Section 90A

Section 90A — the law in short

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

• PCIT v Praveen Sawhney High CourtHelps taxpayerNo later treatment found
  The Department says my search assessment is in time because it made a reference to a foreign tax authority and gets a year excluded under s.153B. The reference was for years the treaty did not cover. Does the exclusion still apply?
  No. Clause (ix) of the Explanation to s.153B excludes the time taken on a reference for exchange of information only where the reference is made in terms of the agreement under s.90 or s.90A. A request made outside what the treaty permitted is not such a reference, gives no exclusion, and the assessments were time-barred. Twenty-nine Revenue appeals were dismissed.
• Coursera Inc v. Income Tax Officer TDS 1(2)(1) — a s.197 order that ignored the 2021 amendment to s.10(50) was set aside, and the receipts exigible to equalisation levy must be excluded before the withholding rate is fixed High CourtHelps taxpayerNo later treatment found
  My non-resident client pays equalisation levy on its Indian receipts, and the Assessing Officer has still refused a NIL section 197 certificate and directed ten per cent withholding. What is the answer?
  The Delhi High Court set that order aside. The equalisation levy is charged by Chapter VIII of the Finance Act, 2016, not by the Income-tax Act; the join between the two statutes is section 10(50) of the Act, and the Finance Act 2021 amended that clause with effect from 1 April 2021 so that amounts taxable as royalty or fees for technical services under the Act read with the applicable treaty are excluded from the exemption. The Court held that the impugned order did not take that amendment into account, and gave no reasoning for the ten per cent rate at all — the officer's own file had recorded that the receipts were not royalty or fees for technical services under the India-US treaty and had recommended four per cent 'in the interest of Revenue'. The order was set aside with a direction to pass a de novo reasoned order within four weeks excluding, from the receipts subject to withholding, so much as is exigible to equalisation levy.
• DCIT v Kantar GDC India Private Limited ITATHelps departmentNo later treatment found
  The TPO is charging notional interest on my overdue receivables from my associated enterprise. Can I argue for a 90-day credit period by analogy to the secondary adjustment repatriation window in s.92CE and Rule 10CB?
  No, on this Tribunal's view. Section 92CE read with Rule 10CB operates only where a primary adjustment has been made in one of the specific situations the section lists, and the 90-day repatriation window attaches to that specific machinery; it cannot be borrowed as a general benchmark for the credit period allowable on outstanding receivables. The Tribunal instead directed the officer to adopt the credit period the TPO himself had adopted in the assessee's own case for the immediately preceding year that had reached the Tribunal.
• Dell International Services India Pvt Ltd v DCIT ITATHelps taxpayerNo later treatment found
  You offered extra income to give effect to a MAP resolution. The officer says the proviso denying a Chapter III deduction on enhanced income applies. Does it?
  No, on this Bench's view. The proviso applies only to a transfer pricing adjustment made by the Assessing Officer. It does not reach income enhanced under a mutual agreement procedure resolution, which is one of several distinct modes by which an arm's length price can come to be determined, and where the assessee actually invoices its associated enterprise and brings the foreign exchange in.
• Statutory position — section 47(viiac) and (viiad): relocating an offshore fund into an IFSC is not a transfer, if it is done by 31 March 2030 CBDT Circulars & InstructionsCuts both ways
  We want to move an offshore fund's assets into a GIFT City vehicle and issue units in the new fund to the existing investors. Does that trigger capital gains, either for the fund or for the investors?
  Not if it is a 'relocation' as the Act defines it. Section 47(viiac) provides that any transfer, in a relocation, of a capital asset by the original fund to the resulting fund is not regarded as a transfer for the purposes of section 45; section 47(viiad) does the same for any transfer by a shareholder, unit holder or interest holder, in a relocation, of a capital asset being a share, unit or interest held by him in the original fund in consideration for a share, unit or interest in the resultant fund. The two clauses therefore cover both legs — the fund's transfer of its assets and the investors' exchange of their holdings.
