This document discusses double taxation avoidance agreements and their impact in India. It begins by defining double taxation as the imposition of two or more taxes on the same income, assets, or financial transactions in different countries. It then outlines the basic rules of source taxation and residence taxation. The document discusses India's double taxation avoidance agreements (DTAAs) with over 85 countries, which agree on tax rates and jurisdiction to avoid double taxation. Sections 90 and 91 of the Indian Income Tax Act provide bilateral and unilateral relief from double taxation. Finally, it briefly outlines the exemption method, credit method, and tax sparing method for eliminating double taxation through these agreements.

1. RELEVANCE OF DOUBLE TAXATION
AVOIDANCE AGREEMENT AND ITS
IMPACT IN INDIA
Presented by
M. Amudha

2. INTRODUCTION
Era of cross border
transactions
unique growth in
international trade and
commerce &
increasing interactions
among nations
residents of one
country extend their
sphere of business
operations to other
countries where
income is earned

3. Where a taxpayer is resident in one country but
has a source of income situated in other
country, it gives rise to possible double taxation

4. DOUBLE TAXATION – MEANING AND SCOPE
Double taxation is
imposition of two or
more taxes on the same
income, assets or any
financial transaction in
different countries.
Double taxation occurs
mainly due to
overlapping tax laws and
regulations of countries
where an individual does
business.
Eg. When an Indian
businessman makes a
profit or some taxable
gain in another country,
he may be required to
pay Tax on that income
in India, as well as in
country in which Income
was made.

5. TWO BASIC RULES
• The source rule holds that income is to be taxed in the country in
which it originates irrespective of whether the income accrues to a
resident or a non-resident. [The source of income may be in some
other country]
Source rule:
• The residence rule stipulates that the power to tax should rest with
the country in which the taxpayer resides. [Tax payer’s own country]
Residence rule:
home country
host country

6. ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD. VS. DIT
In this case, the assessee company provided services to persons resident in India. It is a non-resident company incorporated in
Japan. A project for setting-up a liquefied natural gas (LNG) receiving, storage and re-gasification facility in Gujarat. The contract
involved: (i) off-shore supply, (ii) off-shore services, (iii) on-shore supply, (iv) on-shore services and (v) construction and erection.
Issue : WHETHER FEE FOR TECHNICAL SERVICES PAYABLE TO NON-RESIDENT IS TAXABLE?
HELD: Territorial nexus for the purpose of determining the tax liability is an internationally accepted principle. Whatever is payable
by a resident to a non-resident by way of fees for technical services, thus, would not always come within the purview

7. CONCEPTS OF DOUBLE TAXATION
The same person is taxed twice on the same income by more than one state.
Juridical Double Taxation:
• Where a person is a resident of a Contracting State (R) and derives income from, or owns capital in, the
other Contracting State (S or E) and both States impose tax on that income or capital.
If more than one person is taxed on the same item.
Economical Double Taxation:
• Say for example, where the tax law of one state creates a nexus in respect of an item of capital to its legal owners and the tax law of the other state links that
item of capital to the person who controls possession or has an economic benefit.

8. DOUBLE TAXATION
AVOIDANCE AGREEMENT
Referred as Tax Treaty
A bilateral economic agreement between two nations
Aims to avoid or eliminate double taxation of the same income in two countries .
Negotiated under public international law
Governed by the principles laid down under the Vienna Convention on the Law of Treaties.

9. DTAA AND INDIA
comprehensive (DTAA) with 88 (signed 88 DTAAs out of which 85 have
entered into force) countries.
This means that there are agreed rates of tax and jurisdiction on specified
types of income arising in a country to a tax resident of another country.
There are two provisions under the Income Tax Act 1961, which provide
specific relief to taxpayers to save them from double taxation. [Section 90
and Section 91]

10. TYPES OF RELIEF
Bilateral relief:
• Bilateral relief is provided in section 90 and 90A of the Indian
Income Tax Act.
• Under this method, the Governments of two countries can enter
into an agreement to provide relief against double taxation by
mutually working out the basis on which relief is to be granted.
• India has entered into agreement for relief against or avoidance of
double taxation with 85 countries.
Unilateral relief :
• Unilateral Relief is provided in section 91 of the Income Tax Act.
• No country will have such an agreement with every country in the
world.
• In order to avoid double taxation in such cases, country of
residence itself may provide relief on unilateral basis

11. METHODS OF ELIMINATING
DOUBLE TAXATION
EXEMPTION
METHOD
CREDIT
METHOD
TAX
SPARING
METHOD

12. Tax is deductible at the rates prescribed under the Act or under the relevant DTAA, whichever is more beneficial
for non-resident