2009 (11) TMI 21 - HC - Income Tax

Misuse of treaties - Double Taxation Avoidance Agreements - governance of international treaties violation of constitutional mandate public interest litigation held that - In our considered view, the admissibility of a procedure to be devised where such a treaty is to be placed before the Parliament or requiring its approval is a matter to be left to the Government and the Parliament - It would not be within the domain of exercise of writ jurisdiction under Article 226 of the Constitution of India of this Court to issue any direction in that behalf - It is, thus, submitted that the executive power of the Union extends to matters to exercise of rights by virtue of any treaty or agreement with by virtue of Article 73 (1) (b) of the Constitution of India but that is subject of course to constitutional limitations .

Issues Involved:
1. Constitutionality of Double Taxation Avoidance Agreements (DTAA) and their implementation.
2. Requirement of Parliamentary approval for international treaties.
3. Adherence to constitutional provisions by the executive while entering into international treaties.

Detailed Analysis:

Constitutionality of Double Taxation Avoidance Agreements (DTAA) and their implementation:
The petitioner argued that the Central Government's method of entering into Double Taxation Avoidance Agreements (DTAA) and the Mutual Agreement Procedure (MAP) violated the constitutional mandate. The petitioner referenced the Supreme Court's observations in Union of India & Anr. Vs. Azadi Bachao Andolan & Anr., which discussed the legislative history and purpose of Section 90 of the Income Tax Act. The Supreme Court had held that Section 90 was enacted to enable the executive to negotiate and implement DTAA efficiently, without requiring a cumbersome legislative process. The court rejected the petitioner's argument that the Central Government could not grant tax exemptions through DTAA without specific parliamentary legislation. The court stated that the powers exercised under Section 90 are delegated legislative powers, and the executive can grant exemptions in fiscal statutes.

Requirement of Parliamentary approval for international treaties:
The petitioner contended that international treaties with ramifications on municipal governance should be placed before Parliament for approval. The court referred to the Supreme Court's judgment in Union of India & Anr. Vs. Azadi Bachao Andolan & Anr., which stated that the executive power to enter into treaties is vested in the President and does not require parliamentary approval unless the treaty affects justiciable rights of citizens or modifies domestic law. The court concluded that there is no constitutional mandate for treaties to be placed before Parliament unless they necessitate legislative measures.

Adherence to constitutional provisions by the executive while entering into international treaties:
The petitioner emphasized that all governmental actions, including entering into international treaties, must conform to the Constitution. The court acknowledged that the Constitution is supreme and any treaty or executive action must comply with constitutional provisions. The respondents admitted that the Government of India can only enter into treaties in conformity with the Constitution. The court reiterated that any law enacted in pursuance of an international treaty must be placed before Parliament and that executive actions under Article 73 must adhere to constitutional limitations.

Conclusion:
The court dismissed the petition, stating that the issues raised by the petitioner were already covered by the Supreme Court's observations in Union of India & Anr. Vs. Azadi Bachao Andolan & Anr. The court held that the executive's power to enter into DTAA and other treaties is constitutionally valid and does not require parliamentary approval unless it affects justiciable rights or modifies domestic law. The court affirmed that all governmental actions must conform to the Constitution, and the petitioner's concerns were addressed by the respondents' acknowledgment of this legal position. The petition was disposed of with these observations.

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