Q. Consider the following statements::
Statement-I: Double Taxation Avoidance Agreements (DTAAs) cannot be automatically applied in India simply because it has been signed or ratified by India and the other contracting state.
Statement-II: Article 73 of the Constitution states that the executive can make international agreements, but they need legislative backing to become enforceable laws in India.
Which one of the following is correct in respect of the above statements?
Explanation –
Statements 1 and 2 are correct. The Supreme Court of India’s ruling in the case of Assessing Officer Circle (International Taxation) New Delhi Vs Nestle SA has significant implications for the way Double Taxation Avoidance Agreements (DTAAs) are implemented in India. The Court held that a formal notification under Section 90(1) of the Income Tax Act, 1961 is mandatory for giving effect to a DTAA or any protocol that alters its terms or conditions.
This means that a DTAA or its modification cannot be automatically applied in India simply because it has been signed or ratified by India and the other contracting state. They need to be notified in the official gazette by the Indian government to become enforceable in India.
Article 73 of the Constitution gives the executive the power to make international agreements, but the agreements must be approved by the Parliament to become enforceable laws in India. The ratification of international agreements is the prerogative of the Parliament, and the agreements have to be in conformity with the Constitution of India. In other words, the executive cannot bypass the Parliament to implement international agreements.
Source: ForumIAS
