TAX TREATY OVERRIDES – A COMPREHENSIVE ANALYSIS -ABHIMANYU VERMA & MANISH PARMAR

July 21, 2017 | Autor: Manish Parmar | Categoria: Law, Constitutional Law, International Law
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TAX TREATY OVERRIDES – A COMPREHENSIVE ANALYSIS -

ABHIMANYU VERMA & MANISH PARMAR1

INTRODUCTION The developments in India’s taxation regime highlight the fact that the tussle between the Revenue Authorities and the Assessee is constantly evolving. In light of the disputed taxation claims such as was in the recent case of Vodafone International, this fact has been evidently highlighted. As measures of evading taxes become increasingly intricate and convoluted, the Revenue Authorities are ever-increasingly seeking to clamp down with an iron fist in an all-encompassing manner. In this regard this research paper analyses the dichotomy between domestic tax legislation policies and the principles and practices governing international taxation specifically in reference to treaty overrides of Double Taxation Avoidance Agreements (DTAAs).

INTERNATIONAL TAXATION AND THE CONCEPT OF DOUBLE TAXATION In the practice of levying taxes, numerous countries impose tax on income earned by their residents from sources both within and outside their own territory. This is construed as the application of the “worldwide income principle.”2 Furthermore, many countries also levy tax on income derived by non-residents if such income flows from sources within the country. This is termed as the “source principle.”3 Thus there exists an established system

1

The authors are currently in their 3rd year of pursuing B.A. LLB (Hons.) from Rajiv Gandhi National University of Law, Patiala, Punjab. 2 Mathur, C.S., Görl, Maximilian & Sonntag, Karl, Principles of Model Tax Conventions and International Taxation, Haryana; Lexis Nexis, p. 3, (2013) 1st edn. Print. 3 Ibid at p.3

of unlimited (or full) tax liability in their home country, whereas limited tax liability is imposed upon non-residents. This scenario is representative of the fact that, there exists a co-existent system of limited and unlimited tax liabilities, which in effect is the origin of double taxation. Reiterating Organisation for Economic Co-operation and Development (OCED)’s definition contained in the Model Tax Convention (MTC)4, double taxation has been defined as, “the imposition of comparable taxes in two (or more) States on the same taxpayer in respect of the same subject matter and for identical periods.” In this regard, it is detrimental for such a practice of over-taxation or double-taxation to exist, as this would prove to be detrimental towards the development of capital and the exchange of goods and services.

PRINCIPLES OF INTERNATIONAL TAXATION AND TAX TREATIES Broad regulations for the avoidance of double taxation are contained in the various double taxation agreements [Also “Agreements for the Avoidance of Double Taxation”, (DTAs or DTAAs)], which encompass bilateral agreements with other countries. DTAs are based on the colloquially called “recognised principles of international taxation.” Although no formal codification of these principles exists. Although, it is widely evident that rules which have been propagated by the various model tax conventions are widely accepted, with certain variations depending upon the different taxation practices of numerous countries.

4

OECD (2012), Model Tax Convention on Income and on Capital 2010 (2010 updated), OECD Publishing. Web.

Despite the fact that no formal codification of these principles exist, The International Chamber of Commerce, Paris5 has reiterated that besides the general principle of mutual respect, the following basic principles should govern and control the taxation of international business activities: 

The permanent establishment principle, generally limiting taxation to a situation where a permanent establishment exists and to only so much of the income as is attributable to the permanent establishment.



The net income principle, requiring the taxation of income only after full allowance for related expenses wherever they may be incurred.



The limitation of withholding taxes on gross income -

To dividends, interest and royalties exclusively and

-

To tax rates which should not be excessive and should reflect the fact that tax is levied on gross income



The principle of double taxation relief in country-of-residence tax systems.



The principle of non-discrimination between nationals and foreigners.

Further adding to the above list these guiding rules --

That an individual should normally be taxed only in the country where he or she performs work,



That income from immovable property should normally be taxable where the property is located, and



That associated enterprises should deal with each other as if they were not associated (principle of “dealing at arm’s length”).6

5

The International Chamber of Commerce, Paris, Inequitable Taxation of International large projects contracting, document no. 180/ 267 (June 25, 1987) 6 Supra 2

The OECD highlight the underlying purpose of tax treaties and states, “Tax treaties aim primarily at the avoidance of double taxation and the prevention of fiscal evasion but also have the objective of allocating tax revenues equitably between to Contracting States. Thus, any interpretation achieving these objectives would be preferable to one leading to double taxation or to an inappropriate double exemption.”7

