax; Contributes attainment of international development goal, and Avoids double taxation of income by allocating taxing rights between the source country where income arises and the country of residence of the recipient; thereby promoting cooperation between or amongst States in carrying out their obligations and guaranteeing the stabilit y of tax burden.
Tax incidence, therefore, becomes an important factor influencing the nonresidents in deciding about the location of their investment, services, technology etc. Tax treaties serve the purpose of providing protection to tax payers against double taxation and thus preventing the discouragement which taxation may provide in the free flow of international trade, international investment and international transfer of technology. In addition, such treaties contain provisions for mutual exchange of information and for reducing litigation by providing for mutual assistance procedure.
The agreements allocate jurisdiction between the source and residence country. Wherever such jurisdiction is given to both the countries, the agreements prescribe maximum rate of taxation in the source country which is generally lower than the rate of tax under the domestic laws of that country. The double taxation in such cases are avoided by the residence country agreeing to give credit for tax paid in the source country thereby reducing tax payable in the residence country by the amount of tax paid in the source country.
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These agreements give the right of taxation in respect of the income of the nature of interest, dividend, royalty and fees for technical services to the country of residence. However, the source country is also given the right but such taxation in the source country has to be limited to the rates prescribed in the agreement.
So far as income from capital gains is concerned, gains arising from transfer of immovable properties are taxed in the country where such properties are situated. Gains arising from the transfer of movable properties forming part of the business property of a ‘permanent establishment ‘or the ‘fixed base’ is taxed in the country where such permanent establishment or the fixed base is located.
So far as the business income is concerned, the source country gets the right only if there is a ‘permanent establishment‘ or a ‘fixed place of business’ there.
Income derived by rendering of professional services or other activities of independent character are taxable in the country of residence except when the person deriving income from such services has a fixed base in the other country from where such services are performed.
The agreements also provides for jurisdiction to tax Director’s fees, remuneration of persons in Government service, payments received by students and apprentices, income of entertainers and athletes, pensions and social security payments and other incomes.
It may sometimes happen that owing to reduction in tax rates under the domestic law taking place after coming into existence of the treaty, the domestic rates become more favourable to the non-residents. Since the objects of the tax treaties is to benefit the non-residents, they have, under such circumstances, the option to be assessed either as per the provisions of the treaty or the domestic law of the land.
In order to avoid any demand or refund consequent to assessment and to facilitate the process of assessment, it has been provided that tax shall be deducted at source
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out of payments to non-residents at the same rate at which the particular income is made taxable under the tax treaties.
4.2 Recent Developments Mauritius has promised full cooperation with India to address outstanding issues relating to their bilateral tax treaty, days after Prime Minister Narendra Modi's visit to the island nation. The much-talked about changes in India-Mauritius Double Taxation Avoidance Agreement (DTAA) have been hanging fire for a long time, despite several rounds of official level talks between the two sides.
Apprehensions persist that Mauritius is being used for round-tripping of funds into India even though the island nation has always maintained that there have been no concrete evidence of any such misuse.
Mauritius has been one of the largest sources for foreign direct investment in India and inflows touched USD 7.66 billion in the April 2014-January 2015 period. Reflecting the importance that Mauritius attaches to India, the reference about the bilateral
tax
agreement
was
made
by
its
Finance
Minister
Seetanah
Lutchmeenaraidoo in his Budget speech, "The clear statement made by Prime Minister Modi during his last visit in Mauritius has reassured all stakeholders in the global business sector that India will do nothing to harm this s ector,"
Lutchmeenaraidoo, who is also the Economic Development Minister, said, "We will cooperate fully with Indian authorities to bring to a fruitful conclusion our discussions on outstanding issues relating to the Double Taxation Avoidance Agreement (DTAA)," he said while presenting the Budget for 2015-16.
Regarding Agalega island, the Finance Minister said that with the assistance of Indian government "Rs 750 million will be invested in the construction of a new airstrip and new jetty facilities"
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During his visit, earlier this month, Modi and his Mauritian counterpart Anerood Jugnauth discussed the issues related to the tax treaty, "We appreciate that already India postponed the consideration of the GAAR until 2017. However, we have stressed on the initiatives taken by Mauritius to build substance within our offshore jurisdiction, "I have requested PM Modi to give his full support on the DTAA as it is of prime importance for our global business sector," Jugnauth had said during a joint press conference with Modi in Mauritisus on March 11.
