The scope of notifications issued under sec. 90A can't be widened to interpret terms used in DTAA's as well

The scope of notifications issued under sec. 90A can't be widened to interpret terms used in DTAA's as well

The assessee, an Indian company, was holding shares in a company incorporated in Sri Lanka. The said shares were sold by the assessee during the previous year but profit on its sale was not offered for tax in India. The assessee contended that such capital gain can't be taxed in India because of Article 13(4) of the Indo-Sri Lanka DTAA, which provides that "Gains from the alienation of stocks and shares of a company may be taxed in the Contracting State in which they have been issued". The AO relied on Notification No. 90 of 2008 issued under section 90A(3) to tax the above-mentioned capital gains, which provides that any income of a resident of India "may be taxed" in the other country, such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Act and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in agreement. On appeal, the Tribunal held in favour of assessee as under: 1) When the term 'may be taxed; is used in a treaty, there is an automatic exclusion of other State; and 2) Even though the term "may be taxed" has been given a meaning by the Government through a Notification No. 90A(3), the meaning so given can't be extended to the terms used in a DTAA. Therefore, the said Section 90A cannot come to the aid of the Revenue in this manner. Hence, the capital gains are not exigible to tax in India - APOLLO HOSPITAL ENTERPRISES LTD. v. DCIT [2012] 23 taxmann.com 168 (Chennai - Trib.) (View full judgment)