INTERPRETATION OF TAX TREATIES – THE INDIAN CONTEXT In order for tax treaties to be applied efficiently and fairly, courts of different countries must strive to interpret treaty provisions consistently. This principle of common interpretation is already well-established in many jurisdictions.8 Tax treaties are meant to allocate tax claims equally between the contracting states. This goal can only be achieved if the treaty is applied consistently by the authorities and courts of both contracting states. In interpreting tax treaties, therefore, an interpretation should be sought which is most likely to be accepted in both contracting states.9 In some countries, however, treaty benefit is denied in cases of treaty abuse (like treaty shopping) based on purposive interpretation of the treaty. These States consider that a proper construction of tax conventions allows them to disregard abusive transactions such as those entered into with the view to obtaining unintended benefits under the provisions of these conventions. This interpretation results from the object and purpose of tax conventions as well as the obligation to interpret them in good faith.10 Reliance is usually placed on the preamble of a tax treaty i.e. the treaty is for avoidance of double taxation and prevention of fiscal evasion.

7

Supra 4 Klaus Vogel, Double Tax Treaties and Their Interpretation, 4 INT'L TAX & BUS. LAW. 1 (1986). p. 37. Web 9 Felix, G.,Flick, Zur Auslegung von Normen des internationalen Steuer-rechts in Von der Auslegung Und Anwendung Der Steurgesetze, 151, 1958, Print. 10 United Nations, Vienna Convention on the Law of Treaties, 23 May 1969, U.N.T.S., vol. 1155. 8

However, in India the courts have not favoured purposive interpretation, and rather have taken a strictly legal stance. In the case of Azadi Bachao Andolan11, the Supreme Court held that treaty shopping is legal. The relevant observation of the court is reproduced below“―In para 3.3.2, the working group recommended introduction of anti-abuse provisions in the domestic law. In paragraph 3.3.3 it is stated ―The Working Group recommends that in future negotiations, provisions relating to anti-abuse/limitation of benefit may be incorporated in the DTAAs also. We are afraid that the weighty recommendations of the Working Group on Non-Resident Taxation are again about what the law ought to be, and a pointer to the Parliament and the Executive for incorporating suitable limitation provisions in the treaty itself or by domestic legislation. This per se does not render an attempt by resident of a third party to take advantage of the existing provisions of the DTAC illegal. The Supreme Court in the Vodafone case12, again opting for a legalistic stance, expressed the need for a policy decision in such matter as underJustice Kapadia and Swatantra Kumar of SC in Vodafone (dated 20 Jan 2012): “―Tax policy certainty is crucial for taxpayers (including foreign investors) to make rational economic choices in the most efficient manner. Legal doctrines like Limitation of Benefits and look through are matters of policy. It is for the Government of the day to have them incorporated in the Treaties and in the laws so as to avoid conflicting views. Investors should know where they stand. It also helps the tax administration in enforcing the provisions of the taxing laws.”13 Justice Radhakrishnan in the above judgment:

11

Union of India v. Azadi Bachao Andolan (2004) 10 SCC 1 Vodafone International Holdings v. Union of India (2012) 6 SCC 613 13 Ibid ¶91 12

“―It is often said that insufficient legislation in the countries where the operate gives opportunities for money laundering, tax evasion etc. and, hence, it is imperative that the Indian Parliament would address all these issues with utmost urgency.”14

THE CONCURRENT OPERATION OF TAX TREATIES AND DOMESTIC LEGISLATION IN INDIA It is a well observed fact that the adoption of a double taxation avoidance agreement requires modification to the internal tax laws of the State. This is so done because taxpayers may be subject to the agreement and get benefit arising from its provisions. The said agreement is the interaction between its substantive rules and procedural rules.15 The Constitution of India does not render the Treaties to which India is a party a law of the land. Obligations arising therefrom, are not judicially enforceable, unless backed by legislation.16 Section 90 of the Indian Income Tax Act, 1961 contains the enabling Act of the Parliament for the purposes of tax treaties applying internally. THE PREDICAMENT OF OVERRIDING TAX TREATIES – IN VIOLATION OF INTERNATIONAL LAW The Vienna Convention on the Law of Treaties embodies in Article 26 the international law principle of pacta sun servanda, being that: “every treaty in force is binding upon the parties to it and must be performed by them in good faith”17. Further, the Convention provides in Article 27 that “a party may not invoke the provisions of its internal law as a justification for its failure to perform a treaty.”18 Therefore any domestic legislation which overrides a treaty is in clear violation of international law. Further, the ability of countries to unilaterally change,

