Taxation Project

2015
Ria Tandon
UPES, Dehradun
1/5/2015
DOUBLE TAXATION AVOIDANCE
AGREEMENT : CROSSING OVER
THE SHORES!!

DOUBLE TAXATION AVOIDANCE AGREEMENT :
CROSSING OVER THE SHORES!!
2015
2 | P a g e
UNIVERSITY OF PETROLEUM & ENERGY STUDIES
COLLEGE OF LEGAL STUDIES
BA.,LLB.(HONS). ENERGY LAWS
SEMESTER- 8 th
ACADEMIC YEAR: 2014-15
TAXATION LAW
PROJECT SUBMISSION: DOUBLE TAXATION AVOIDANCE RELIEF
Under the Supervision of: Mr. Sujith Surendran
Name:
1.Ria Tandon
500017689
R-450211080

2015
3 | P a g e
INDEX
Serial Number Contents
1. CHAPTER 1: INTRODUCTION
 Concept in Brief
 About Double Taxation Avoidance Agreement
2.
CHAPTER 2: CONCEPTS IN GENERAL
 Need for Double Taxation
 Who are subject to the rule of this agreement?
 Types of Reliefs
 Language used in the Treaties
3. CHAPTER 3: LEGAL PROVISIONS
 Section 90 of the Income Tax Act
 Section 90 A of the Income Tax Act
 Section 90 A of the Income Tax Act
 Procedure for obtaining Relief
4.
CHAPTER 4: INTERNATIONAL SCENARIO
 Types of Model under DTAA
 Indian Scenario
5. CHAPTER 5: CASE ANALYSIS
 This case explains about the concept of Permanent
Establishments:
 Assessee to decide which will be beneficial

2015
4 | P a g e
 DTAA and Jurisdictional issues:-
 Treaty Shopping : Misuse of DTAA
6.
Misuse of DTAA CHAPTER 6:
 Status quo
 Conclusion

2015
5 | P a g e
CHAPTER 1: INTRODUCTION
i. Concept in Brief
In the present time of cross -outskirt exchanges over the world, because of extraordinary
development in universal exchange also, trade and expanding connection among the countries,
occupants of one nation amplify their circle of business operations to different nations where
wage is earned. A standout amongst the most critical aftereffects of globalization is the detectable
effect of one nation's household charge strategies on the economy of another nation. This has
prompted the requirement for ceaselessly evaluating the assessment administrations of different
nations and bringing about essential changes. Universal twofold assessment has antagonistic
consequences for the exchange and administrations and on development of capital and
individuals. Levy of the same wage by two or more nations would constitute a restrictive weight
on the citizen. In perspective of the above discourse, the article endeavors to assess different
aspects of two-sided Double Taxation Avoidance Agreements (DTAAs)1
with specific reference
to India's system of DTAAs as a device of assessment coordination utilized by countries2
to
convey rights to charge diverse bases in the worldwide financial lodge. All the more absolutely,
an endeavor has been made, in this article, to break down and give a brief record of the different
experiences in appreciation of twofold assessment shirking concurrences with India. By method
for Double Taxation Avoidance Agreements, every nation suits the cases of different countries
inside their financial stadium to create universal exchange and ventures with insignificant
boundaries. Nonetheless, the worldwide expense administration must be rebuilt always in order to
react to the present difficulties and downsides.
1 NRI TAX SERVICES,available at http://www.nritaxservices.com/ (Last Visited on 15th,April, 2015).
2 SHARMENDRA CHAUDHRY, DOUBLE TAXATION AVOIDANCE AGREEMENTS, available at ,
http://dx.doi.org/10.2139/ssrn.2036494 (Last Visited on 15 th , April, 2015).