• Statutory position — section 9A: an offshore fund managed from India has no business connection here, but only if every condition in section 9A(3) is met CBDT Circulars & InstructionsCuts both ways
  My client is an offshore fund that has moved its portfolio manager to Mumbai. The Assessing Officer says the manager is a business connection and the whole fund is now taxable in India. Is there a safe harbour?
  Yes, but it is a conditional one. Section 9A(1) provides that, notwithstanding section 9(1), the fund management activity carried out through an eligible fund manager acting on behalf of an eligible investment fund shall not constitute a business connection in India of that fund, and section 9A(2) provides that, notwithstanding section 6, the fund shall not be said to be resident in India merely because the manager undertaking fund management activities on its behalf is situated in India. The protection is available only where the fund answers the definition in section 9A(3), which carries thirteen lettered conditions, (a) to (m), every one of which has to be satisfied.
• Statutory position — rule 10V: the look-through for institutional investors, the cure periods that save a breach, and the twenty-six per cent control test CBDT Circulars & InstructionsCuts both ways
  My offshore fund breached one of the section 9A(3) conditions for part of the year, and one of its investors is itself a pooling vehicle. Is the safe harbour lost for the whole year?
  Not necessarily. Rule 10V(3) provides that a fund shall not be denied the benefit of being an eligible fund where non-fulfilment of conditions (c), (d) or (e) of section 9A(3) is for reasons beyond the fund's control and does not exceed ninety days, or does not exceed eighteen months from the date the fund is set up or the final closing of the fund, whichever is earlier, where bona fide efforts are made, or arises because the fund is being wound up and does not exceed one year from the date the winding-up process began; and it gives the same protection where the delay in furnishing the section 9A(5) statement does not exceed ninety days. Rule 10V(1) separately requires a look-through where the investment has been made directly by an institutional entity, and rule 10V(4) fixes the point at which the fund is said to control or manage a business in India for condition (k) at a holding exceeding twenty-six per cent.
• Statutory position — ss.196A, 196B and 196C: three fixed-rate deduction sections for non-residents, only one of which carries a treaty proviso, and none of which is in the s.197 list CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  We are remitting income on mutual fund units to a foreign company, and separately paying on Global Depository Receipts. Do we deduct under section 195 at rates in force, and can the payee get a lower deduction certificate?
  No. Where one of these three sections applies, it and not section 195 supplies the rate, and the rate is a figure fixed in the section rather than the 'rates in force'. Section 196A covers income in respect of units of a Mutual Fund specified under clause (23D) of section 10, or from the specified company referred to in the Explanation to clause (35) of section 10, paid to a non-resident not being a company or to a foreign company, at twenty per cent; it alone carries a proviso letting the rate fall to the treaty rate where an agreement under section 90(1) or section 90A(1) applies and the payee has furnished the certificate referred to in section 90(4) or section 90A(4). Section 196B covers income in respect of units referred to in section 115AB, and long-term capital gains on their transfer, payable to an Offshore Fund. Section 196C covers interest or dividends on bonds or Global Depository Receipts referred to in section 115AC, and long-term capital gains on their transfer, payable to a non-resident. Sections 196B and 196C each now carry a three-limb rate: ten per cent on the income, ten per cent on long-term capital gains where the transfer takes place before 23 July 2024, and twelve and one-half per cent where it takes place on or after that date. None of the three sections is in the list in section 197(1).
• CBDT MAP Guidance 2022 CBDT Circulars & InstructionsCuts both waysNo later treatment found
  You have a transfer pricing adjustment that also bites your associated enterprise abroad. Can you run MAP and the domestic appeal together, and what closes the MAP down?
  You can run both. India follows a liberal regime and permits appeal and MAP proceedings to be pursued simultaneously, which many treaty partners do not. But a final ITAT order on the merits for the same year ends it: the competent authorities will not deviate from that order, the MAP is closed as resolved by a domestic remedy, and India then asks the treaty partner for correlative relief. Access is refused altogether in a defined set of cases, and there are fixed clocks for accepting a MAP outcome and for the officer to give effect to it.
