2023 (11) TMI 1373 - HC - Income Tax

Enforceability of treaty - Necessary notification not issued by the Government for brining the treaty into force - Most Favoured Nation (MFN) - Indian treaties with countries that are members of the Organisation for Economic Cooperation and Development ( OECD ) - protocol for changing terms or conditions in treaty - lowering of rate of taxation at source on dividends interest royalties or fees for technical services ( FTS ) - bilateral treaties in question are between India and Netherlands France and Switzerland respectively - whether there is any right to invoke the MFN clause when the third country with which India has entered into DTAA was not an OECD member yet (at the time of entering into such DTAA) - whether the MFN clause is to be given effect to automatically or if it is to only come into effect after a notification is issued? HELD THAT - As assessee fairly concedes that the issue raised in the above captioned matters is covered by the judgment of the Supreme Court in titled AO vs Nestle SA 2023 (10) TMI 981 - SUPREME COURT as held a notification u/s 90(1) is necessary and a mandatory condition for a court authority or tribunal to give effect to a DTAA or any protocol changing its terms or conditions which has the effect of altering the existing provisions of law. The fact that a stipulation in a DTAA or a Protocol with one nation requires same treatment in respect to a matter covered by its terms subsequent to its being entered into when another nation (which is member of a multilateral organization such as OECD) is given better treatment does not automatically lead to integration of such term extending the same benefit in regard to a matter covered in the DTAA of the first nation which entered into DTAA with India. In such event the terms of the earlier DTAA require to be amended through a separate notification u/s 90. The interpretation of the expression is has present signification. Therefore for a party to claim benefit of a same treatment clause based on entry of DTAA between India and another state which is member of OECD the relevant date is entering into treaty with India and not a later date when after entering into DTAA with India such country becomes an OECD member in terms of India s practice. Reasoning and findings in the impugned orders cannot survive they are set aside. However says that he has instructions to convey to the court that he would be carrying the issue further in appeal. As far as this court is concerned it is bound by the judgment of the Supreme Court. Therefore the above-captioned writ petitions are closed. Pending applications shall also stand closed.

Summary

The Delhi High Court, presided by Justices Rajiv Shakdher and Girish Kathpalia, disposed of the writ petitions in light of the Supreme Court's binding precedent in Civil Appeal No. 1420/2023 (Assessing Officer vs Nestle SA, 2023 INSC 928). Counsel for the petitioner conceded that the issue is governed by this Supreme Court judgment but indicated an intention to pursue further appeals. The High Court emphasized that it is "bound by the judgment of the Supreme Court," and accordingly, the writ petitions and pending applications were closed. The order directs parties to rely on the digitally signed copy.