Section 90(2) of the Income Tax Act
Income-tax Act, 2025: s.159
Section 90(2) falls under section 90 of the Income-tax Act, 1961, which corresponds to section 159 (Agreement with foreign countries or specified territories and adoption by Central Government of Agreement between Specified associations for double taxation relief) of the Income-tax Act, 2025.
Read section 159 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 90(2) is CIT v. De Beers India Minerals (P.) Ltd. (346 ITR 467), cited in 371 of the 387 judgments on BharatTax that turn on this section.
Leading authorities on Section 90(2)
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.
Payments for the use of equipment, such as satellite transponders, do not constitute 'royalty' under Section 9(1)(vi) of the Income-tax Act, 1961, or under applicable tax treaties, especially when there is no transfer of the right to use a process or underlying technology.
An amendment to the Income Tax Act, such as the Finance Act, 2012 amendment to Section 9(1)(vi) defining royalty, does not automatically override or alter the definition of 'royalty' as provided in a Double Taxation Avoidance Agreement (DTAA) unless the DTAA itself is bilaterally amended. The definition of royalty in a DTAA remains unaffected by unilateral changes to domestic law.
Technical services involve human intervention and expertise, not just routine or machine-based operations. Routine customer support and standard facility provision through technology do not constitute technical services under the Act.
Orders that are inordinately delayed are liable to be recalled and heard afresh, and the Appellate Tribunal President should frame guidelines for timely disposal of appeals.
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.
Expenditure on application software, which enhances business efficiency and requires a computer system to function, constitutes revenue expenditure rather than acquisition of a capital asset, even if it provides an enduring benefit.
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.
The provisions of a Double Taxation Avoidance Agreement (DTAA) would prevail over the domestic law rate of Dividend Distribution Tax (DDT) under Section 115-O.
