Can Parliament override a tax treaty by notifying the other country as a notified jurisdictional area, and is section 94A constitutionally valid?
The Madras High Court upheld section 94A(1) and dismissed all nine writ petitions, holding that the challenge to its constitutional validity was without merit and that the notification of 1 November 2013 specifying Cyprus as a notified jurisdictional area was equally unassailable. The Court reasoned that where a treaty partner fails to provide information, it is that partner and not section 94A which dilutes section 90(1)(c), and that the phrase 'any country or territory' in section 94A(1) cannot be read as excluding countries with which India has a treaty.
Decided by the High Court (V. Ramasubramanian J and T. Mathivanan J) on 2016-04-12, reported as W.P.Nos.17241 to 17243 & 17407 to 17412 of 2015 (Madras High Court); reserved 12 August 2015, delivered 12 April 2016. It bears on section 94A, section 94A(1), section 94A(5), section 90, section 90(1), section 195, section 246A, section 4, section 5 of the Income Tax Act 1961, in TDS Defaults, How Tax Law Is Read and Deductions & Disallowances matters.
This is the only decision the library carries on section 94A and it settles the framework question: an agreement under section 90(1) does not immunise a country from being notified under section 94A(1), and the absence of a non obstante clause in sub-section (1) — in contrast to sub-sections (2) to (5) — does not matter, because both the treaty and the notification are exercises of delegated power. The reasoning on the Vienna Convention is worth having: even taking Article 26, pacta sunt servanda, as customary international law, it obliges both contracting parties to perform in good faith, so a party benefiting from the other State's breach of its information-exchange obligation cannot invoke the Convention to stop India resorting to internal law. The Court also relied on the observation in Ram Jethmalani that the Government cannot bind India in a manner that derogates from constitutional provisions, values and imperatives. The practical value is now largely defensive rather than offensive, because the Cyprus notification that the case was about was rescinded in December 2016 with retrospective effect; but the holding is what stands behind any future notification. Two limits must be stated. The Supreme Court disposed of the appeals against this judgment on 6 January 2017 by reference to the rescission notification, expressly recording that it had not expressed any opinion on the merits — so the judgment has not been affirmed on merits. And this is a decision of a Division Bench of one High Court on the vires of a central provision; no contrary decision was searched for.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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Three persons filed nine writ petitions under Article 226 challenging, first, the constitutional validity of section 94A(1) of the Income-tax Act 1961 as ultra vires Articles 14, 19, 51, 253 and 265 read with Entry 82 of List I and beyond Parliament's legislative competence under Articles 246 and 248 read with Entries 10, 14, 82 and 97 of List I; second, the validity of Notification No. 86/2013 dated 1 November 2013 issued under section 94A(1) specifying Cyprus as a notified jurisdictional area, as ultra vires section 94A read with Articles 14, 19 and 265; and third, the validity of a press release of the same date issued by the Ministry of Finance, titled 'Cyprus Notified as a notified Jurisdictional Area Under Section 94-A of the Income-Tax Act, 1961', as ultra vires sections 4, 5, 94A(5) and 195 read with Articles 14 and 265. The petitioners had also filed statutory appeals under section 246A before the Commissioner (Appeals) and came to the writ court simultaneously. Mr Arvind P. Datar, Senior Counsel, appeared for the petitioners and Mr Pramod Kumar Chopda, Standing Counsel, for the respondents.
All the writ petitions were dismissed, with no order as to costs and connected miscellaneous petitions closed (paragraph 122). The Court held that the challenge to the constitutional validity of section 94A(1) was without any merit (paragraph 90) and that the writ petitions challenging the validity of section 94A were liable to be dismissed (paragraph 95); it further held that the challenge to the notification dated 1 November 2013 was also bound to fail, because section 94A(1) uses the phrase 'any country or territory' and that phrase cannot be read to mean any country or territory other than those covered by section 90(1), a taxing statute admitting neither addition nor deletion of expressions nor re-phrasing (paragraph 109).