2015
6 | P a g e
ii. About Double Taxation Avoidance Agreement
A standout amongst the most profoundly ensured wards of a nation is its monetary purview.
Accordingly, in the time of globalization, twofold levy3
keeps on being one of the significant
obstructions to the improvement of universal monetary relations. A person who earned salary
needs to pay impose in the nation in which the wage was earned furthermore in the nation in
which such individual was inhabitant. Accordingly, the obligation to duty on the previously stated
pay emerges in the nation of source and the nation of living arrangement. The Monetary
Committee of OECD in the Model Double Taxation Convention on Income and Capital, 1977,
characterizes twofold tariff as 'the inconvenience of tantamount assessments in two or more states
on the same citizen in appreciation of the same topic and for indistinguishable periods'. Though a
citizen's own nation (alluded to as home nation) has a sovereign right to expense him, the
wellspring of salary may be in some other nation (alluded to as host nation) which likewise
claims right to assessment the wage emerging in that nation. Countries are regularly compelled to
3
See, Rajkumar Adukia, ‘Double Taxation Avoidance Agreement and Taxation’, also available at
www.carajkumarraukia.com/articles/dtaa.doc , (Last Visited on 15 th , April, 2015).
Cause
•Cross Border Transaction
•There is a scenario of cross border transaction as that of across the globe hence there is a need
for a simpliefied sytem with respect to taxation.
•There is an impact of the tax policies of one country over the economy of the anothercountry.
Effect
•There is an urgent need with respect to immediately and continously assess the assess the tax
regimes which are persisting in various countries.
•The situation may arise wherein a person may be a resident of one country but has his/her
income being accrued from different country that is why the concept of double taxation comes
up.
Effect
•If Double Taxation is to be allowed then this will create a problem for the trade and the
services as well as the movement of the people and the goods
•This kind of taxation will reate a problem off burden on the assesse ofpaying more.

2015
7 | P a g e
examine and settle the cases of different countries by method for twofold assessment shirking
understandings, keeping in mind the end goal to cut down the obstructions to global exchange.
Twofold duty settlements are settlements between two nations, which incorporate the end of
global twofold tariff, advancement of trade of products, persons, administrations and speculation
of capital. This is on account of, the communication of two duty frameworks of two distinct
nations can bring about twofold tariff. Each nation looks for to assessment the wage created
inside its region on the premise of one or all the more joining variables, for example, area of the
source, habitation of assessable element et cetera. Twofold Taxation of the same pay would cause
extreme results on the eventual fate of global exchange. Nations of the world subsequently go for
wiping out the predominance of twofold assessment. Such assentions are known as "Twofold Tax
Avoidance Assentions" (DTAA) additionally termed as "Assessment Treaties". Taking after the
strides of most nations of the world that impose assess on salary/ capital, India has additionally
forced Income Tax on the "aggregate world wage" i.e. wage earned anyplace on the planet. The
outcome is that salary emerging to an inhabitant out of India is subjected to duty in India as it is a
piece of aggregate world salary and, additionally in host nation which gives the hotspot for that
salary. To stay away from the hardship of twofold assessment, Government of India has entered
into Double Taxation Avoidance Agreements with a few nations. The statutory power to go into
such assentions is vested in the Central Government by the procurements contained in Section 90
of the Salary Tax Act regarding which India has, before the end of March 2002, went into 64
assentions of this nature which manage distinctive sorts of pay which may be subjected to
twofold assessment. Subsequently, Two fold Tax Avoidance Agreements involve agreement
between two nations going for disposal of Two fold assessment. Twofold Taxation Avoidance
Agreements between two nations would concentrate on moderating the frequency of twofold
levy. It would advance trade of products, persons, administrations and venture of capital among
such nations. These are reciprocal financial understandings wherein the nations concerned.
DTAAs dealt with specialized skill and administration charges, decreased rates of expense on
profit, interest, also, sovereignties got by occupants of one nation from other. At the point when
the rate of expense is higher in the Indian Salary Tax Act, 1961 than the rate recommended in the
DDTA, then the rate endorsed in the DDTA might be connected i.e. the rate which is ideal to the
citizen would be connected. Contingent upon their extension, twofold assessment evasion
understandings are delegated Comprehensive and Limited. Far reaching DTAAs are those which
cover a wide range of salaries secured by any model tradition. Numerous a period a settlement

2015
8 | P a g e
covers riches assessment, blessing expense, surtax. And so on as well. While exhaustive Double
Taxation Agreements accommodate assessments on pay, capital additions and capital, Limited
Double Taxation Agreements allude just to wage from delivering and air transport,or domains,
legacy and endowments. Far reaching understandings guarantee that the citizens in both the
nations would be dealt with just as, in appreciation to issues identifying with twofold assessment