14

Ibid ¶53 Mittal, D.P., Indian Double Taxation Agreements & Tax Laws, New Delhi; Taxmann Allied Services (P.) Ltd., p. 1.120 (2007), 5th edn. Print. 16 State of West Bengal v. Jugal Kishore; AIR 1969 SC 1171. 17 Supra 10 18 Supra 10 15

or “override” their tax treaties through domestic legislation has been identified as a serious threat to the bilateral tax treaty network.19 The OECD report on tax treaty overrides20 condemns all forms of treaty overrides. The OECD Committee report in this regard opines, “The certainty that tax treaties bring to international tax matters has, in the past few years, been called into question, and to some extent undermined, by the tendency in certain States for domestic legislation to be passed or proposed which may override provisions of tax treaties.” Further the OECD21 recommends to its member countries to avoid enactments of legislation which is intended to have effects in clear contradiction to international treaty obligations. IN SUPPORT

OF TREATY OVERRIDES:

PREVENTION

OF TREATY ABUSE

– THE

CONCEPT OF

TREATY SHOPPING The primary argument of any revenue authority when justifying their actions of invoking a treaty override is the prohibition of any practice which would constitute an abuse of a tax treaty. Primarily, the rationale behind invoking override provisions is the fact that no assesse or potential assesse should derive any contemptible benefit from a tax treaty if he commits any practice deemed to constitute ‘treaty abuse’. The term treaty abuse has not been encapsulated in a definite form in either of the Model Tax Conventions (MTCs), i.e. either the UN or the OECD. However, the commentary on Article 1 of the OECD Model Tax Convention (MTC)22

19

See, e.g., OECD Committee on Fiscal Affairs, Report on Tax Treaty Overrides, 2 Tax Notes Int’l 25 (1990); New York State Bar Assoc., Tax Sect., Legislative Overrides of Tax Treaties, 37 Tax Notes 931 (1987); Infanti, Anthony, Curtailing Tax Treaty Overrides: A Call to Action, 62 U. Pitt. L. Rev. 677 (2001); Vagts, Detlev, The United States and Its Treaties: Observance and Breach, 95 AJIL 313 (2001); Doernberg, Richard, Overriding Tax Treaties: The US Perspective, 9 Emory Int’l L. Rev. 71 (1995); Doernberg, Richard Treaty Override by Administrative Regulation: The Multiparty Financing Regulations, 2 Fla. Tax Rev. 521 (1995); Sachs, David, Is the 19th Century Doctrine of Treaty Override Good Law for Modern Day Tax Treaties, 47 Tax Law. 867 (1994). 20 OECD Committee on Fiscal Affairs, Report on Tax Treaty Overrides, 2 Tax Notes Int’l 25. 28 (1990). 21 Organisation for Economic Co-operation and Development (OECD), Recommendation of the Council concerning Tax Treaty Override, 2 October 1989 – C (89) 146/FINAL. Web. 22 Supra 4

provides guiding principles to determine cases of treaty abuse. Two elements must be present for constituting abuse of tax treaty provisions – 1. That the main purpose of entering into the transaction was to secure a more favourable tax position; and, 2. Obtaining that more favourable treatment in given facts would be contrary to the object and purpose of the relevant provisions of the tax treaty. The first condition requires probing into taxpayers' intentions underlying the transaction, and this may be difficult to ascertain objectively given the fact that a seemingly honest intention to minimise an assessee’s tax liability may be construed as a dishonest intention to evade payment of taxes. Also, a reference to ‘more favourable’ tax outcome should be judged in the light of the transaction meeting the substantive test of the domestic legal provisions. Thus, evidently the fact that an assessee obtains a favourable tax treatment on application of the tax treaty, by itself, cannot be sufficient to allege ‘treaty abuse’. There should be a conscious and deliberate attempt to structure a transaction to obtain such advantage which otherwise is not in line with the intent of the relevant provisions, and is not merely an incidental result of the transaction. In essence where the sole purpose of transacting is to obtain benefits from a Double Taxation Avoidance Agreement (DTAA) and such purpose is a deliberate attempt to use the provisions of the treaty to one’s advantage, therein the benefits of the treaty should not be granted to such a person. In the U.S. treaty overrides represent attempts by Congress to prevent taxpayers from avoiding taxes that the United States is conceded to have the authority to levy under its treaties. In effect, the United States has read into each of its treaties a general anti-avoidance clause authorizing

it to adopt reasonable23 statutory measures to prevent the use of the treaty for tax-avoidance purpose. In furtherance, the OECD opines that the actions which are reasonably designed to limit international tax avoidance are consistent with the object or purpose of a tax treaty.24

