What do you understand by the term double taxation? Discuss the connecting factors which lead to double taxation of an income.

Double taxation occurs when an assessee is required to pay two or more taxes for the same income, asset, or financial transaction in different countries. Double taxation occurs mainly due to overlapping tax laws and regulations of the countries where an assessee operates his business. Double taxation Agreement is the systematic imposition of two or more taxes on the same income. The double tax liability is often mitigated by tax agreements, known as treaties, between countries. The taxability of a Foreign Entity in any country depends upon two distinct factors, namely, whether it is doing business with that country or in that country. Internationally, the term used to determine the jurisdiction for taxation is "connecting factors". There are two types of connecting factors, namely, "Residence" and "Source". It means a company can be subject to tax either on its residence link or its source link with a country. Broadly, if a company is doing business with another country (i.e., host/source country), then it would be subject to tax in its home country alone, based on its residence link. However, if a company is doing business in a host/ source country, then, besides being taxed in the home country on the basis of its residence link, it will also be taxed in the host country on the basis of its source link. Jurisdictional Double Taxation: Accordingly, when source rules overlap, double taxation may arise i.e. tax is imposed by two or more countries as per their domestic tax laws in respect of the same transaction; income arises or is deemed to arise in their respective jurisdictions. This is known as "jurisdictional double taxation". In order to avoid such double taxation, a company can invoke provisions of Double Taxation Avoidance Agreements (DTAAs) (also known as Tax Treaty or Double Tax Convention - DTC) with the host/ source country, or in the absence of such an agreement, as Indian company can invoke provisions of section 91 of the Income-tax Act, 1961, providing unilateral relief in the event of double taxation. Economic Double Taxation: Economic Double Taxation happens when the same transaction, item of income or capital is taxed in two or more states but in hands of different person (because of lack of subject identity).