2015
9 | P a g e
CHAPTER 2: CONCEPTS IN GENERAL
i. Need for Double Taxation
Twofold assessment is the methodical burden of two or more assessments on the same pay (on
account of salary charges), resource (on account of capital duties), or budgetary exchange (on
account of offers assessments). It alludes to levy by two or more nations of the same salary,
resource or exchange, for instance, wage paid by a substance of one nation to an inhabitant of an
alternate nation. The twofold risk is regularly alleviated by duty arrangements between nations. In
this way, twofold levy can be characterized as the duty of assessments on pay/ capital in the
hands of the same citizen in more than one nation in appreciation of the same salary or capital for
the same period. The issue gets confounded since levy plans of diverse nations contain disparate
ideas viewing meaning of pay as source. The position gets to be peculiar in a circumstance where
an assessee dwelling in one nation wins wage in another nation4
, and the expense rates in both the
nations are higher than 50%. In the event that saddled at both places on the same wage the
assessee will be left with a negative pay. This is sure to influence the monetary development. To
stay away from such a hardship to people furthermore with a perspective to seeing that national
monetary development does not endure, Double Taxation Avoidance Agreements (D.T.A.A.) is
gone into with different nations. Such expense arrangements, thusly, fill the need of giving full
security to citizens against twofold tariff and in this way keep the debilitation which twofold
assessment may give in the free stream of global exchange and worldwide speculation. Moreover,
such arrangements for the most part contain procurements for common trade of data and for
decreasing case. Thusly, the requirement for Agreement for Double Tax Avoidance emerges due
to clashing guidelines in two diverse nations with respect to chargeability of pay in light of
receipt and collection, private status and so on. As there is no unmistakable meaning of salary and
taxability thereof, which is acknowledged globally, a wage may get to be obligated to assessment
4
APOORVA SHARMA, Double Taxation Avoidance Agreement and Impact of Advanced Pricing Agreement on
Indian Regime: A Comparative Study with Other Nations, available at , http://dx.doi.org/10.2139/ssrn.2338920
(Last Visited on 15 th, April, 2015).

2015
10 | P a g e
in two nations. In such a case, the two nations have an Agreement for Double Tax Avoidance, in
which case the potential outcomes are:
1. The wage is saddled just in one nation.
2. The wage is absolved in both nations.
3. The wage is saddled in both nations, yet credit for assessment paid in one nation is given
against expense payable in the other nation.
In India, the Central Government, acting under Section 90 of the Income Tax Act, has been
approved to go into twofold duty evasion assentions (hereinafter alluded to as expense bargains)
with different nations. The object of a Double Taxation Avoidance Agreement is to accommodate
the duty cases of two administrations both really inspired by burdened a specific wellspring of
salary either by relegating to one of the two the entire claim or else by endorsing the premise on
which duty cases is to be imparted between them. The need and motivation behind expense
bargains has been outlined by the OECD5
in the 'Model Tax Convention on Income and on
Capital' in the accompanying words: 'It is alluring to illuminate, institutionalize, and affirm the
monetary circumstance of citizens who are locked in, mechanical, budgetary, or whatever other
exercises in different nations through the application by all nations of normal answers for
indistinguishable instances of twofold levy'.
ii. Who are subject to the rule of this agreement?
A normal DTA Agreement in the middle of India and another nation normally covers persons,
who are occupants of India or the other contracting nation, which has gone into the concurrence
with India. An individual, who is not inhabitant both of India alternately of the other contracting
nation, would not be qualified for advantages under DTA Agreements. Worldwide twofold
assessment has unfriendly consequences for the exchange and administrations and on
development of capital and individuals. Assessment of the same salary by two or more nations
would constitute a restrictive weight on the citizen. The local laws of most nations, including
India, relieve this trouble by bearing one-sided help in admiration of such doubly exhausted pay
(Section 91 of the Income Tax Act). Anyhow, as this is not an agreeable arrangement in
perspective of the disparity in the guidelines for deciding wellsprings of pay in different nations,
the expense settlements attempt to uproot charge hindrances that repress exchange and
administrations and development of capital and persons between the nations concerned. It helps
5 Model Convention with respect to Taxes on Income and on Capital, also available at
http://www.oecd.org/ctp/treaties/2014-model-tax-convention-articles.pdf, (Last Visited on 15 th, April, 2015).