TREATY SHOPPING – THE JUDICIAL CONSENSUS IN INDIA The tax administration's attempts to deny tax treaty benefits on the grounds of “treaty shopping” have largely been unsuccessful. In the case of Azadi Bachao Andolan25, the Supreme Court held that in the absence of any specific provisions, treaty benefit could not be denied on the grounds of treaty shopping and upheld a circular of the CBDT permitting beneficial treatment under the India Mauritius treaty to an entity holding a Mauritius tax residency certificate. The Court observed that “treaty shopping” and underlying objective to mitigate tax is not the same as “colorable” device which is not permitted. In the case of E Trade Mauritius26, the Authority for Advance Ruling upheld the availability of capital gains tax exemption to a Mauritius tax resident company. The Authority refuted the arguments of the Revenue that treaty benefit could not be granted as the Mauritius entity was a mere conduit and the actual beneficiary of the income was the parent company situated in USA. The Authority held that a mere exercise of control by the holding company or the fact that the sale proceeds of shares were ultimately transferred to the holding company was not sufficient to deny treaty benefit.

23

There is such a provision in the non-discrimination clause of the Australia and New Zealand treaties. U.S. courts have routinely read an anti-avoidance clause into some Code provisions. The leading case is Gregory v. Helvering, U.S. (1935). 24 OECD Commentary to Article 1, para. 24 (“The main problem seems to be whether or not general principles such as “substance-over-form” are inherent in treaty provisions. . . . [I]t is the view of the wide majority that such [domestic anti-avoidance] rules, and the underlying principles, do not have to be confirmed in the text of the convention to be applicable.” 25 Supra 11 26 AAR No.826 of 2009.

INDIAN

LEGISLATIVE PROVISIONS GOVERNING TAX TREATIES AND TREATY OVERRIDES



CHAPTER IX AND X-A OF THE INCOME TAX ACT, 1961 A perusal of Chapter IX of the Income Tax Act, 1961 encompasses double taxation relief by empowering the Central Government to enter into agreements with foreign countries. Section 90 (1) (b) in particular empowers that these agreements be entered into for the avoidance of double taxation of income under the Income Tax Act, 1961 and the corresponding law in force in the country with which the Government of India enters into such agreements with. Further as per the provisions of s. 90(2) of the Act expounds that in scenarios where the Central Government has entered into an agreement with the government of any foreign territory for the avoidance of double taxation (as the case may be) then the assesse to whom any such agreement applies, the provisions of the Income Tax Act will apply to the extent that are more beneficial to that assesse. On a strict reading of s. 90 (2) it is evident that agreements entered into for the avoidance of double taxation shall attract only the beneficial provisions of the income tax act to the assesse concerned. Thus, section 90 enables the Central Government to enter into a DTAA with the foreign Government. When the requisite notification has been issued thereunder, the provisions of subsection (2) of section 90 spring into operation and an assessee who is covered by the provisions of the DTAA is entitled to seek benefits thereunder, even if the provisions of the DTAA are inconsistent with the provisions of the Act.27

27

Supra 11

ANALYSING CIRCULAR NO. 333 – WHETHER SPECIFIC PROVISIONS MADE IN THE DOUBLE TAXATION AGREEMENT WOULD PREVAIL OVER THE GENERAL PROVISIONS CONTAINED IN THE INCOME TAX ACT, 1961

In a circular released by the Income Tax Department of India, (No. 333 [F.No. 506/42/81FTD], dated 02-04-1982]) the legal position regarding this dispute was clarified and it was unequivocally reiterated, “The correct legal position is that where a specific provision is made in the double taxation avoidance agreement, that provisions will prevail over the general provisions contained in the Income-tax Act. In fact that the double taxation avoidance agreements which have been entered into by the Central Government under section 90 of the Income-tax Act, also provide that the laws in force in either country will continue to govern the assessment and taxation of income in the respective countries except where provisions to the contrary have been made in the agreement.”28

Further, in conclusion the circular

enunciates, “Thus, where a double taxation avoidance agreement provides for a particular mode of computation of income, the same should be followed, irrespective of the provisions in the Income-tax Act. Where there is no specific provision in the agreement, it is basic law, i.e., the Income-tax Act, [which] will govern the taxation of income.”

