ASSESSING OFFICER CIRCLE (INTERNATIONAL TAXATION) 2(2)(2) NEW DELHI versus M/S NESTLE SA

Citation: [2023] 16 S.C.R. 1139 · Decided: 19-10-2023 · Supreme Court of India · Bench: S. RAVINDRA BHAT · Disposal: Appeal(s) allowed

cites 6 · see the full citation network in Lexace

Judgment (excerpt)

[2023] 16 S.C.R. 1139 : 2023 INSC 928
CASE DETAILS
ASSESSING OFFICER CIRCLE (INTERNATIONAL TAXATION) 
2(2)(2) NEW DELHI
v.
M/S NESTLE SA
(Civil Appeal No(S). 1420 of 2023)
OCTOBER 19, 2023
[S. RAVINDRA BHAT AND DIPANKAR DATTA, JJ.]
HEADNOTES
Issue for consideration: Whether there is any right to invoke the Most 
Favoured Nation (MFN) clause when the third country with which India 
has entered into a Double Tax Avoidance Agreement (DTAA) was not an 
Organisation for Economic Cooperation and Development (OECD) member 
yet (at the time of entering into such DTAA); and whether the MFN clause 
is to be given eff ect to automatically or if it is to only come into eff ect after 
a notifi cation is issued.
Income Tax Act, 1961– s.90– Agreement with foreign countries 
or specifi ed territories – Double Tax Avoidance Agreement (DTAA)– 
Notifi cation u/s.90, if mandatory to give eff ect to a DTAA or any 
Protocol changing its terms/conditions– “is” occurring in the DTAAs 
– Interpretation – Bilat-eral treaties between India and Netherlands, 
France, and Switzerland, respectively– Plea of as-sessee that having 
regard to the Protocol to the India-Franwce DTAA, the more restrictive 
defi ni-tion of ‘fees for technical services’ appearing in the India-UK 
DTAA, must be read as forming part of the India-France DTAA as 
well– Disagreed by Authority for Advance Ruling– Reversed by High 
Court– In another appeal, relating to the India-Netherlands DTAA, 
the assessees contended that regard being had to the phraseology of the 
DTAA and the subsequent Protocol, the relevant event relied upon- the 
provisions of the DTAA and the Protocol, obliged the revenue to extend 
the lower rate of withholding tax at 5%– In case of Nestle, the provisions 
of the India-Switzerland DTAA and its three protocols considered– Writ 
petitions allowed by High Court:
1139
 
SUPREME COURT REPORTS 
[2023] 16 S.C.R.
1140
Held: A notifi cation u/s.90(1) is necessary and a mandatory condition 
for a court, authority, or tribunal to give eff ect to a DTAA, or any protocol 
changing its terms or conditions, which has the eff ect 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 benefi t in regard to a matter covered in the DTAA of the fi rst 
nation, which entered into DTAA with India – In such event, the terms of the 
earlier DTAA require to be amended through a separate notifi cation u/s.90 
– Further, the interpretation of the expression “is” has present signifi cation 
and it derives meaning from the context – Therefore, for a party to claim 
benefi t 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 be-comes an OECD member, in terms of India’s 
practice – Impugned orders set aside – International Convention/Treaties. 
[Paras 88, 51]
International Convention/Treaties – Constitution of India – Article 
253, 73 – Treaty making power:
Held: The terms of a treaty ratifi ed by the Union do not ipso facto 
acquire enforceability – The Union has exclusive executive power to enter 
into international treaties and conventions under Article 73 r/w corresponding 
Entries- Nos. 10, 13 and 14 of List I of the VIIth Schedule to the Constitution 
of India and Parliament, holds the exclusive power to legislate upon such 
conventions or treaties; Parliament can refuse to perform or give eff ect to 
such treaties – In such event, though such treaties bind the Union, vis-a-vis 
the other contracting state(s), leaving the Union in default – The application 
of such trea-ties is binding upon the Union – Yet, they “are not by their own 
force binding upon Indian nationals” – Law making by Parliament in respect 
of such treaties is required if the treaty or agreement restricts or aff ects the 
rights of citizens or others or modifi es the law of India – If citizens’ rights 
or others’ rights are not unaff ected, or the laws of India are not modifi ed, no 
legislative measure is necessary to give eff ect to treaties – In the event of 
1141
any ambiguity in the p

Excerpt shown. Read the full judgment & AI analysis in Lexace.