As per case facts, the Delhi High Court quashed Central Board of Direct Taxes (CBDT) Circular No. 789, which provided instructions for assessing cases under the Indo-Mauritius Double Taxation Avoidance ... Convention (DTAC). The High Court ruled the circular ultra vires Sections 90 and 119 of the Income-tax Act, 1961, finding it exceeded CBDT's powers, interfered with the quasi-judicial functions of tax officers, and encouraged 'treaty shopping'. The question arose whether CBDT Circular No. 789 was legally valid and within its statutory powers, and if the benefits of the DTAC could be denied to resident entities based on whether they actually paid tax in Mauritius or were accused of engaging in 'treaty shopping' to avoid Indian taxes. Finally, the Supreme Court held that Circular No. 789 was valid and effectively issued within the CBDT's broad powers under Section 119 of the Act. The Court emphasized that Section 90 allows the Central Government to enter into DTACs that can override inconsistent provisions of the Income-tax Act, and that 'liable to taxation' refers to legal liability, not necessarily actual tax payment. It rejected the notion that 'treaty shopping' is inherently illegal or fraudulent unless specifically prohibited by treaty provisions. The judgment reiterated that legitimate tax planning, which operates within legal frameworks, is permissible, and courts should not invalidate transactions based on imputed motives when their legal effect is clear.