Double Taxation Relief: What's the Appropriate Approach?

Last year, a question in General Law Study's Taxation Law paper came across as tricky. It asked whether double taxation relief under the Double Taxation Avoidance Agreement (DTAA) is available when a tax resident of India earns a foreign-sourced income that's already taxed in the foreign country as a non-resident. The catch was that the foreign country, where the income's sourced, doesn't have a DTAA with India.

The correct approach here should be to analyze the Income-tax Act, 1961, in conjunction with the DTAA. Section 90 of the IT Act states that where a tax resident of India earns income from a source situated in a country with which India has a DTAA, the income shall be taxed in India. However, the DTAA's Article 23(1) specifically restricts DTAA benefits to resident taxpayers.