2015
11 | P a g e
in enhancing the general venture atmosphere. The requirement for Agreement for Double Tax
Avoidance emerges due to clashing principles in two unique nations with respect to chargeability
of pay taking into account receipt and gathering, private status and so on. As there is no
reasonable meaning of salary and taxability thereof, which is acknowledged globally, a pay may
get to be subject to duty in two nations. Twofold levy happens when an individual is obliged to
pay two or more charges for the same pay, resource, or money related exchange in diverse
nations. Twofold tariff happens fundamentally because of covering duty laws and regulations of
the nations where an individual works his business.
In such a case, the two nations have an Agreement for Double Tax Avoidance, in which case the
potential outcomes are:
 The salary is saddled just in one nation.
 The salary is excluded in both nations.
iii. Types of Reliefs
In India, Under Section 90 and 916
of the Income Tax Act, alleviation against twofold levy is
given in two ways:
One-sided RELIEF /Unilateral Relief
Under Section 91, an individual can be eased from twofold levy by Indian Government regardless
of whether there is a DTAA in the middle of India and the other nation concerned. One-sided
alleviation to a citizen may be offered if:
 The individual or organization has been an inhabitant of India in the earlier year.
 In India and in another nation with which there is no assessment bargain, the wage
ought to have been burdened.
 The assessment have been paid by the individual or organization under the laws of the
outside nation being referred to.
Reciprocal RELIEF /Bilateral Relief
6 GIRISH AHUJA & RAVI GUPTA, PRACTICAL APPROACH TO INCOME TAX ,(2009).

2015
12 | P a g e
Under Section 90, the Indian government offers assurance against twofold assessment by going into a
DTAA with another nation, taking into account commonly worthy terms. Such is offered under two of the
methods
 EXEMPTION METHOD: This guarantees complete shirking of assessment covering.
 TAX CREDIT METHOD This gives help by giving the citizen a derivation from the expense
payable
•Whereintheincomeof theperson
is subjectedto taxation becauseof
being the placeof thesourceof
income.
•This incomecanbe intheform of
the bussiness , or wherethe
property is located.
Source Rule
•The distinctionwith respectto this
rule has been made based on the
Source Ruleas to where the
income arises .
•Home Rule wherein itis basedon
the residentshipofthe person.
Double
Taxation •Under this theperson is considered
to be taxedin accordance with
his/her residentship .
•So if a person is resident of a
particular country thentheperson
will haveto pay the money as taxin
the countryoutise wherethe
person does business.
HomeRule

2015
13 | P a g e
iv. Language used in the Treaties
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 State7
- country which enters into Treaty
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. 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 are “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.
7 Double Taxation AvoidanceAgreement, Rajput Consultancy,PrivateLimited, (Last Visited on 15 th, April, 2015).

2015
14 | P a g e
CHAPTER 3: LEGAL PROVISIONS
i. Section 908
of the Income Tax Act
1. The Central Government may go into a concurrence with that of the Government of any nation
outside India or determined terriority which is outside India: For the allowing of alleviation in
appreciation of:
(i) wage on which have been paid both salary charge under this Act and pay –tax in that nation or
indicated terriotory , as the case may be, or
(ii) wage –tax chargeable under this Act and under this Act and under the comparing law in
power in that nation or indicated domain , as the case may be , to advance common monetary
relations , exchange and speculation, or
For the shirking of twofold tariff of pay under this Act and under the relating law in power in that
nation or indicated region, as the case might be,or For the trade of data for the counteractive
action of avoidance or shirking of pay expense chargeable under this Act or under the
corresponsding law in power in that nation or indicated region, as the case may be , or of
instances of such avoidance or evasion , or For recuperation of pay –tax under this Act .
2) Where the Central Government has entered into an agreement with the Government of any
country outside India or specified territory outside India, as the case may be, under sub-section
(1) for granting relief of tax, or as the case may be, 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.
(2A) 60
[***]
The following sub-section (2A) shall be inserted after sub-section (2) of section 90 by the Finance
Act, 2013, w.e.f. 1-4-2016 :
8 Refer to Section 90 of the Income Tax Act.

2015
15 | P a g e
(2A) Notwithstanding anything contained in sub-section (2), the provisionsof ChapterX-A of the
Act shall apply to the assessee even if such provisions are not beneficial to him.
(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.
[(4) 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 62
[a certificate62a
of
his being a resident] in any country outside India or specified territory outside India, as the case
may be, is obtained by him from the Government of that country or specified territory.]
[(5) The assessee referred to in sub-section (4) shall also provide such other documents and
information, as may be prescribed
ii. Section 90 A of the Income Tax Act
90A9
. Adoption by Central Government of agreement between specified associations for double
taxation relief.- (1) 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 such provisions as may be necessary for adopting and
implementing such agreement—
(a) for the granting of relief in respect of—
(i) income on which have been paid both income-tax under this Act and income-tax in any
specified territory outside India; or
(ii) income-tax chargeable under this Act and under the corresponding law in force in that
specified territory outside India 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 specified territory outside India, or
9 Refer to Section 90 A of the Income Tax Act.