The Court held that even taking Article 26 of the Vienna Convention, pacta sunt servanda, as part of customary international law, it obliges both contracting parties to perform their obligations in good faith; since one of the four purposes for which an agreement may be entered into under section 90(1) is the exchange of information, a party failing to provide information is itself in breach, and the beneficiary of that breach cannot invoke the Convention to prevent India from resorting to internal law (paragraph 88). It relied on the Supreme Court's observation in Ram Jethmalani, which had itself considered the Vienna Convention and Azadi Bachao Andolan, that the Government cannot bind India in a manner that derogates from constitutional provisions, values and imperatives, treating that as a complete answer to the challenge to Parliament's power to enact section 94A despite an existing section 90(1) agreement (paragraph 89). It rejected the argument that section 90(1)(c) cannot be diluted by section 94A(1), holding that where the purpose of the agreement is defeated by the lack of effective exchange of information it is the contracting party and not section 94A(1) that dilutes section 90(1)(c); and it held that nothing turns on the absence of a non obstante clause in sub-section (1) as against sub-sections (2) to (5), because an agreement under section 90(1) and a notification under section 94A(1) are each exercises of delegated power (paragraph 90). The Court set out the G20 London Summit resolutions of 2 April 2009 to take action against non-cooperative jurisdictions including tax havens and held that these gave Parliament sufficient justification to insert section 94A without disrespect to any treaty (paragraphs 91 and 92), cross-verified that against the Explanatory Notes to the Finance Act 2011 in Circular No. 2 of 2012 (paragraph 93) and against the comparative table of defensive measures adopted by other countries taken from paragraph 29 of the Union's counter affidavit (paragraph 94), and concluded that many countries have become guarded in their approach towards Double Taxation Avoidance Agreements, so that a contention surrendering the legislative power of Parliament to the will of the Executive could not be accepted and the writ petitions challenging the validity of section 94-A were liable to be dismissed (paragraph 95).
Therefore, we are of the considered view that the challenge to the Constitutional validity of Section 94A(1) is without any merit.
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Handle my notice → Ask a CA on WhatsAppThe Madras High Court upheld section 94A(1) and dismissed all nine writ petitions, holding that the challenge to its constitutional validity was without merit and that the notification of 1 November 2013 specifying Cyprus as a notified jurisdictional area was equally unassailable. The Court reasoned that where a treaty partner fails to provide information, it is that partner and not section 94A which dilutes section 90(1)(c), and that the phrase 'any country or territory' in section 94A(1) cannot be read as excluding countries with which India has a treaty. This was decided by the High Court (V. Ramasubramanian J and T. Mathivanan J) and bears on section 94A, section 94A(1), section 94A(5), section 90, section 90(1), section 195, section 246A, section 4, section 5 of the Income Tax Act 1961. It is reported as W.P.Nos.17241 to 17243 & 17407 to 17412 of 2015 (Madras High Court); reserved 12 August 2015, delivered 12 April 2016. This is the only decision the library carries on section 94A and it settles the framework question: an agreement under section 90(1) does not immunise a country from being notified under section 94A(1), and the absence of a non obstante clause in sub-section (1) — in contrast to sub-sections (2) to (5) — does not matter, because both the treaty and the notification are exercises of delegated power. The reasoning on the Vienna Convention is worth having: even taking Article 26, pacta sunt servanda, as customary international law, it obliges both contracting parties to perform in good faith, so a party benefiting from the other State's breach of its information-exchange obligation cannot invoke the Convention to stop India resorting to internal law. The Court also relied on the observation in Ram Jethmalani that the Government cannot bind India in a manner that derogates from constitutional provisions, values and imperatives. The practical value is now largely defensive rather than offensive, because the Cyprus notification that the case was about was rescinded in December 2016 with retrospective effect; but the holding is what stands behind any future notification. Two limits must be stated. The Supreme Court disposed of the appeals against this judgment on 6 January 2017 by reference to the rescission notification, expressly recording that it had not expressed any opinion on the merits — so the judgment has not been affirmed on merits. And this is a decision of a Division Bench of one High Court on the vires of a central provision; no contrary decision was searched for. If it applies to you, the first step is this: Do not argue that a country with which India has a DTAA cannot be notified under section 94A(1); the Court held that 'any country or territory' cannot be read down to exclude treaty partners and that in a taxing statute words cannot be added or deleted.