OBSERVING THE JUDICIAL TRENDS ON CIRCULAR NO. 333 A. CIT v. P.V.A.L. Kulandagan Chettiar29 “Where liability to tax arises under the local enactment, provisions of sections 4 and 5, which provide for taxation of global income of an assessee chargeable to tax, thereunder, are subject to the provisions of an agreement entered into between the

28

Taxmann’s Direct Taxes Circular, Vol. I,(2005) p. 584

29

(2004) 267 ITR 654 (SC)

Central Government and the Government of a foreign country for avoidance of double taxation as envisaged under section 90 to the contrary, if any. Such an agreement will act as an exception to or modification of sections 4 and 5. The provisions of such agreement cannot fasten a tax liability where the liability is not imposed by a local Act. Where tax liability is imposed by the Act, the agreement may be resorted to either for reducing the tax liability or altogether avoiding the tax liability. In case of any conflict between the provisions of the agreement and the Act, the provisions of the agreement would prevail over the provisions of the Act, as is clear from the provisions of section 90(2). Section 90(2) makes it clear that the Act gets modified in regard to the assessee insofar as the agreement is concerned if it falls within the category stated therein.” B. ITO v. Degremont International30 with the following observations: “4. The ITO has assumed that the provisions of section 44C override the provisions of the articles in the Agreement. This assumption is contrary to a circular issued by the CBDT, i.e., Circular No. 333. Now, it will be seen from the above that the ITO have been directed to compute the income according to the Agreement unless the Agreement clearly provides otherwise. The provisions of the Agreement will override the provisions of the Act.” C. Elkem Spigerverket v. ITO31, with the following observations: “. . . Circular No. 333 issued by the CBDT has clarified the legal position by saying that where a specific provision is made in the Double Taxation Avoidance Agreement that provision will prevail over the general provisions contained in the Income-tax Act. It further says that where a Double Taxation Avoidance Agreement provided for a particular mode of computation of income, the same should be followed, irrespective of the provisions of the Income-tax Act. Thus, even according to the aforesaid Circular, the provisions of the

30 31

(1985) 11 ITD 564 (JP) (1988) 32 TTJ 5 (Cal. - Trib.)

DTA Agreement will prevail over the general provisions contained in the Income-tax Act, 1961. . .” D. DCM Ltd. v. ITO32. The Tribunal observed: “6. The double taxation avoidance agreements are referable to sections 90 & 91. Where a specific provision is made in the double taxation avoidance agreement, that provision prevails over the general provisions contained in the Income-tax Act. The laws in force in either country continue to govern the assessment and taxation of the income in the respective countries except where provisions to the contrary have been made in the agreement. This position is not under dispute before us and was also clarified vide Circular No. 333. . .” E. CIT v. Davy Ashmore Ltd.33, as follows: “The Circular reflected the correct legal position inasmuch as the Convention or Agreement is arrived at by the two contracting Governments in deviation from the general principles of taxation applicable to the Contracting States; otherwise, the double taxation avoidance agreement will have no meaning at all.” F. Banque National De Paris v. IAC34, as follows: “4. ...the provisions of DTAA would prevail over the provisions of the Income-tax Act…But that is when there is a conflict between the two; otherwise the assessments would be governed by the provisions of the respective laws of the country. . .” G. CIT v. R.M. Muthiah35 as follows:

32

(1989) 29 ITD 123 Delhi (1991) 190 ITR 626 (Chd.) 34 1991) 94 CTR 57 (Bom. - Trib.) 35 (1993) 202 ITR 508 (Kar.) 33

“The effect of an ‘agreement’ entered into by virtue of section 90 of the Act would be: (i) if no tax liability is imposed under this Act, the question of resorting to the agreement would not arise. No provision of the agreement can possibly fasten a tax liability where the liability is not imposed by this Act; (ii) if a tax liability is imposed by this Act, the agreement may be resorted to for negativing or reducing it; (iii) in case of difference between the provisions of the Act and of the agreement, the provisions of the agreement prevail over the provisions of this Act and can be enforced by the appellate authorities and the court. To the same effect is the circular issued by the Central Board of Direct Taxes as per Circular No. 333....” H. Agencia Geral (P.) Ltd. v. First ITO36, as follows: “7. Para 3 of the above circular clearly clarifies that a particular mode of computation of income which for that matter includes the particular rate of tax payable on such computation of income should be followed irrespective of the provisions in the Income-tax Act. Therefore, it is clear that the provisions of Double Taxation Avoidance Agreement entered into with the Government of Singapore would prevail over the relevant provisions of the Income-tax Act, 1961.” I. CIT v. VR.S.R.M. Firm37, as follows: “Tax treaties are for that matter considered to be mini legislations containing themselves all the relevant aspects or features which are at variance with the general taxation laws of the respective countries. Such variations are in some cases in addition to the existing local tax laws and in other cases in lieu thereof. That being the legal position, the exposition of the said position also by the Central Board of Direct Taxes in their Circular No. 333, assumes significance and importance inasmuch as they can also be traceable to the powers of the Board under section 119 of the Act. Consequently, wherever the double taxation

36 37

(1993) 45 ITD 243 (Pune - Trib.) (1994) 208 ITR 400 (Mad.)