• Statutory position — s.245MA and the e-Dispute Resolution Scheme, 2022: ten lakh rupees of variation, fifty lakh rupees of returned income, and a committee that can waive the penalty CBDT Circulars & InstructionsCuts both waysNo later treatment found
  The variation in my assessment order is about six lakh rupees and my returned income was thirty-eight lakh. Filing a first appeal will take years. Is there anything else I can do, and what do I lose if I go that way?
  There is one alternative, and it is narrow. Section 245MA lets the Central Government constitute Dispute Resolution Committees for persons the Board specifies, who may opt for dispute resolution in respect of a dispute arising from any variation in a 'specified order' and who fulfil the 'specified conditions'. The Explanation fixes two numbers: the aggregate sum of variations proposed or made in the order must not exceed ten lakh rupees, and where a return has been filed for the relevant assessment year the total income as per that return must not exceed fifty lakh rupees. An order based on a search under section 132, a requisition under section 132A, a survey under section 133A, or information received under an agreement referred to in section 90 or section 90A is outside the definition altogether. The committee may reduce or waive a penalty imposable under the Act and grant immunity from prosecution. The application is in Form No. 34BC under rule 44DAB with a fee of one thousand rupees. The section itself says nothing about section 246A at all.
• Statutory position — section 285BB and rule 114-I: what the Annual Information Statement is, and what it is not CBDT Circulars & InstructionsCuts both ways
  The notice says an amount 'appears in your AIS' and proposes to add it. What is the AIS in law, and does an entry in it prove anything?
  Section 285BB requires the prescribed income-tax authority to UPLOAD, in the assessee's registered account, an annual information statement containing information which is in the possession of an income-tax authority, in the prescribed form and manner. That is the whole of the section: it is a disclosure obligation on the department, not a charging provision, not a deeming provision and not an evidentiary one. Rule 114-I lists the six heads of information that go into it and prescribes Form No. 26AS.
• Statutory position — Chapter X-A applies only from AY 2018-19, and Rule 10U's three-crore threshold and the grandfathering of investments made before 1 April 2017 CBDT Circulars & InstructionsCuts both ways
  The Assessing Officer says my client's 2015 restructuring is an impermissible avoidance arrangement. Can GAAR reach an arrangement entered into before it came into force, and is there a monetary floor below which it simply does not apply?
  Chapter X-A applies in respect of any assessment year beginning on or after 1 April 2018 — that is, from AY 2018-19 — under s.95(2). Rule 10U(2) then makes the Chapter apply to an arrangement irrespective of when it was entered into, so long as the tax benefit is obtained on or after 1 April 2017; but Rule 10U(1)(a) takes out any arrangement where the tax benefit in the relevant assessment year, in aggregate to all parties, does not exceed three crore rupees, and Rule 10U(1)(d) read with the exception in Rule 10U(2) takes out income from the transfer of investments made before 1 April 2017.
• Statutory position — s.144BA(15) to (21) and the Explanation: who sits on the Approving Panel, the powers it borrows from the Advance Rulings Authority, and the two things that stop its six-month clock CBDT Circulars & InstructionsCuts both ways
  My case is going to the Approving Panel. Who actually sits on it, what powers does it have over me, how long is its term, and can the six months it has to decide be extended?
  The Approving Panel is not a departmental committee. By s.144BA(15) the CENTRAL GOVERNMENT constitutes one or more Panels, each of three members including a Chairperson, and by s.144BA(16) "the Chairperson of the Approving Panel shall be a person who is or has been a judge of a High Court", with one member from the Indian Revenue Service not below the rank of Principal Chief Commissioner or Chief Commissioner of Income-tax and one member "an academic or scholar having special knowledge of matters, such as direct taxes, business accounts and international trade practices". By s.144BA(19) the Panel has, in addition to its own powers, "the powers which are vested in the Authority for Advance Rulings under section 245U". Its term is ordinarily one year, extendable up to three years (s.144BA(17)). The six-month period in s.144BA(13) is subject to an Explanation that excludes two things — time taken on an exchange-of-information reference under s.90 or s.90A, capped at one year, and any period during which the Panel's proceeding is stayed by a court order or injunction — with a proviso that if fewer than sixty days remain after that exclusion, the period is extended to sixty days.
