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Assessment year: 2006-07

12. We may also briefly deal with a rather recent decision of Hon'ble Supreme Court in the case of Ram Jethmalani Vs Union of India (2011 TIOL SC 57 PIL) to the extent this judgment deals with limitations on universal applicability of the principles of tax treaty override. One of the issues which came up for the consideration of Their Lordships, in this case, was whether in view of the provisions of Article 26 of India German Double Taxation Avoidance Agreement (223 ITR Stat 130), Government of India was indeed forbidden from disclosing certain information it has received from the German Government, with regard to Indian account holders in banks based in Liechtenstein. Their Lordships rejected the stand of the Government and held that Article 26 does not prevent Government of India from disclosing this information because (a) the "information" that is referred to in Article 26 is that which is "necessary for carrying out the purposes of this agreement", i.e. the Indo-German DTAA", and this does not extend to "information regarding Indian citizens' bank accounts in Liechtenstein that Germany secures and shares that have no bearing upon the matters that are covered by the double taxation agreement between the two countries"; (b) "there is no absolute bar of secrecy. Instead the agreement specifically provides that the information may be disclosed in public court proceedings, which the instant proceedings are", and (c) that the last sentence in Article 26(1) permitting disclosure of such secret information "in public court proceedings or in judicial proceedings" must be so construed as not limiting it to disclosure in the income tax proceedings only because such an approach will come in conflict with the scheme of the Constitution of India, granting every person a power to seek remedy against infringement of fundamental right under Part III of the Constitution, as "in order that the right guaranteed by Clause (1) of Article 32 be meaningful, and particularly because such petitions seek the protection of fundamental rights, it is imperative that in such proceedings the petitioners are not denied the information necessary for them to properly articulate the case and be heard, especially where such information is in the possession of the State". Their Lordships further observed that "to deny access to such information, without citing any Assessment year: 2006-07 constitutional principle or enumerated grounds of constitutional prohibition, would be to thwart the right granted by Clause (1) of Article 32". The law so laid down by Their Lordships does not, in any way, dilute the principles of tax treaty override, even as Their Lordships observe that when Courts have to interpret the provisions of tax treaty, they must not do so in such a manner as to come in conflict with the basic structure of the Constitution of India. This observation cannot, in our humble understanding, be construed as limited the principles of tax treaty override either. As a matter of fact, Their Lordships, later in the judgment, have observed that "We have perused the documents in question, and heard the arguments of Union of India with respect to the double taxation agreement with Germany as an obstacle to disclosure" and rejected these arguments, in the immediately following sentence, by observing that "we do not find merit in its arguments flowing from the provisions of double taxation agreement with Germany". It was on interpretation of the treaty provisions, rather than on rejecting the applicability of treaty provisions, that in Ram Jethmalani's case (supra), the Government of India's stand for non-disclosure of names of persons holding accounts in Liechtenstein. This judgment cannot, therefore, be seen as diluting the principles of tax treaty override.