Recently, the Supreme Court held that for a Double Taxation Avoidance Agreement (DTAA) to be legally enforceable, it must be officially notified by the Central Government in accordance with Section 90 of the Income Tax Act, thus necessitating government endorsement for implementation by courts, authorities, or tribunals.

The Court's verdict established that the DTAA treaty remains unenforceable in Indian courts until the Government of India issues a notification in compliance with Section 90.

A bench, including Justices S Ravindra Bhat and Dipankar Datta, made this decision while granting permission for a series of appeals filed by the Income Tax Department challenging the judgments of the Delhi High Court.

"We have discussed the arguments related to the requirement of section 90 and also the treaty practice of India, treaty practice of other countries and in the light of international treaty practice, especially Article 31 (3)(b), we have said that the treaty practice is not bilateral; it can be unilateral. ''

''Until such notification is issued, we maintain that the treaty lacks inherent enforceability within Indian Courts."

Justice Bhat further said that the following are the conclusions in the judgment :

A Notification under Section 90 of the Income Tax Act is a necessary and a mandatory condition for a court, authority or a tribunal to give effect to a Double Taxation Avoidance Agreement or any protocol changing its terms and conditions which has the effect of altering the existing provisions of law.

The fact that a stipulation in DTAA or protocol with one nation requires same treatment be applied to a specific matter covered by its terms when subsequently entered into with another country that is a member of a multilateral organization like the OECD and receives better treatment, does not inherently result in the automatic extension of that same benefit to a matter covered in the DTAA of the first country that has entered into a DTAA with India. In such a scenario, any changes or extensions to the terms of the earlier DTAA would necessitate a distinct amendment through a separate notification in accordance with Section 90.

Case Title : Assessing Officer Circle (International Taxation) New Delhi v. M/s Nestle SA