2015
16 | P a g e
(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 specified territory
outside India, 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
specified territory outside India.
(2) Where a specified association in India has entered into an agreement with a specified
association of any specified territory outside India under sub-section (1) and such agreement has
been notified under that sub-section, for granting relief of tax, or as the case may be, 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.
(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.
iii. Section 91 ofthe Income Tax Act
Countries with which no agreement exists.-
(1) If any person who is resident in India in any previous year proves that, in respect of his
income which accrued or arose during that previous year outside India10
(and which is not
deemed to accrue or arise in India), he has paid in any country with which there is no agreement
under section 90 for the relief or avoidance of double taxation, income-tax, by deduction or
otherwise, under the law in force in that country, he shall be entitled to the deduction from the
Indian income-tax payable by him of a sum calculated on such doubly taxed income at the Indian
rate of tax or the rate of tax of the said country, whichever is the lower, or at the Indian rate of tax
if both the rates are equal.
10 Refer to Section 91 of the Income Tax Act.

2015
17 | P a g e
(2) If any person who is resident in India in any previous year proves that in respect of his income
which accrued or arose to him during that previous year in Pakistan he has paid in that country,
by deduction or otherwise, tax payable to the Government under any law for the time being in
force in that country relating to taxation of agricultural income, he shall be entitled to a deduction
from the Indian income-tax payable by him—
(a) of the amount of the tax paid in Pakistan under any law aforesaid on such income which is
liable to tax under this Act also; or
(b) of a sum calculated on that income at the Indian rate of tax;
whichever is less.
(3) If any non-resident person is assessed on his share in the income of a registered firm assessed
as resident in India in any previous year and such share includes any income accruing or arising
outside India during that previous year (and which is not deemed to accrue or arise in India) in a
country with which there is no agreement under section 90 for the relief or avoidance of double
taxation and he proves that he has paid income-tax by deduction or otherwise under the law in
force in that country in respect of the income so included he shall be entitled to a deduction from
the Indian income-tax payable by him of a sum calculated on such doubly taxed income so
included at the Indian rate of tax or the rate of tax of the said country, whichever is the lower, or
at the Indian rate of tax if both the rates are equal.
Explanation.—In this section,—
(i) the expression “Indian income-tax” means income-tax charged in accordance with the
provisions of this Act;
(ii) the expression “Indian rate of tax” means the rate determined by dividing the amount of
Indian income-tax after deduction of any relief due under the provisions of this Act but before
deduction of any relief due under this Chapter, by the total income;
(iii) the expression “rate of tax of the said country” means income-tax and super-tax actually paid
in the said country in accordance with the corresponding laws in force in the said country after
deduction of all relief due, but before deduction of any relief due in the said country in respect of
double taxation, divided by the whole amount of the income as assessed in the said country;
(iv) the expression “income-tax” in relation to any country includes any excess profits tax or
business profits tax charged on the profits by the Government of any part of that country or a
local authority in that country.

2015
18 | P a g e
iv. Procedure for obtaining Relief
The most effective method to benefit advantages under the DTAA Any NRI can benefit
advantages under the DTAA by opportune accommodation of archives recorded underneath to the
deductor.
 Charge Residency Certificate (TRC)
 Self-verified duplicate of PAN Card
 Self-announcement cum repayment organization (organizations of such letter are availabe
in the bank site)
 Self-bore witness to duplicate of Passport and Visa
 Duplicate of PIO Proof (pertinent if the international ID has been reestablished amid the
Financial Year)
Obligatory points of interest to be incorporated in the TRC
 Name of the assessee
 Status (individual, organization, firm and so forth.) of the assessee
 Nationality (if there should be an occurrence of person)
 Nation or indicated domain of joining or enrollment (in the event of others)
 Assessee's duty ID number in the nation or indicated region of habitation or in the event
that no such number, then a special number on the premise of which the individual is
distinguished by the Government of the nation or the predefined domain
 Private status for the reasons of duty
 Period for which the endorsement is relevant
 Location of the candidate for the period for which the endorsement is relevant
The testament containing above points of interest ought to be rightfully confirmed by the
Government of the nation or the predetermined region of which the NRI cases to be an occupant
for the reasons of assessment.
Overhaul May 21, 2013: You may read the Finance Bill Amendment on "TRC – Can be a
definitive proof yet must be bolstered by endorsed records"

