Section 90(1)

Section 90(1) — the law in short

What the courts have decided on section 90(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• AO v Nestle SA Supreme CourtHelps department
  My protocol has an MFN clause and I applied the lower rate India later agreed with an OECD member. Was I entitled to?
  No, on both counts. A notification under s.90(1) is a mandatory condition before any court, authority or tribunal can give effect to a treaty or to a protocol that alters the existing provisions of law, so an MFN clause does not import a later treaty's rate or scope by itself. And where the clause is triggered by India's treaty with a third state 'which is a member of the OECD', that state must have been an OECD member when it entered the treaty with India, not merely by the time the benefit is claimed.
• ADIT v E-Funds IT Solution Inc Supreme CourtHelps taxpayer
  We outsource back-office work to our Indian subsidiary. Does that give us a permanent establishment in India?
  No, not by itself. The Revenue must prove that a fixed place in India was at the disposal of the foreign company and that the foreign company carried on its own business through it. Close association between parent and subsidiary, and the fact that the Indian company depends on the group for its work, do not answer that question, and the functions-assets-risks analysis borrowed from transfer pricing is not the test for whether a fixed place permanent establishment exists.
• Sky High Appeal XLIII Leasing v ACIT ITATHelps taxpayer
  Can the officer apply the PPT to my India-Ireland treaty claim just because both countries signed the MLI?
  No, on this Tribunal's view. The India-Ireland treaty is a covered tax agreement under the MLI, but the Tribunal held that no MLI provision — including the PPT — can be given effect in India without a separate notification under s.90(1), and none had been issued. The treaty benefits on aircraft lease rentals were allowed, the Tribunal also holding the lessors had no permanent establishment in India and that Article 8 covers the rental of aircraft in international traffic.
• Valeo v ACIT (International Taxation), Chennai ITATHelps departmentValidity unconfirmed
  My French client offered dividend from its Indian subsidiaries at 5 per cent under the most favoured nation clause and claimed a refund. After the Supreme Court's decision in Nestle SA, what happens to that claim?
  It fails. The Chennai Tribunal applied Nestle SA and dismissed the ground, holding that the 5 per cent rate claimed under Article 11(2) of the India-France DTAA read with the Protocol most favoured nation clause, imported from India's treaties with Slovenia, Lithuania and Colombia, could not be given effect without a separate notification under s.90(1). The dividend therefore remains taxable at the treaty rate as notified, and the refund claimed on the 5 per cent basis goes.
• CBDT Circular 1/2025 on the Principal Purpose Test CBDT Circulars & InstructionsHelps taxpayer
  The officer says the PPT in the MLI destroys my Mauritius capital gains exemption on shares bought in 2015. Does the Board's own circular help?
  Yes, on both points. The Board says the PPT is intended to apply prospectively — from the date the treaty or protocol carrying it enters into force, or from the MLI's entry into effect for that treaty under Article 35 — and that the grandfathering provisions in the India-Cyprus, India-Mauritius and India-Singapore treaties stay outside the PPT altogether and are governed by the treaties' own clauses. It also tells officers to treat the exercise as fact-specific and case-by-case rather than as a rule of thumb.
• Concentrix Services Netherlands B.V. and Optum Global Solutions International B.V. v ITO (TDS) — OVERRULED High CourtHelps taxpayerOverruled
  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?
  No. This Delhi High Court judgment held that the Protocol forms an integral part of the India-Netherlands Convention so that 'no separate notification is required' for the most favoured nation clause to operate, and directed withholding at 5 per cent by importing the rate from India's later treaties with Slovenia, Lithuania and Colombia. That reasoning was reversed by the Supreme Court in Assessing Officer Circle (International Taxation) v. Nestle SA on 19 October 2023, which held that a notification under s.90(1) is a necessary and mandatory condition before a court, authority or tribunal can give effect to a Protocol that alters the existing provisions of law. The entry is carried so that the reader can identify the authority and stop relying on it.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.