In his response, Modi had said the two sides agreed to continue negotiations on the revised treaty based on shared objectives to prevent the "abuse" of the convention. He had also assured Mauritius that India would do nothing to harm its interests. "I also conveyed our deep appreciation for the support and cooperation offered by Mauritius on information exchange on taxation," Modi had said.
In the recent case of Sanofi tax, Andhra Pradesh High Court rules the double tax avoidance agreement between India and France exempts the French drug maker from capital gains tax relating to 90% stake in Shantha Biotech.
In a landmark judgment, the Andhra Pradesh High Court (APHC) on 15 February ruled that the French drug maker Sanofi Aventis, which (by buying another French firm ShanH) had acquired a 90% stake in the Hyderabad-based vaccine-maker Shantha Biotech in 2009, need not pay tax in India. The controversy dates back to 2006 when ShanH, a holding company, was incorporated in France as a joint venture (JV) between Merieux Alliance (MA) and Groupe Industriel Marcel Dassault (GIMD). The income tax authorities claimed that ShanH was formed as a shell company only with the intention of avoiding tax. They sought to lift the corporate veil to understand the structure of ShanH. Soon after its incorporation, ShanH acquired the Shantha stake in 2006. In 2009, it decided to sell that stake. So, MA and GIMD, founders of ShanH, sold their ShanH holding to Sanofi Pasteur Holding for an estimated Rs 3,700 crore. This MA-GIMD-Sanofi deal for ShanH had come under the income tax radar. The income tax authorities had raised a claim for about Rs 700 crore to be payable on account of capital gains. But Sanofi
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rubbished the claim in its petition. It said that ShanH was formed to make it “from the very first day the owner of the shares of Shantha”.
MA (Sanofi) had contested the income tax department's claim and the issue has since been going through rounds of adjudication. MA's contention is that the tax by the Indian authorities would tantamount to double taxation which is sought to be avoided by an India-France Double Taxation Avoidance Agreement (DTAA). Even Sanofi referred the tax issue to the Authority for Advance Rulings (AAR). However, the AAR ruled against Sanofi.and favoured the tax authorities. In response, Sanofi approached the Andhra Pradesh High Court.
The outcome of the case was a matter of interest for various other firms, particularly those contemplating mergers and acquisitions in India but protected by the DTAA concerned. "The (AP) High Court has clearly settled the law that the retrospective amendments have no impact on interpretation of the treaty provisions," said Rohit Jain, partner with law firm Economic Laws Practice that represented MA in the case. Analysts, too, expect the APHC order to encourage foreign investments, particularly from countries having DTAA with India. For, the APHC has provided clarity on how to interpret the provisions of the DTAA. "This order definitely gives boost to foreign investors in the country. It is a very positive development because there is clarity that such transactions are not liable for tax in cases of treaty agreements," said Vikram Doshi, partner with consultancy firm KPMG. However, income tax authorities may exercise the option of appealing against the APHC order in the Supreme Court. “I cannot comment anything on this order. The decision on whether or not to appeal has to be taken by the income tax department,” said S R Ashok, the counsel for the department.
Indian Income Tax Department (IT) filed a special leave petition (SPL) before the Supreme Court against the ruling by Andhra Pradesh High Court in Sanofi-Aventis double tax case. According to the report, in February 2013, the AP high court issued a ruling in favour of Sanofi-Aventis, a French pharmaceutical company, in a case filed by the IT Department seeking taxation of Sanofi's offshore transaction in India. The AP high court had ruled that transaction was only taxable in France under the India-France double taxation avoidance pact (DTAA). In its plea before
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the Apex Court, the IT Department had sought reconsideration of its ruling claiming that the high court's interpretation of DTAA was erroneous.
Previously, the IT Department had demanded Sanofi to pay Rs 700 crores in capital tax gains in the offshore transaction by Sanofi. Both the Authority for Advance Ruling’s order and the IT Department’s demand notice for Rs 985 crores for tax and interest, and Rs 985 crores for penalty were also rejected by AP High Court.
