ISSUE FOR CONSIDERATION
Section 90(1) of the Income-tax Act, 1961 (“IT Act”) provides that the Central Government may enter into an agreement with the government of any country outside India or any specified territory outside India for the granting of relief in respect of:
a) income on which taxes have been paid both in India and that country/territory,
b) income-tax chargeable under the IT Act and under the corresponding law in force in that country/territory, where the agreement is for:
i) the avoidance of double taxation of income under the IT Act and under the corresponding law in force in that country/territory, or
ii) exchange of information for the prevention of evasion or avoidance of income-tax, and for recovery of income-tax under the IT Act.
Section 90(2) of the IT Act provides that, an assessee can choose to apply the provisions of the DTAA or the IT Act, whichever is more beneficial.
Section 9 of the IT Act deems certain income to accrue or arise in India. Such income includes, inter alia, dividend, interest, royalties and fees for technical services (“FTS”) payable by a resident of India to a non-resident (clauses (iv), (v), (vi) and (vii)), subject to