avoidance agreement provides for a particular mode of computation of income, the said method alone is required to be followed, irrespective of the provisions of the Income-tax Act, and it is only where there is no specific provision in the agreement to the contrary the basic tax law in force in the country will get attracted and govern the taxation of such income...” J. CIT v. Hindustan Paper Corpn. Ltd.38, as follows: “. . . It is by now well-settled that wherever there is a conflict between a DTA and the specific provisions contained in the Income-tax Act, the provisions of DTA will prevail over the statutory provisions contained in the said Act. In this connection reference may be made to Circular No. 333, dated 2-4-1982. The CBDT made it quite clear that where a specific provision is made in the DTA that provisions will prevail over the general provisions contained in the Act. In fact, the DTA which has been entered into by the Central Government under section 90 of the Act, also provides that the laws in force in a country will continue to govern the assessment and taxation of income in that country except where provisions to the contrary had been made in the agreement. Thus, where a DTA provides for a particular mode of computation of income, the same should be followed irrespective of the provisions in the Act. Where there is no specific provision in the agreement, it is the basic law, i.e., the Act which will govern the taxation of income.”

JUDICIAL CONSENSUS

ON CONFLICTS BETWEEN

TAX

TREATY PROVISIONS AND DOMESTIC

LEGISLATION

Analysing the judicial consensus in India which has been that section 90 is specifically intended to enable and empower the Central Government to issue a notification for implementation of

38

(1994) 77 Taxman 450 (Cal.)

the terms of a double taxation avoidance agreement. When that happens, the provisions of such an agreement, with respect to cases to which where they apply, would operate even if inconsistent with the provisions of the Income-tax Act. If it was not the intention of the Legislature to make a departure from the general principle of chargeability to tax under section 4 and the general principle of ascertainment of total income under section 5 of the Act, then there was no purpose in making those sections “subject to the provisions” of the Act. The very object of grafting the said two sections with the said clause is to enable the Central Government to issue a notification under section 90 towards implementation of the terms of the DTAA which would automatically override the provisions of the Income-tax Act in the matter of ascertainment of chargeability to income tax and ascertainment of total income, to the extent of inconsistency with the terms of the DTAA. It is evident that tax treaties override the provisions of the Act. A perusal of some cases highlighting this reveals the following trends; a. Wherever there is a conflict between a Double Taxation Avoidance Agreement (DTAA) and specific provisions contained in Income-tax Act, provisions of DTA will prevail over statutory provisions contained in Act.39 b. Provisions of the DTA Agreement will prevail over the general provisions contained in the 1961 Act.40 c. Where a specific provision is made in the Double Taxation Avoidance Agreement that provision will prevail over the general provisions contained in Income-tax Act.41 d. In event of conflict between provisions of Double Taxation Agreement and National Tax Laws, former would prevail.42

39

Supra 38 Elkem Spigerverket A/s. v. ITO, (1988) 32 TTJ (Cal.) 5 41 Austria Micro Systems International AG v. ITO, (2004) 85 TTJ 767 (Mum.). 42 AEG Aktiengesselschaft v. IAC, (1994) 48 ITD 359 (Bang.) 40

e. Provisions of section 90 prevail over those of sections 4, 5 and 9.43 f. In view of section 90(2) where a Double Taxation Avoidance Agreement exists such provisions of Income-tax Act which are against assessee, can never be made applicable. 44 g. The provisions of Double Taxation Agreement would constitute ‘provisions of the Act’ for the purpose of determining the chargeability of income-tax for the purpose of deduction of tax at source45 h. There is no justification for holding that foreign nationals, having elected to be governed by double taxation treaty, cannot ask for application of any provision of the Income-tax Act even when such provision is beneficial to them.46 i.

Provisions of DTAAs override the provisions of the Act, to the extent these agreements are more favourable to the assessee and only in the event of the assessee’s case failing on the provisions of the DTAA, the question of examining provisions under the Incometax Act would arise. 47

ANALYSIS OF

THE TREATY OVERRIDE PROVISIONS CONTAINED IN THE INCOME

TAX ACT,

1961 However, the predicament in relation to double taxation agreements in respect to treaty overrides arise with the inclusion of sub-section (2A)48 in section 90 of the Income Tax Act, 1961 which reads as under:-

43

CIT v. Visakhapatnam Port Trust, (1983) 144 ITR 146 (AP) Supra 38 45 Gujarat Narmada Valley Fertilisers Co. Ltd. v. ITO, (1982) 2 ITD 515 (Ahd.) 46 Foramer S.A. v. Dy. CIT , (1995) 52 ITD 115 (Delhi) 47 Dy. CIT v. ITC Ltd. (2002) 82 ITD 239 (Kol.) 48 Inserted by the Finance Act, 2012 w.e.f 1-4-2013 44

“Notwithstanding anything contained in sub-section (2), the provisions of Chapter X-A of the Act shall apply to the assesse even if such provisions are not beneficial to him.” The inclusion of this non-obstante clause, acts as an overriding provisions which in the strictest of interpretations disentitles any relief provided by the agreements entered into by the Government of India for the purposes contained in S.90 (2) of the Act.