2015
19 | P a g e
Step by step instructions to get the TRC
You can approach the expense/government powers of the abroad where you dwell to get the TRC.
You might likewise check with your Chartered Accountant/ Tax Consultant abroad on the
strategy to get the same. Keep in mind! No other archive in lieu of the TRC is considered for
benefitting the advantages under DTAA.
Presently the inquiry may emerge, whether you have to present these reports consistently to
benefit advantages under the DTAA? Answer is; Yes! DTAA advantage is reached out on a
yearly premise. In this way, any NRI is obliged to give all the essential records consistently to
keep profiting the advantage under DTAA.
Additionally what happens if one (here NRI) doesn't submit TRC11
and different reports to the
bank inside stipulated timetables? In such case, the bank will need to deduct premium earned on
NRO stores at the in a matter of seconds appropriate rate of 30.90
11 Shankar P B, How Non-Residents in India can claim tax relief under Double Taxation Avoidance Agreement, The
Economic Times, also available at http://articles.economictimes.indiatimes.com/2012-12-06/news/35647719_1_tax-
treaty-tax-residency-certificate-indian-tax, (Last Visited on 15 th, April, 2015).
Person who claims
the credit or tax
exemtption
Self-declaration&
identity form.
Self-attestedXerox
of passport & visa.
Self-attestedXerox
of Pan Card.
Tax Residency
Certificate

2015
20 | P a g e
• This provision has been given or the relief of that of some
kind is provided by the Hope even if there is no agreement
which has been enteredintobetweenthe two countries
• This provision is given under Section 91 of the Income Tax
Act , wherein the government can relieve the person from
the double taaxation even if there is no Double Tax
Avoidance Agreement.
• This can arise in followingsituations-:
• a) If the company or the person has been a resident in the
country in thepreviousyear.
• b) If the company or the person has paid the tax as that
under the laws of the foreign country.
• The same income has been gained as well as received by
the assesse outside India in that ofthe previous year .
• The income has been taxed both in India and in the country
with which India has no taxtreaty.
Unilateral
Relief
•Under this method or the rule Government of
the two countries enter into an agreement
against the double taxation. India has entered
into an agreement with around 50 countries.
•Methods which are employed are:
•a) Exemtption Method where income is taxed in
only one of the two countries which are there.
•b) Tax Relief Method is one under which the
taxation happens in both the country according
to the tax laws of the respective countries in
accordance of the adouble taxation avoidance
agreement. The country of residence allows for
the credit for that of the tax charged thereon in
that of the country..
Bilateral
Relief

2015
21 | P a g e
CHAPTER 4: INTERNATIONAL SCENARIO
i. Types of Model under DTAA
There are distinctive models grew over a time of time in view of which arrangements are drafted
and arranged between two countries. These models support in keeping up consistency in the
organization of assessment arrangements. They additionally serve as agenda for guaranteeing
thoroughness or procurements to the two arranging nations.
OECD Model, UN Model, the US Model and the Andean Model are few of such models. Of these
the initial three are the most conspicuous and regularly utilized models. Nonetheless, a last
understanding could be mix of distinctive models.
OECD MODEL- Organization of Economic Co-operation and Development (OECD) Model
Double Taxation Convention on Salary and on Capital, issued in 1977, 1992 and 1995. OECD
Model is basically a model settlement between two created countries. This model supporters
living arrangement guideline, that is to say, it lays accentuation on the privilege of condition of
home to assessment.
UN MODEL- United Nations Model Double Taxation Convention12
in the middle of Developed
and Developing Countries, 1980. The UN Model gives more weight to the source standard as
against the living arrangement guideline of the OECD model. As a correlative to the standard of
tariff at source the articles of the Model Convention are predicated on the reason of the
acknowledgment by the source nation that (a) levy of wage from outside capital would consider
costs allocable to the profit of the wage so that such pay would be exhausted on a net premise,
that (b) assessment would not be so high as to demoralize speculation and that (c) it would
consider the fittingness of the imparting of income with the nation giving the capital.
Furthermore, the United Nations Model Convention epitomizes the thought that it would be
proper for the living arrangement nation to amplify a measure of alleviation from twofold
12 United Nations Model Double Taxation Convention between Developed and Developing Countries, also available
at http://www.un.org/en/development/desa/publications/double-taxation-convention.html and
http://www.un.org/esa/ffd/wp-content/uploads/2014/09/UN_Model_2011_Update.pdf, (Last Visited on 15 th, April,
2015).