Three persons filed nine writ petitions under Article 226 challenging, first, the constitutional validity of section 94A(1) of the Income-tax Act 1961 as ultra vires Articles 14, 19, 51, 253 and 265 read with Entry 82 of List I and beyond Parliament's legislative competence under Articles 246 and 248 read with Entries 10, 14, 82 and 97 of List I; second, the validity of Notification No. 86/2013 dated 1 November 2013 issued under section 94A(1) specifying Cyprus as a notified jurisdictional area, as ultra vires section 94A read with Articles 14, 19 and 265; and third, the validity of a press release of the same date issued by the Ministry of Finance, titled 'Cyprus Notified as a notified Jurisdictional Area Under Section 94-A of the Income-Tax Act, 1961', as ultra vires sections 4, 5, 94A(5) and 195 read with Articles 14 and 265. The petitioners had also filed statutory appeals under section 246A before the Commissioner (Appeals) and came to the writ court simultaneously. Mr Arvind P. Datar, Senior Counsel, appeared for the petitioners and Mr Pramod Kumar Chopda, Standing Counsel, for the respondents. The matter was decided on 2016-04-12 by the High Court (V. Ramasubramanian J and T. Mathivanan J). On those facts the High Court held as follows. All the writ petitions were dismissed, with no order as to costs and connected miscellaneous petitions closed (paragraph 122). The Court held that the challenge to the constitutional validity of section 94A(1) was without any merit (paragraph 90) and that the writ petitions challenging the validity of section 94A were liable to be dismissed (paragraph 95); it further held that the challenge to the notification dated 1 November 2013 was also bound to fail, because section 94A(1) uses the phrase 'any country or territory' and that phrase cannot be read to mean any country or territory other than those covered by section 90(1), a taxing statute admitting neither addition nor deletion of expressions nor re-phrasing (paragraph 109).
The Court held that even taking Article 26 of the Vienna Convention, pacta sunt servanda, as part of customary international law, it obliges both contracting parties to perform their obligations in good faith; since one of the four purposes for which an agreement may be entered into under section 90(1) is the exchange of information, a party failing to provide information is itself in breach, and the beneficiary of that breach cannot invoke the Convention to prevent India from resorting to internal law (paragraph 88). It relied on the Supreme Court's observation in Ram Jethmalani, which had itself considered the Vienna Convention and Azadi Bachao Andolan, that the Government cannot bind India in a manner that derogates from constitutional provisions, values and imperatives, treating that as a complete answer to the challenge to Parliament's power to enact section 94A despite an existing section 90(1) agreement (paragraph 89). It rejected the argument that section 90(1)(c) cannot be diluted by section 94A(1), holding that where the purpose of the agreement is defeated by the lack of effective exchange of information it is the contracting party and not section 94A(1) that dilutes section 90(1)(c); and it held that nothing turns on the absence of a non obstante clause in sub-section (1) as against sub-sections (2) to (5), because an agreement under section 90(1) and a notification under section 94A(1) are each exercises of delegated power (paragraph 90). The Court set out the G20 London Summit resolutions of 2 April 2009 to take action against non-cooperative jurisdictions including tax havens and held that these gave Parliament sufficient justification to insert section 94A without disrespect to any treaty (paragraphs 91 and 92), cross-verified that against the Explanatory Notes to the Finance Act 2011 in Circular No. 2 of 2012 (paragraph 93) and against the comparative table of defensive measures adopted by other countries taken from paragraph 29 of the Union's counter affidavit (paragraph 94), and concluded that many countries have become guarded in their approach towards Double Taxation Avoidance Agreements, so that a contention surrendering the legislative power of Parliament to the will of the Executive could not be accepted and the writ petitions challenging the validity of section 94-A were liable to be dismissed (paragraph 95). In the words reproduced by the source cited on this page: "Therefore, we are of the considered view that the challenge to the Constitutional validity of Section 94A(1) is without any merit." The decision followed or applied Ram Jethmalani v. Union of India — relied upon for the proposition that the Government cannot bind India in a manner that derogates from constitutional provisions, values and imperatives.
It was decided by the High Court on 2016-04-12 and is reported as W.P.Nos.17241 to 17243 & 17407 to 17412 of 2015 (Madras High Court); reserved 12 August 2015, delivered 12 April 2016. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 94A, section 94A(1), section 94A(5), section 90, section 90(1), section 195, section 246A, section 4, section 5, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. All the writ petitions were dismissed, with no order as to costs and connected miscellaneous petitions closed (paragraph 122). The Court held that the challenge to the constitutional validity of section 94A(1) was without any merit (paragraph 90) and that the writ petitions challenging the validity of section 94A were liable to be dismissed (paragraph 95); it further held that the challenge to the notification dated 1 November 2013 was also bound to fail, because section 94A(1) uses the phrase 'any country or territory' and that phrase cannot be read to mean any country or territory other than those covered by section 90(1), a taxing statute admitting neither addition nor deletion of expressions nor re-phrasing (paragraph 109). It arises in TDS Defaults, How Tax Law Is Read and Deductions & Disallowances matters, on section 94A, section 94A(1), section 94A(5), section 90, section 90(1), section 195, section 246A, section 4, section 5 of the Income Tax Act 1961, and was decided by V. Ramasubramanian J and T. Mathivanan J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not rely on the absence of a non obstante clause in section 94A(1); the Court held none was needed because both the treaty under section 90(1) and the notification under section 94A(1) are exercises of delegated power. Where a treaty argument is run, be ready for the good-faith point: Article 26 of the Vienna Convention binds both parties, and a taxpayer benefiting from the other State's failure to exchange information cannot use the Convention to bar India's recourse to internal law. Check the vintage of the notification your case turns on before relying on this judgment; it was decided on 12 April 2016 and the Cyprus notification it upheld was rescinded on 14 December 2016 with retrospective effect from 1 November 2013. If the question is whether the judgment binds, note the Supreme Court disposed of the appeals on 6 January 2017 without expressing any opinion on the merits, so it is a High Court decision standing on its own reasoning and not one affirmed on appeal.
