If an agreement is entered into under this section, the effect of the same shall be as under:-
(i) If no tax liability is imposed under the Income-tax Act, the question of resorting to the agreement would not arise. An agreement cannot impose any tax liability where the liability is not imposed by the Act. [CIT v R.M. Muthaiah (1993) 202 ITR 508 (Karn) affirmed in Union of India v Azadi Bachao Andolan (2003) 263 ITR 706 (SC)].
(ii) The person has to be a resident in at least one of the two countries entering into DTAA. If he is resident of both the countries then “Tie Breaker rule” will apply to decide of which country he will be considered to be resident for the purpose of such DTAA.
(iii) If the tax is leviable in our country as well as the other country or specified territory, as the case may be-
(a) the income may be taxed in only one country; or
(b) if income is being taxed in both the countries, then the tax paid in one country is allowed as deduction from the tax payable in the other country, as per the agreement.
(iv) In case of difference between the provision of the Act and of an agreement under section 90, the provisions of agreement shall prevail over the provisions of the Act and can be enforced by the appellate authorities and the court. However, as per section 90(2), the provisions of the Income-tax Act shall apply to the assessee in the event these are more beneficial to the assessee.