INTERPRETATION OF TAXING STATUTES IN RELATION TO THE AVOIDANCE OF TAX In the principle of strict interpretation of a taxing statute, the ground-breaking case of Duke of Westminster v. Inland Revenue49 where it was observed, “it is open to the taxpayer to arrange his affairs in a manner so as to avoid or minimise his tax”. In taxation, it is essentially justified for the taxpayer to minimise his taxes, and it is only the evasion of tax which is unlawful. The Hon’ble Supreme Court of India has further highlighted that a taxpayer may resort to a device to divert his income before it accrues or arises to him and the effectiveness of the device depends not on considerations of morality but on the operation of the Income Tax Act.50 However, it must be observed that even though a person is entitled to arrange his affairs so as to avoid taxation, the arrangement must be real and genuine.51 Further, in order to ascertain whether a fraud has been committed towards evading taxes, the substance of the transaction can be looked into in applying taxing statutes.52 The observations of Sutherland in this regard highlight that, “While a person has the legal, and perhaps the moral right, to decrease the amount of his taxes by methods which the law permits, evasions of the tax laws by shams should be prohibited, and in securing this result it has not been uncommon for the courts to overlook the form of a transaction to expose its substance.”53

49

19 TC 490 HL CIT v Raman & Co (1968) 67 ITR 11 (SC) 51 Jiyajeerao Cotton Mills v. CIT AIR 1959 SC 270 (4) 52 Maxwell (12th Ed.) p. 140-3. Web 53 Sutherland Statutory Construction (3rd Ed. Vol 3) p. 299. Web 50

In McDowell & Company Ltd. v CTO54, the Supreme Court of India criticized the concept of that tax avoidance is permissible in all circumstances. In this regard the Supreme Court slightly evolved the strict construction of a taxing statute and observed, “[T]he proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it.” Thus the taxing statute must be construed and effectively applied in those circumstances when the transaction is in itself a device to avoid tax.

CHAPTER X-A: THE GENERAL ANTI-AVOIDANCE RULE (GAAR) As reiterated earlier S. 90 and 90A of the Indian Income Tax Act, 1961 provide for the legal authority to the executive for entering into an agreement for the avoidance of double taxation (DTAA) with another country (i.e. S.90) or a specified territory (S. 90A). In furtherance, S. 90 (2) and S.90A (2) of the Act further provide that a taxpayer may choose any provision between domestic law and DTAA whichever is more beneficial. In observation, this enunciates that tax treaties have an overriding status over domestic law. The override provisions however inserted in S.90 (2A) and S. 90A (2A) create a sense of confusion over the existing relationship between DTAAs and the Income Tax Act. The benefit clause provided in the aforementioned S.90 (2) and S.90A (2) has been effectively restricted by these subsequent additions instituted by the Finance Act, 2012.

54

AIR 1986 SC 649

The sub-section (2A) to S.90 reads as under, “(2A) notwithstanding anything contained in subsection (2), the provisions of Chapter X-A of the Act shall apply to the assessee, even if such provisions are not beneficial to him.” Thus, even in circumstances where the provisions of the Act, i.e. Chapter X-A are not beneficial to the assesse they will still preside over any DTAA.

Essentially though the expert committee report on the General Anti-Avoidance Rules (GAAR)55 recommended that the taxing authorities should refrain from treaty override in those scenarios where the tax treaty explicitly provides a mechanism to address issues pertaining to tax avoidance. Further the expert committee recognises the internationally accepted principle of interpretation in the particular interplay of domestic law and tax treaty wherein, in the cases of conflict between the provisions of the domestic law and the treaty, whichever is more beneficial to the taxpayer shall be applicable.56 This principle finds its place in S. 90 (2) of the Income Tax Act.