Searched for later treatment; none was found. That is not the same as a source affirming it. The citator returns five later documents and none of them treats the judgment on the point it decided. Only one, ITO v Thanjavur District Central Co-operative Bank Ltd (Madras High Court, Madurai Bench, 22 December 2023), engages with it at all, and there the reference at para 50 is to the tabular statement in T. Rajkumar comparing the expressions 'sum', 'income', 'payment' and 'amount' used across the Act, in the course of a section 194LA argument; section 94A is not mentioned anywhere in that judgment. The other citations (A. Arumugam, N. Mariappan, Ch. Srinivasulu Reddy) pick up unrelated propositions. A second probe pairing the case name with '94A' returns only the judgment itself. So the constitutional holding on section 94A - that the provision and the notification machinery survive the treaty challenge - has not been applied, affirmed, doubted or overruled by any later court, and no Supreme Court challenge to it is traceable. A practitioner should treat it as the only High Court authority in the field rather than as a tested one, and should separately check the current notification position for the jurisdiction concerned, since the section operates through notifications that have been varied since. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Structure warning worth recording. Indian Kanoon lists this judgment under the date 1 November 2013; the judgment itself was reserved on 12 August 2015 and delivered on 12 April 2016, and the 1 November 2013 date is the date of the notification and press release under challenge. A first pass over the document also reported the judgment as ending at paragraph 93, which would have made the last words 'we find no merit in the challenge to the Constitutional validity of Section 94A(1)' the conclusion; the judgment in fact runs to at least paragraph 122, where the writ petitions are dismissed, and paragraphs 96 onwards deal separately with the vires of the notification. The disposal was located only by searching the disposal formula. The passage that the challenge to the notification 'is also bound to fail' is at paragraph 109. That locator was withheld on the first pass because it had come only from a summarising layer; it has since been established by two independent document-fragment searches on different phrases, the second returning paragraph 109 as printing 'It uses the phrase "any country or territory". We cannot read the said phrase to mean "any country or territory other than those covered by Section 90(1)."' Paragraphs 91 and 93 reproduce the G20 'Global Leaders Statement' and the Explanatory Notes to the Finance Act 2011 respectively; those are quoted documents, not the Court's own words, and the commencement date of 1 June 2011 for section 94A comes from that quoted Explanatory Note. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
All the writ petitions were dismissed, with no order as to costs and connected miscellaneous petitions closed (paragraph 122). The Court held that the challenge to the constitutional validity of section 94A(1) was without any merit (paragraph 90) and that the writ petitions challenging the validity of section 94A were liable to be dismissed (paragraph 95); it further held that the challenge to the notification dated 1 November 2013 was also bound to fail, because section 94A(1) uses the phrase 'any country or territory' and that phrase cannot be read to mean any country or territory other than those covered by section 90(1), a taxing statute admitting neither addition nor deletion of expressions nor re-phrasing (paragraph 109).
TaxSphere, “T. Rajkumar v Union of India”, https://taxnotice.vittsphere.com/caselaw/case/t-rajkumar-v-union-of-india-section-94a-constitutional-validity/ (validity last checked 2026-09-08)
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My client is remitting money to a company in a low-tax jurisdiction. Does section 94A apply, and is any country actually notified as a notified jurisdictional area at the moment?
My client was held to be an assessee in default for not deducting tax at thirty per cent on a remittance to a Cyprus company. Cyprus has since been removed from the notified list — does that help for a past year?
My protocol has an MFN clause and I applied the lower rate India later agreed with an OECD member. Was I entitled to?
My Dutch parent has a s.197 certificate application pending and wants dividend withholding at 5 per cent under the most favoured nation clause in the Protocol. There is a Delhi High Court judgment in its favour. Can I still rely on it?
