TaxTMI 
TaxTMI 
Streamlining Double Taxation Relief and International Tax Agreements : Clause 159 of Income Tax Bill, 2025 Vs. Section 90A of Income Tax Act, 1961
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.... regarding double taxation relief, adoption of agreements with foreign countries and specified territories, and the procedural framework for such agreements. This clause is intended to replace and consolidate the existing framework under section 90A of the Income Tax Act, 1961, and is implemented in conjunction with procedural rules such as Rule 21AB of the Income-tax Rules, 1962. The significance of Clause 159 lies in its comprehensive approach to tackling double taxation, facilitating exchange of information, and ensuring compliance with evolving international standards in cross-border taxation. The following commentary provides a detailed analysis of Clause 159, its objectives, operative provisions, practical implications, and a comparat....
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....itory" is defined in sub-section (9) as any area outside India notified by the Central Government. The purpose of such agreements is further elaborated in sub-section (3), encompassing relief from double taxation, exchange of information, and tax recovery mechanisms. The provision for notification ensures that any agreement entered into by the Central Government is operationalized through a formal process, thereby ensuring transparency and enforceability. This mirrors the existing framework u/s 90A(1), but Clause 159 makes explicit reference to both countries and specified territories, providing greater flexibility for India to engage with non-sovereign jurisdictions (e.g., territories with special tax regimes). Agreements by Specified As....
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....D's BEPS (Base Erosion and Profit Shifting) project and the Multilateral Instrument (MLI). * Exchange of Information: Agreements may provide for the exchange of information to prevent or investigate tax evasion or avoidance. This is critical for effective international cooperation and enforcement. * Recovery of Income-tax: The provision allows for mutual assistance in the recovery of taxes, which is increasingly important in a globalized world where assets and taxpayers are mobile. These purposes are largely reflective of Section 90A(1), but Clause 159 provides a more detailed and structured articulation, particularly with respect to anti-abuse measures. Application of More Beneficial Provisions Clause 159(4) provides that, where....
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....ct's definition applies. * If not defined in either, the meaning assigned in a notification by the Central Government applies. * If still undefined, the meaning in other Central Government tax laws or, failing that, in other Central Government laws applies. This is a more elaborate version of the interpretive rules found in Section 90A(3), and the various explanations, providing greater clarity and reducing the scope for interpretive disputes. Conditions for Claiming Relief by Non-residents Clause 159(8) stipulates that a non-resident assessee can claim relief under an agreement only if: * A certificate of residence is obtained from the government of the relevant country or specified territory, and * Such other documents and ....
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....mparative Analysis with Section 90A and Rule 21AB 1. Structural and Substantive Similarities * Both Clause 159 and Section 90A empower specified associations to enter into agreements for double taxation relief, subject to adoption by the Central Government. * The purposes for which agreements may be entered (relief from double taxation, avoidance of double taxation, exchange of information, recovery of tax) are substantially identical. * Both provisions require that the Act's provisions shall apply to the extent they are more beneficial to the assessee. * The anti-abuse override (application of GAAR/Chapter XI or X-A even if not beneficial) is present in both. * The interpretive hierarchy for undefined terms is present in bot....
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....-abuse measures) rather than only Chapter X-A (GAAR) as in Section 90A(2A). 3. Rule 21AB: Procedural Framework Rule 21AB operationalizes the requirements of Section 90A(4) and (5) (and, by extension, Clause 159(8)), by prescribing the information and documentation (in Form 10F) that must be furnished by non-resident taxpayers seeking treaty relief. The rule also provides for the maintenance of supporting documents and the process for Indian residents to obtain certificates of residence. Clause 159(8) refers to "such other documents and information as prescribed," which will likely continue to be governed by Rule 21AB or its successor under the new regime. The procedural emphasis on documentation and verification is a key compliance saf....