Plain meaning of tax treaty entry-into-force clause controls availability of treaty benefit from the later assessment year

The India-Malta tax treaty was interpreted by its ordinary language, and the clause on entry into force in India was found to apply only to the fiscal year beginning on or after 1 April of the year following its entry into force. The Kerala HC rejected reliance on beneficial construction, contemporaneous administrative practice, punctuation arguments, and reddendo singula singulis, holding that none could override the clear treaty text. Section 90(2) of the Income-tax Act did not displace the express treaty wording where no ambiguity existed. Treaty benefit was therefore unavailable for assessment year 1996-97 and became available only from assessment year 1997-98.

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Issues: Whether the Double Taxation Avoidance Agreement between India and Malta became operative for the assessment year 1996-97 or only from the assessment year 1997-98.

Analysis: The treaty provision governing entry into force and application in India was read according to its ordinary language. The phrase fixing effect in India to the fiscal year beginning on or after 1 April of the calendar year next following the year of entry into force was held to be clear and unambiguous. The Court rejected reliance on strict construction in favour of the assessee, contemporaneous administrative interpretation, absence of punctuation, and the maxim reddendo singula singulis, holding that none of these altered the plain meaning of the clause. Section 90(2) of the Income-tax Act, 1961 was held not to override the explicit treaty language where no ambiguity existed.

Conclusion: The assessee was not entitled to the treaty benefit for the assessment year 1996-97, and the benefit became available only from the assessment year 1997-98. The issue was decided against the assessee and in favour of the Revenue.

Ratio Decidendi: Where the language of a tax treaty is plain and unambiguous, it must be given effect according to its ordinary meaning, and neither equity, administrative practice, nor a beneficial construction can be used to rewrite its terms.

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