Sanofi's subsidiaries — Institut Merieux (IM), Groupe Industriel Marcel Dassault (GIMD) and ShanH were also involved in the case. ShanH SAS, a French subsidiary of Merieux Alliance, acquired by Sanofi Pasteur, bought a majority stake in Shantha Biotechnics in November 2008. IM and GIMD held 80% and 20% shares in ShanH, which were sold to Sanofi Aventis in August2009. Sanofi acquired 80% stake of Shantha Biotechnics in July 2009 at INR38 billion. The IT Department claimed that Shantha Biotech has formed a shell company, ShanH, prior to signing a tax avoidance deal. This claim was challenged by Sanofi in 2010. The IT Department sought to bring tax from these transactions to India, citing retrospective amendments to income-tax law in Budget 2012-13. Although the Division Bench ruled that the transaction was not designed for tax avoidance, it was rejected in the High Court.
4.2.1 Questions
1) What did Sanofi Aventis appealed in its petition? 2) What was the reason behind the controversy? 3) Why were many firms interested in the outcome of the case? 4) What is the outcome of the filed case? 5) How could the judgement turn out to be beneficial to the economy?
Solution-1: Quoting the provisions of the India-France DTAA, Sanofi said that where shares of a resident company of France are transferred, representing the participation of anything more than 10%, the capital gains are taxable only in France. Further, it contended that all other so-called rights, properties and assets
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held by a French resident, when transferred and even if located in India, are taxable in France.
Solution-2: The controversy started when the income tax authorities claimed that ShanH was formed as a shell company only with the intention of avoiding tax because soon after its incorporation, ShanH acquired the Shantha stake in 2006 and in some time, founders of ShanH sold their holding to Sanofi Pasteur Holding. This made the deal to come under Indian IT Department radar which filed a petition for a payment of capital tax gains in the offshore transaction by Sanofi.
Solution-3: The firms which were interested in the outcome were those firms which were expecting mergers and acquisitions in India but were threatened by the Double Taxation Avoidance Agreement (DTAA) with India. There was not much of clarity in the interpretation of the provisions of DTAA.
Solution-4: The Andhra Pradesh High Court, in February 2013, ruled that the offshore transaction was only taxable in France under the India-France DTAA and exempted the French drug maker from capital gains tax relating to 90% stake in Shantha Biotech. In the judgment, the APHC issued a ruling that the French firm Sanofi Aventis, which (by buying another French firm ShanH) had acquired stake in Shantha Biotech, need not pay tax in India.
Solution-5: Many analysts, after the judgement, have said that AP High Court has clearly settled the law that the ex post facto amendments have no impact on interpretation of the treaty provisions. They also expect that the order will also encourage foreign investments in the country, particularly from countries having DTAA with India. For, the APHC has provided clarity on how to interpret the provisions of the DTAA.
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CONCLUSION From the above study it can be said that Double Taxation Avoidance Agreement is very much helpful for avoiding double taxation not only that double taxation avoidance agreement can override the Income Tax Act, it is beneficial for the assessee too. But it should not be used in wrong manners to promote double non taxation or to unnecessarily or illegally reduce the tax liability or treaty shopping. It is essential that the Double Taxation Avoidance Agreement should have a clear provision which prevents DTAA from misuse (example: provision for anti treaty shopping etc). So to conclude it can be said the Double Taxation Avoidance Agreement should be used for good purposes like for the benefits of the assessee or to prevent a person from being taxed twice for the same income it should not be misused.
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BIBLIOGRAPHY Primary Source:
Bare Act – 1) Income Tax Act, 1961 Secondary Source: Websites:
C.S.Rajkumar,
Double
Taxation
Avoidance
Agreement
and
https://taxguru.in/income-tax/double-tax-avoidance-agreements-taxation.html,
Taxation, (Last
updated, Feb 20, 2012) CR Sukumar, France, not India is entitled to 650 crore in capital gains from Shantha Deal,
https://economictimes.indiatimes.com/news/economy/finance/france-not-india-is-
entitled-to-rs-650-crore-in-capital-gains-tax-from-shantha-deal-andhra-highcourt/articleshow/18524103.cms?intenttarget=no, (last updated, Feb 16, 2013) Mauritius
promises
India
full
cooperation
on
tax
treaty
issues,
https://economictimes.indiatimes.com/news/economy/foreign-trade/mauritius-promisesindia-full-cooperation-on-tax-treaty-issues/articleshow/46677575.cms?intenttarget=no, (Updated on March 24, 2015) Double Taxation, Wikipedia, https://en.wikipedia.org/wiki/Double_taxation, (Updated on 7 December 2017)