• Statutory position — s.92CE(1): the FIVE gateways into a secondary adjustment, the one crore threshold, the AY 2016-17 cut-off, and the word "and" that was retrospectively replaced by "or" CBDT Circulars & InstructionsCuts both ways
  The TPO's order says I must now make a secondary adjustment. Which primary adjustments actually trigger s.92CE, and is there any threshold or year below which the section simply does not apply to me?
  Section 92CE(1) is triggered by a primary adjustment to transfer price arising in any one of FIVE ways — made suo motu by the assessee in his return; made by the Assessing Officer and accepted by the assessee; determined by an advance pricing agreement entered into under s.92CC on or after 1 April 2017; made under the safe harbour rules framed under s.92CB; or arising from a resolution under the mutual agreement procedure under an agreement entered into under s.90 or s.90A. In any of those cases "the assessee shall make a secondary adjustment". The first proviso then takes the case out of the section altogether if EITHER (i) the amount of primary adjustment made in any previous year does not exceed one crore rupees, OR (ii) the primary adjustment is made in respect of an assessment year commencing on or before 1 April 2016. The word joining those two limbs was originally "and"; it was substituted by "or" by Act No. 23 of 2019 with retrospective effect from 1 April 2018, and that single word is what makes the exclusions workable.
• Statutory position — Rule 10U: the exclusions a cross-border case must clear first — the Foreign Institutional Investor and offshore-derivative carve-outs, and how the three crore rupee tax benefit is actually computed CBDT Circulars & InstructionsCuts both ways
  Before I argue the merits of a GAAR notice for a foreign investor, which exclusions in Rule 10U do I have to run, and how is the three crore rupee tax benefit figure arrived at?
  Rule 10U(1) takes four classes of case outside Chapter X-A altogether. Clause (a) is the monetary floor: the Chapter does not apply to an arrangement where the tax benefit in the relevant assessment year arising "in aggregate, to all the parties to the arrangement" does not exceed three crore rupees. Clause (b) excludes a Foreign Institutional Investor that is an assessee under the Act, that "has not taken benefit of an agreement referred to in section 90 or section 90A", and that has invested in listed or unlisted securities in accordance with the SEBI (Foreign Institutional Investors) Regulations, 1995. Clause (c) excludes a non-resident in relation to an investment made by him "by way of offshore derivative instruments or otherwise, directly or indirectly, in a Foreign Institutional Investor". Clause (d) grandfathers income from the transfer of investments made before 1 April 2017. Rule 10U(3)(iv) then tells you how to quantify the tax benefit for the clause (a) threshold: for sub-clauses (a) to (e) of s.102(10) it is "the amount of tax", and for sub-clause (f), an increase in loss, it is "the tax that would have been chargeable had the increase in loss referred to therein been the total income".
• Statutory position — Rule 10CB: the five different starting points for the ninety-day repatriation clock, and the two SEPARATE interest rate bases — SBI one-year MCLR plus 325 basis points for a rupee transaction, six-month LIBOR plus 300 basis points for a foreign-currency one CBDT Circulars & InstructionsCuts both waysNo later treatment found
  My primary adjustment stands and the money is still with my overseas associated enterprise. When exactly do my ninety days start, and at what rate is the deemed advance to be charged interest?
