Circular No. 116

What this is

Circular No. 116 was issued by the Central Board of Direct Taxes on 10 July 1973. Its subject is Income-tax (Double Taxation Relief) (Dominions) Rules, 1956 providing for grant of double taxation relief with certain domin­ions - Present position thereunder.

This one is about a tax treaty. India’s treaties enter Indian law by notification under section 90; where the instrument below is that notification, its date decides from when the treaty may be applied, and where it is a circular, it is the Board telling its officers how it reads the treaty — which is not the same thing.

What it does

States where matters stand under the Income-tax (Double Taxation Relief) (Dominions) Rules, 1956, notified on 23 June 1956 under section 49A of the 1922 Act, which gave relief on income taxed both in India and in Kenya, Tanganyika, Uganda, Zanzibar, Gold Coast, Nigeria, Sierra Leone, Gambia or Mauritius, and which continued in force under section 297(2)(k) of the 1961 Act. Four countries have said the underlying agreements no longer bind them from independence: Uganda from 9 October 1962, Tanzania, comprising Tanganyika and Zanzibar, from 9 December 1961, Kenya from 12 December 1963 and Gambia from 18 February 1965. For income in those countries Indian residents fall back on unilateral relief under section 91, from assessment year 1963-64 for Uganda, 1962-63 for Tanzania, 1964-65 for Kenya and 1965-66 for Gambia, that is the assessment year following the financial year of independence. Sierra Leone has said it has no objection in principle to continuing the arrangement, so the rules remain in force for it, and the position for Gold Coast, Nigeria and Mauritius is being ascertained.

Why it was issued

Several of the countries covered by the 1956 rules had attained independence and taken the position that the agreements no longer bound them, so the basis of relief had to be restated.

Who it reaches

• Indian residents with income from Kenya, Uganda, Tanzania or Gambia
• Indian residents with income from Sierra Leone, for whom the rules continue
• Assessing Officers computing double taxation relief on East and West African income

The provisions it speaks to

The instrument, as the Board published it

Income-tax (Double Taxation Relief) (Dominions) Rules, 1956 providing for grant of double taxation relief with certain domin­ions - Present position thereunder

1. In exercise of the powers available under section 49A of the 1922 Act, the Government of India had issued a Notification dated 23-6-1956 called the Income-tax (Double Taxation Relief) (Dominions) Rules, 1956 [Annex], providing for grant of relief in respect of income on which tax has been paid both in India and in any of the following Dominions:

1. Kenya

6. Nigeria

2. Tanganyika

7. Sierra Leone

3. Uganda

8. Gambia

4. Zanzibar

9. Mauritius

5. Gold Coast

These rules being consistent with the corresponding provisions of the 1961 Act continued to be operative by virtue of the provi­sions contained in section 297(2)(k).
2. The following countries have, however, stated that the agree­ments on the basis of which the said rules were applicable are no longer binding on them after the date of their attainment of independence as shown against each:

1. Uganda

9-10-1962

3. Kenya

12-12-1963

2. Gambia

18-2-1965

4. Tanzania

9-12-1961

(Tanganyika & Zanzibar)

Thus, there is no subsisting agreement, between India and the above-named four countries for the avoidance of double taxation of income after the dates shown above. The cases of Indian resi­dents will, therefore, be covered by the provision for grant of unilateral relief under section 91. This will be applicable in respect of the assessment years commencing from the assessment year immediately following the financial year in which a particu­lar country attained independence. Thus, the provision for unilateral relief will become applicable in case of income in these countries for and from the assessment year as indicated below:

Assessment year

1. Uganda

1963-64

2. Gambia

1965-66

3. Kenya

1964-65

4. Tanzania (Tanganyika & Zanzibar)

1962-63

3. The Government of Sierra Leone has informed that it has no objection in principle to continue the arrangements with India as contained in the Income-tax (Double Taxation Relief)(Dominions) Rules, 1956. Hence, the said rules will continue to remain in force in relation to Sierra Leone.
4. The position in respect of the remaining countries, viz., Gold Coast, Nigeria and Mauritius is being ascertained.
Circular : No. 116 [ F. No. 145/32-FTD], dated 10-7-1973.

What to watch

• The switch from the rules to unilateral relief under section 91 is year-specific, and the first assessment year differs for each country.
• Unilateral relief under section 91 is computed differently from relief under the rules, so the quantum changes.
• The circular leaves the position for Gold Coast, Nigeria and Mauritius open.
• Relations with these countries have since been governed by treaties concluded under section 90, so the position stated here is that of 1973.

Where you meet it

In an old assessment where relief on African income is claimed and the basis, agreement or unilateral, is in question.

On the same provision

• Circular No. 171 — 718. Income-tax (Double Taxation Relief) (Aden) Rules, 1953 - Present position thereunder 8 July 1975
• Circular No. 172 — Income-tax (Double Taxation Relief) (Dominions) Rules, 1956 providing for grant of double taxation relief with certain d 8 July 1975
• Notification No. 1574 — Approval of an institution under section 297 of the Income-tax Act, 1961 10 May 1965

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