Case Law Details
Assessing Officer Circle (International Taxation) Vs Nestle SA (Supreme Court)
Introduction: The recent Supreme Court judgment in Assessing Officer Circle (International Taxation) 2(2)(2) New Delhi Vs Nestle Sa has shed light on the necessity and mandatory condition of a notification under Section 90(1) for a court, authority, or tribunal to give effect to a Double Taxation Avoidance Agreement (DTAA) or any protocol altering its terms. In this article, we’ll delve into the key aspects of this ruling and its implications.
The Case Background: The case revolved around the interpretation of the Most Favored Nation (MFN) clause in DTAA. Specifically, it addressed whether the MFN clause should be automatically enforced or if it requires a separate notification. The leading precedent in this matter was Steria India Ltd Vs CIT [(2016) 386 ITR 390 (Del)].
Steria’s Argument: Steria argued that clause 7 of the Protocol in the Indo-French DTAA did not necessitate a separate notification and should be immediately operational. The Authority for Advance Rulings (AAR) did not concur with this interpretation initially. However, Steria’s position found favor when it sought recourse through a writ petition before the High Court. The High Court ruled that a protocol is an integral part of the treaty and doesn’t require a separate notification for the MFN clause’s application.
The ASG’s Argument: The learned Additional Solicitor General (ASG) contended that treaties are unenforceable without enabling parliamentary legislation. Citing Section 90, the ASG emphasized the necessity of notification for any treaty or convention’s effect, invoking the Gramophone India and Azadi Bachao judgments as supporting references.
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