  Rule 10CB(1) gives the repatriation window as "on or before ninety days" from a starting point that differs with the source of the primary adjustment: from the s.139(1) due date where the adjustment was made suo motu in the return; from the date of the order of the Assessing Officer or the appellate authority where the adjustment in that order was accepted; where the adjustment is determined by an APA, from the date of filing the s.139(1) return if the APA was entered into on or before the due date, and from the END OF THE MONTH in which the APA was entered into if it came later; from the s.139(1) due date where the safe harbour option was exercised; and from the date the Assessing Officer gives effect under rule 44H to a mutual agreement procedure resolution. Rule 10CB(2) then fixes two different rate bases, and they are not interchangeable: for a transaction denominated in INDIAN RUPEES the imputed per annum interest is "at the one year marginal cost of fund lending rate of State Bank of India as on 1st of April of the relevant previous year plus three hundred twenty five basis points"; for a transaction denominated in FOREIGN CURRENCY it is "at six month London Interbank Offered Rate as on 30th September of the relevant previous year plus three hundred basis points". Clause (ii) still names LIBOR. LIBOR settings have been permanently discontinued and no replacement benchmark has been substituted into this rule, so for recent previous years the foreign-currency limb prescribes a rate that may not exist for 30 September of the relevant year.
• Statutory position — place of effective management under section 6(3)(ii) from AY 2017-18, and the CBDT Circular 6/2017 guidelines CBDT Circulars & InstructionsCuts both ways
  A foreign company in my client's group is run largely from India. From when can it be treated as resident here, and what test does the department actually apply?
  From assessment year 2017-18, a company is resident in India if it is an Indian company or if its place of effective management in that year is in India — 'the place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance, made'. CBDT Circular No. 6 of 2017 dated 24 January 2017 lays down the guidelines: a company 'engaged in active business outside India' is presumed to have its POEM outside India if the majority of its board meetings are held outside India, and only a company failing that test goes through the two-stage enquiry of identifying who actually makes the key management and commercial decisions and then where those decisions are in fact made.
• Statutory position — ss.10 and 11 of the Black Money Act: the s.10(1) notice, the enquiry, the s.10(3) assessment and the s.10(4) best judgment assessment, and the two-year limit in s.11 with the exclusions in Explanation 1 and the one-year cap on the exchange-of-information exclusion CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  I have an assessment order under s.10(3) of the Black Money Act. The department says the limitation was extended because a request for exchange of information was pending. How long is the period, and how much can that request add to it?
  Two years, and the exchange-of-information exclusion is capped. Section 11(1) provides that no order of assessment or reassessment shall be made under s.10 after the expiry of two years from the end of the financial year in which the notice under s.10(1) was issued by the Assessing Officer. Explanation 1 to s.11 excludes, in computing that period, (i) the time taken in reopening the whole or any part of the proceeding, (ii) the period during which the assessment proceeding is stayed by an order or injunction of any court, and (iii) the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in s.90 or s.90A of the Income-tax Act or under s.73 of this Act and ending with the date on which the Principal Commissioner or the Commissioner last receives the information so requested "or a period of one year, whichever is less". The exclusion in clause (iii) therefore cannot add more than one year however long the request remains outstanding. A proviso to the Explanation extends the remaining period to sixty days where, after the exclusion, less than sixty days are left. On the machinery itself: s.10(1) empowers the Assessing Officer, on receipt of information from an income-tax authority or any other authority or on information coming to his notice, to serve a notice requiring production of accounts, documents or evidence on a date to be specified, and to serve further notices; s.10(2) allows him to make such enquiry as he considers necessary; s.10(3) requires him, after considering what he has obtained under s.10(1), what he has gathered under s.10(2) and any other evidence produced by the assessee, to assess or reassess by an order in writing and determine the sum payable; and s.10(4) provides that on a failure to comply with all the terms of the s.10(1) notice he shall, after taking into account all relevant material gathered and after giving the assessee an opportunity of being heard, make the assessment or reassessment to the best of his judgment and determine the sum payable.
• Statutory position — s.90(4), s.90(5) and Rule 21AB: the TRC and Form 10F a non-resident must have before any treaty relief, and the Form 10FA route that is closed to him CBDT Circulars & InstructionsCuts both ways
  What exactly does a non-resident have to hold and file before he can claim a treaty benefit, and can he ask the Indian Assessing Officer for a residence certificate?