2015
22 | P a g e
assessment through either remote assessment acknowledge or absolution as in the OECD Model
Convention. The greater part of India's arrangements are in light of the UN Model.
United States Model Convention of September , 1996. The US Model is not the same as OECD
and UN Models in numerous regards. US Model has secured its distinction through radical flight
from normal arrangement conditions under OECD Model and UN Model.
ii. Indian Scenario
As indicated by the World Investment Report (UNCTAD, 2009), starting 2008 there were 2805
thorough then again constrained two-sided settlements between nations from a conceivable most
extreme of around 50,000 arrangements. These settlements are generally between nations with
significant exchange or other monetary relations. Most arrangements are between sets of created
nations while, of the equalization, most are in the middle of created and creating nations.
DTAAs13
(a) give corresponding concessions to moderate twofold levy, (b) allot assessment
rights generally as per that "current agreement" portrayed underneath and (c) to a great extent
however not unbendingly take after the OECD Model Tax Convention14
or, for creating nations,
the UN Tax Convention. Later arrangements contain new statements taking after the OECD
Model Tax Conventions of 2005 to 2010 which augment regions of collaboration to regulatory
and data issues. While current arrangements bargain essentially with the right to assessment
earnings and, sometimes, capital, the OECD‟s late Model VAT Guidelines could extend the
extent of two-sided bargains in future to additionally cover the VAT (Owens, 2002). An average
DTA Agreement in the middle of India and another nation covers just inhabitants of India and the
other contracting nation who has gone into the concurrence with India. An individual who is not
occupant both of India or of the other contracting nation can't guarantee any advantage under the
said DTA Agreement. Such understanding by and large gives that the laws of the two contracting
states will represent the levy of pay in individual states aside from when express procurement
despite what might be expected is made in the assention.
13 DTAA,available at http://businesstoday.intoday.in/story/how-treaties-with-foreign-countries-can-help-nrissave-
tax/1/194401.html (Last Visited on 1 5 th, April,2015).
14 Deepshikha Sikarwar, India finally gets a say in OECD tax convention, The Economic Times, also available at
http://articles.economictimes.indiatimes.com/2008-07-25/news/27707004_1_treaty-benefits-model-convention-tax-
treaties, (Last Visited on 15 th, April, 2015).

2015
23 | P a g e
CHAPTER 5: CASE ANALYSIS
i. This case explains about the concept of Permanent Establishments:
Rolls Royce Industrial Power Limited v. ACIT 15
: The Delhi ITAT explained the scope of Article
26(2) of that of the Indo –UK DTAA ( this dealth with the PE of that of the non-resident should
not be treated unfavorably as against the residents). As per the observation which was noted by
ITAT , stated that with respect to non-discrimination clause, the followings things were required
to be noted firstly that the foreign company is being taxed which is more burdensome as
compared with that of the Indian Company and secondly , the resident company which is being
compared should be in similar business to the non-resident company.
ii. Assessee to decide which will be beneficial
CIT vs.Vishakhapatnam Port Trust16
- This case explained the rule which has been stated under
section 90 (2) was recognized as by the High Court of Andhra Pradesh , . After this there was the
famous case of the Union of India vs. Azadi Bachao Andolon, wherein the Supreme Court had
recognized the same. Section 90 (2) states the provisions that there is a benefit to decide the
income tax for one type of the income and the DTAA for that of the other type income. Hence if
there is a problem like this then based on the letter of law both the options shall be tried.
iii. DTAA and Jurisdictional issues:-
The question which arose is who can tax the income ? So it is better to know as to who has the
right to do so when DTAA has been entered into. So the options are the country where the
income comes from or the country taxpayer resides.
The Madras High Court in the case of CIT vs. V.R.S.M Firm and other17
s as well as the
Karnataka High Court in the case of CIT vs. R.M. Muthaiah18
it was stated that if the tax is being
15 Rolls Royce Industrial Power Limited v. ACIT, also available at
https://www.taxmanagementindia.com/visitor/Detail_Case_Laws.asp?ID=205363&text=Rolls%20royce%20industri
al%20power%20ltd, (Last Visited on 15 th, April, 2015).
16 CIT vs. VISAKHAPATNAM PORT TRUST, also available at http://www.indiankanoon.org/doc/865397/ (Last
Visited on 15 th, April, 2015).
17 208 ITR 400.
18 19CIT vs. R. M. Muthaiah,available at, http://indiankanoon.org/doc/1675748/, (Last Visited on 15 th, April,
2015).

