Income Tax--Current Issues

Practice Update

CA Kavita Agarwal

IS TRC IS IMPORTANT TO AVAIL DTAA BENEFITS BY A NON-RESIDENT?

Section 90(2) of the Income-tax Act, provides that in cases where DTAA exists between India and other countries/specified territories, for the purpose of avoidance of double taxation or granting relief under DTAA, the provisions under the Act or DTAA will apply to the assessee whichever are more beneficial to him.

Moreover, Section 90(4) provides, an assessee, not being a resident, who wishes to apply the provisions of DTAA as applicable to him, shall not be entitled to claim any relief under such agreement unless a certificate of his being a resident in any country outside India or specified territory outside India, as the case may be, is obtained by him from the Government of that country or specified territory. This certificate is called the Tax Residency Certificate (TRC).

The requirement of obtaining TRC is introduced in Finance Act, 2012 applicable from 1.4.2013. However, since this concept is under Indian law, there may be instances where the country which a non-resident person is tax resident, may not provide any such certificate to him under its domestic laws. A question may arise here is, whether in such a case, a non-resident will not be able to take treaty benefits?

It is to be noted here that section 90(4) does not contain any non-obstante clause, which means it cannot override section 90(2). The mere non-furnishing of TRC cannot be a ground enough to disentitle the taxpayer to obtain treaty benefits, as held by Ahmedabad Bench of ITAT in the case of Skaps Industries India (P) Ltd. v. Income Tax Officer 2018 TaxPub(DT) 3566 (Ahd-Trib).

Rule 21AB of Income-tax Rules provides the information to be furnished by an assessee in Form 10F (in a case where the TRC does not contain a particular detail, viz, (i) status, (ii) Nationality, (iii) Tax Identification no. in the other country/specified territory of which he is a resident, (iv) period for which the TRC is applicable, and (v) address in the country/specified territory.

While the Rule provides that Form 10F should be provided only to the extent of particulars which are not mentioned in the TRC, and in cases where all the details are there in TRC, there is no need for Form 10F to be furnished.

It can be deduced from the above discussion that in a case where the taxpayer is not able to obtain TRC from the tax authorities of the country/specified territory of which he is a resident, he may produce Form 10F, which is a self-declaration form containing the relevant information for the purpose of Income-tax Act.