Section 90 of the Act, empowers the Central Government to enter into an agreement with foreign countries or specified territories for the purpose of granting reliefs particularly in respect of double taxation. Under this power, the Central Government has entered into various treaties commonly known as Double Taxation Avoidance Agreements (DTAA’s).
Section 90A of the Act similarly empowers the Central Government to adopt and implement an agreement between a specified association in India and any specified association in a specified territory outside India for granting relief from ‘double taxation’ etc. on the lines of section 90 of the Act.
Sub-section (3) of sections 90 and 90A of the Act empowered the Central Government to assign a meaning, through notification, to any term used in the Agreement, which was neither defined in the Act nor in the agreement.
Since this assignment of meaning is in respect of a term used in a treaty entered into by the Government with a particular intent and objective as understood during the course of negotiations leading to formalization of treaty, the notification under section 90(3) gives a legal frame work for clarifying the intent, and the clarification should normally apply from the date when the agreement which has used such a term came into force.
Therefore, the legislative intent of sub-section (3) to section 90 and section 90A that whenever any term is assigned a meaning through a notification issued under Section 90(3) or section 90A(3), it shall have the effect of clarifying the term from the date of coming in force of the agreement in which such term is used, needs to be clarified.
It is proposed to amend Section 90 of the Act to provide that any meaning assigned through notification to a term used in an agreement but not defined in the Act or agreement, shall be effective from the date of coming into force of the agreement. It is also proposed to make similar amendment in Section 90A of the Act.
The amendment in section 90 will take effect retrospectively from 1st October, 2009 and the amendment in section 90A shall take effect retrospectively from 1st June, 2006.