  A non-resident to whom a treaty applies is NOT entitled to claim any relief under it unless he obtains a certificate of his being a resident from the Government of the country or specified territory of residence — that is s.90(4), and s.90A(4) is its mirror for an agreement with a specified association. Section 90(5) requires him also to provide such other documents and information as may be prescribed, and Rule 21AB(1) prescribes five particulars to be furnished in Form No. 10F. The Indian Assessing Officer cannot supply a residence certificate to him: Rule 21AB(3) and (4) give the Form 10FA application and the Form 10FB certificate only to an assessee 'being a resident in India'.
• Statutory position — s.10(50) of the Income-tax Act: the exemption for income already subjected to equalisation levy, the royalty and fees-for-technical-services carve-out, and the two dates that close it CBDT Circulars & InstructionsCuts both ways
  My client paid equalisation levy on the same receipts the Assessing Officer is now taxing as income. Is there an exemption, and has the department any answer to it?
  There is, and it is the only place in the Income-tax Act where the equalisation levy — which is charged by Chapter VIII of the Finance Act, 2016 and not by the Income-tax Act — meets income-tax. Section 10(50) excludes from total income any income arising from (i) a specified service provided on or after the date on which Chapter VIII of the Finance Act, 2016 came into force, or (ii) e-commerce supply or services made or provided or facilitated on or after 1 April 2020 BUT BEFORE 1 AUGUST 2024, and chargeable to equalisation levy under that Chapter. Two limits close it. Explanation 1 says the income referred to in the clause 'shall not include and shall be deemed never to have been included' any income chargeable to tax as royalty or fees for technical services in India under the Act read with a section 90 or 90A agreement. And the proviso says the clause does not apply to any income of the previous year relevant to the assessment year beginning on or after 1 April 2026 — that is, from AY 2026-27 onwards.
• Statutory position — s.153 Explanation 1(xi): the limitation clock stops from the day the GAAR reference reaches the Commissioner until his direction or the Panel's comes back, and then never leaves less than sixty days CBDT Circulars & InstructionsCuts both ways
  A reference under s.144BA has been made in my case and months have gone by. Does the ordinary time limit for completing the assessment keep running while the Approving Panel sits on it?
  No. Clause (xi) of Explanation 1 to s.153 excludes from the limitation period "the period commencing from the date on which a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the Principal Commissioner or Commissioner under sub-section (1) of section 144BA and ending on the date on which a direction under sub-section (3) or sub-section (6) or an order under sub-section (5) of the said section is received by the Assessing Officer". The clock therefore stops on receipt of the Assessing Officer's reference and restarts only when the outcome — the Commissioner's own direction under s.144BA(3), the Approving Panel's direction under s.144BA(6), or the Commissioner's order under s.144BA(5) dropping the matter — reaches the Assessing Officer. The proviso that follows the Explanation then gives the officer at least sixty days: if what is left after the exclusion is less than sixty days, the remaining period is extended to sixty days.
• Statutory position — s.90(2A): the treaty does not save you from GAAR, because Chapter X-A applies "even if such provisions are not beneficial" to the assessee CBDT Circulars & InstructionsCuts both ways
  My client is a treaty resident and the treaty plainly gives him the better of it. The department is invoking Chapter X-A anyway. Can it, when s.90(2) says the more beneficial provision applies?
  It can, and s.90(2A) is the provision that says so. Section 90(2) is the ordinary rule that where India has a treaty, the provisions of the Act apply "to the extent they are more beneficial to that assessee". Section 90(2A) then reads: "Notwithstanding anything contained in sub-section (2), the provisions of Chapter X-A of the Act shall apply to the assessee even if such provisions are not beneficial to him." So the treaty override that normally protects a non-resident is expressly switched off for Chapter X-A, and the fact that a Chapter X-A determination leaves the taxpayer worse off than the treaty is not an answer to 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.