“Section 90(4)”
The decision most relied on for Section 90(4) is Union of India v. Azadi Bachao Andolan (263 ITR 706), cited in 691 judgments on BharatTax.
Leading authorities on Section 90(4)
A citizen is free to carry on business within the law, and mere tax planning without a motive to evade taxes through colorable devices is not frowned upon. The liability to taxation, for the purpose of tax treaty application, is a legal situation, not the fiscal fact of actual payment.
For fees for technical or consultancy services to 'make available' technical knowledge or know-how under a DTAA, the service must transmit such knowledge, allowing the recipient to derive an enduring benefit and utilize it independently in the future.
Sections 4 and 5 of the Income Tax Act, which define total income and chargeability, are subject to Section 90, meaning that Double Taxation Avoidance Agreements (DTAAs) override the Act's provisions in case of a conflict.
The terms 'income' or 'profits and gains' are inclusive of losses, signifying that losses are 'minus income' to be factored into the computation of taxable income. Therefore, set-off and carry forward provisions for losses apply exclusively to taxable income or gains and cannot be pressed into service against non-taxable gains, such as those exempt under a DTAA or other specific provisions.
An amount cannot be treated as unexplained income in the hands of an assessee if it is found to belong to another person, even if the department is free to reopen that other person's individual assessments.
A judicial decision is authority only for what it actually decides, which is its ratio decidendi, and not for every observation or what logically follows from general expressions. A decision must be read as applicable to the facts proved, with general expressions qualified by the specific context in which they are found.
Gains from the indirect transfer of shares in a foreign company holding Indian shares are not taxable in India under the relevant tax treaty, which is considered a self-contained code to be interpreted plainly. Creating corporate structures or special purpose vehicles for investment to secure tax benefits is a legitimate business activity.
When a tax treaty conflicts with the Income Tax Act, the treaty provisions apply to the extent they are beneficial to the assessee. However, if the treaty does not provide for a specific benefit, such as the set-off of losses, that benefit cannot be claimed under the Act.