2015
24 | P a g e
charged by one state then the other contracting party has no right to do the same on the same
income.
iv. Treaty Shopping : Misuse of DTAA
Misuse takes place when it comes to DTAA when an asssesse wishes to do a transaction through
that of another country , with which there is beneficial treaty with India in so as to reduce his tax
liability.
In the famous case Union of India v. Azadi Bachao Andolan19
: It was stated that DTAA aim was
not to have the iclusion of a person fro m that of the third world country and to stop them from
taking the benefit of the terms which were favorable. Hence it is the responsibility of that of the
parliament to see that the re is no problem or discrimination id there is no specific provision then
everyone has the right to avail the favorable tax understanding that the treaty shopping is not
allowed.
v. Misuse of DTAA
In the case of Turquoise Investment Case ( 300 itr 1):20
It was stated that the Tax credit method of
the double taxation shall be there if the tax which is to be made payable is there in both of the
countries. In terms of that of the article 11 of DTAA with Malaysia the income which was
derived by the assessee from the company based in Malyasia was not made liable to be taxed in
India.
In the case of CIT VS. Hyundai Industries Co.Ltd21
. – A Korean company which is the assessee
had entered into an agreement with ONGC for the work of designing , hook up and other of the
platform work at the Bombay High Court in India and the contract was entered in that of the two
parts : firstly fabrication of the platform in Korea and other was with respect to the installation
and commissioning of the platform at Bombay High Court it was said or held that the installation
was the permanent establishment and in India on the conclusion of the transaction which gave
rise to the supplies of that of the fabricated platform and it emerged after the contract with that of
19 263 ITR 706 at pages 746 – 753.
20 Turquoise Investment Case ( 300 itr 1), also available at http://indiankanoon.org/doc/559475/, (Last Visited on 15
th, April, 2015).
21 CIT VS. Hyundai Industries Co. Ltd, also available at http://indiankanoon.org/doc/559475/, (Last Visited on 15
th, April, 2015).

2015
25 | P a g e
ONGC had stood to be concluded and the plaforms were delivered by the agents from Korea to
ONGC so the profits were seen to be arising for Korean Operations hence were not liabled to be
taxed in India.

2015
26 | P a g e
CHAPTER 6:
i. Status quo
 The Finance Minister asked for the review of the 77 DTAA so as to see their compliance
along the guidelines of OCED with respect to the information involving the flow of the
blackmoney and to achieve India’s commitment at G-20 Summit.
 India has a network of that of 126 22
DTAA, the ldest being with Greece which was
signed in the year of 1965. India is also on the verge of being in negotiation 12 of the
treaties with autonomous territories and is also now the signatory to that of 2005
multilateral SAARC avoidance of double taxation convention and that of some other
bilateral treaties which are there.
 India and the other two of the low tax countries had signed in the early 1990’s while
after 2000 it was seen that India’s treaties with those countries with which it has limited
relations.
ii. Conclusion
India’s tax treaties are basically a combination of both the models be it OECD and U.N. model.
However emphasis is given more to the source country taxation system which is considered to be
in objective as well as rationale of the U.N. Model.The language which is used in many
agreement are differeing, hence no staright –jacket formula can be adopted unilatelly for all the
cases. India has entered into agreement with those countries with which it does not have
economic relations , hence this can turn out to be disadvantageous to the country
22 Income Tax Department, Government of India, also available at
http://www.incometaxindia.gov.in/Pages/international-taxation/dtaa.aspx, (Last Visited on 15 th, April, 2015).

2015
27 | P a g e

2015
28 | P a g e

2015
29 | P a g e

2015
30 | P a g e

Taxation Project

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (20)

Semelhante a Taxation Project

Semelhante a Taxation Project (20)

Mais de Ria Tandon

Mais de Ria Tandon (6)

Taxation Project