TaxTMI 
TaxTMI 
2009 (11) TMI 21
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.... Agreement Procedure), ratification and adoption of Uruguay Round Final Act (WTO Treaty) and the provisions relating to the MAP set forth in the CBDT's Instruction as also under the Income Tax Rules 1962. 2. The petitioner took us through the pleadings and the various synopsis filed by him to firstly contend that in matters of taxation the mode adopted by the Central Government was impermissible. The petitioner is, however, conscious of the observations made by the Supreme Court in Union of India & Anr. Vs. Azadi Bachao Andolan & Anr. (2004) 10 SCC 1 pointed out by learned counsel for the respondents in which proceedings he had appeared. The question of Double Taxation Avoidance Treaties specifically forms subject matter of discussion and enunciation of law in that behalf inter alia is in the following paragraphs: "19. When it comes to fiscal treaties dealing with double taxation avoidance, different countries have varying procedures. In the United States such a treaty becomes a part of municipal law upon ratification by the Senate. In the United Kingdom such a treaty would have to be endorsed by an order made by the Queen-in-Council. Since in India such a treaty would have t....
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....x to a level lower than what has been provided in the tax treaty. 43.1. Since the tax treaties are intended to grant tax relief and not put residents of a contracting country at a disadvantage vis-à-vis other taxpayers, Section 90 of the Income Tax Act has been amended to clarify that any beneficial provision in the law will not be denied to a resident of a contracting country merely because the corresponding provision in the tax treaty is less beneficial." …. …. …. …. …. …. …. …. …. 30. Though a number of interconnected and diffused arguments were addressed, broadly, the argument of the respondents appears to be as follows: by reason of Article 265 of the Constitution, no tax can be levied or collected except by authority of law. The authority to levy tax or grant exemption therefrom vests absolutely in Parliament and no other body, howsoever high, can exercise such power. Once Parliament has enacted the Income Tax Act, taxes must be levied and collected in accordance therewith and no person has the power to grant any exemption therefrom. The treaty-making power under Article 73 is confined only to such matters as would not fall within the province of A....
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....aforesaid adjudication, it is not permissible for us to go into this question and the hierarchy of courts must be respected where the enunciation of law by the highest court is binding on us. The petitioner states that these are in the nature of observations which are obiter and does not reflect the ratio. We are unable to accept this plea on a bare reading of the judgement. 4. The second aspect urged by the petitioner arises from the plea relating to the procedure to be adopted by the Government of India while entering into treaties. It is the submission of the petitioner that the requirement is of such treaties to be placed in Parliament and approval sought once they have a ramification on the various aspects of municipal governance of the country. Petitioner submits that this issue was not really discussed in Union of India & Anr. Vs. Azadi Bachao Andolan & Anr. case (supra) though there are some stray observations. The observations which are sought to be relied upon by the respondents are contained in para 18 of the judgement: "18. The power of entering into a treaty is an inherent part of the sovereign power of the State. By Article 73, subject to the provisions of the C....
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.... by the petitioner are covered by observations of the Supreme Court albeit not reflecting the correct legal position as per the petitioner. 7. One of the serious challenges sought to be raised by the petitioner is that the system of governance in our country has to be satisfied on the touchstone of the Constitution. The Parliament, the Executive and the Judiciary are all creations of the Constitution which is supreme. It is, thus, the submission of the petitioner that it can never be pleaded on behalf of the respondents or portrayed in different forums that this basic touchstone is not to be satisfied while entering into international treaties. In this behalf the petitioner seeks to refer to the principle of "Reductio ad absurdum" to canvas the proposition that where one assumes a claim for the sake of argument and derive an absurd or ridiculous outcome then the natural conclusion is that the original claim must have been wrong as it led to an absurd result. As an illustration the petitioner submits that could an executive through a treaty establish any highest legislative or judicial body for India in some foreign land whose writ would run on the constitutional organs of the Re....
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....ra 1 "it is humbly submitted that the Government of India can only enter into a treaty in conformity with the constitutional provisions laid down in the Constitution of India". 10. The submission of learned counsels for the respondents is that the petition is predicated on a hypothetical exercise seeking declaration in respect of various aspects for which no declaration is required. It is their contention that this Court is not required to declare as an abstract proposition that the provisions of Constitution of India must be adhered to because there is no lis in this behalf. It is submitted that no one can dispute that the Constitution of India is supreme. 11. The stand of the respondents, thus, is that WTO Agreement incorporates and carries forward the concept of most favoured treatment from all other member countries and is in furtherance of the consistent support by India of an orderly multilateral trading system. This is stated to be beneficial to the developing countries whose economic leverage is limited. Insofar as making a treaty, ratifying a treaty and acceding to the treaty is concerned, the same has to be in conformity with the powers conferred under Articles 73 a....