THE GAAR FRAMEWORK The Shome Committee Report highlights the intention of the parliament towards introducing Chapter X-A in the Income Tax, 1961. The Report enunciates, “Indeed, Parliament enacted GAAR to deal with tax avoidance schemes in both domestic law as well as cross-border transactions though GAAR’s perceived wide interpretation rather than a narrow and strict focus on anti-abuse.”57 The General Anti-Avoidance Rule is contained in Chapter X-A of the Income Tax Act, 1961. The applicability of the provisions of Chapter X-A of the Income Tax Act commences with a non-obstante clause and applies in circumstances where the arrangement entered into by an

55

Shome, Parthasarathi, Final Report on General Anti Avoidance Rules (GAAR) in Income-tax Act, 1961, p. 32. Print 56 Ibid. p. 41. 57 Ibid. p. 43.

assessed is an impermissible avoidance arrangement. The consequences in relation to tax arising from such arrangements are deliberated upon in the provisions of Chapter X-A.58 Section 96 defines an impermissible avoidance arrangements to be one whose main purpose is to obtain a ‘tax benefit’ and it: (a) creates rights, or obligations, which are not ordinarily created between persons dealing at

arm’s length; (b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act; (c) lacks commercial substance or is deemed to lack commercial substance either in whole or

in part (d) is entered into, or carried out, by means, or in a manner, which are not ordinarily

employed for bona fide purposes. Further S. 96 (2) also presumes those arrangements to be impermissible which have been entered into, or carried out, for the main purpose of obtaining a tax benefit. Further if such purpose of a step in, or a part of, the arrangement is to obtain a tax benefit, despite the fact being that the main purpose of the whole arrangement is not to obtain a tax benefit. S.97 defines when an arrangement shall be deemed to be lacking in commercial substance. S.98 (1) enunciates the consequences arising from entering into an impermissible avoidance arrangement. It provides that, “...the consequences, in relation, to tax, of the arrangement, including denial of tax benefit or benefit under a tax treaty...”59 This provision thus effectively provides that any benefit provided by a tax treaty will be denied to an impermissible avoidance arrangement. Section 98 (1) follows in the stead of the OECD Model Tax Convention which expounds, “A guiding principle is that the benefits of a double taxation convention should not be available

58 59

Section 95, Income Tax Act, 1961 Section 98, Income Tax Act, 1961

where a main purpose for entering into certain transactions or arrangements was to secure a more favourable tax position and obtaining that more favourable treatment in these circumstances would be contrary to the object and purpose of the relevant provisions. Where specific avoidance techniques have been identified or where the use of such techniques is especially problematic, it will often be useful to add to the convention provisions that focus directly on the relevant avoidance strategy.”60

CONFLICT OF DOMESTIC ANTI-AVOIDANCE RULES WITH TAX TREATIES Deliberating upon the issue of whether specific provisions of the domestic law of a contracting state that are intended to prevent tax abuse could come into a conflict with tax treaties, the OECD in its commentary on Model Convention61 has stated as under“…These States take account of the fact that taxes are ultimately imposed through the provisions of domestic law, as restricted (and in some rare cases, broadened) by the provisions of tax conventions. Thus, any abuse of the provisions of a tax convention could also be characterised as an abuse of the provisions of domestic law under which tax will be levied. For these States, the issue then becomes whether the provisions of tax conventions may prevent the application of the anti-abuse provisions of domestic law. As indicated in paragraph 22.1 below, the answer to that second question is that, to the extent these anti-avoidance rules are part of the basic domestic rules set by domestic tax laws for determining which facts give rise to a tax liability, they are not addressed in tax treaties and are therefore not affected by them. Thus, as a general rule, there will be no conflict between such rules and the provisions of tax conventions.”

60 61

Supra 4 ¶9.2 Ibid

Thus, the OECD observes that if domestic law that covers GAAR provisions is not reflected in a tax treaty, then GAAR if there is no conflict with the treaty. It is in this stead that the section 90 of the Income-tax Act (which is the legal basis of Indian tax treaties) has been amended vide Finance Act 2012 to specifically provide for treaty override in case where GAAR is applicable. This has been done as a matter of abundant precaution as there is no conflict between antiavoidance rules in the domestic law and the treaty provisions which do not have any antiavoidance rule as such. However, the case of conflicts arising may occur in those treaties which have special antiavoidance rules (SAAR) in the form of limitation of benefits clause etc. as the tax avoidance is being addressed both in the domestic law as well as the treaty law. The Shome Committee in this regard observes that, “It should, therefore be clarified through subordinate legislation so that there is no treaty override where the treaty itself has anti-avoidance provisions in the form of limitation of benefits clause. In other words, in such cases, GAAR should not be invoked.”62 The Shome Committee has thus conclusively stated in this context that, “where the treaty itself has anti-avoidance provisions, such provisions should not be substituted by GAAR provisions under the treaty override provisions.”63

OPERATION

OF THE

GAAR

FRAMEWORK IN RELATION TO

SAAR

AND

LOB CLAUSES

IN

DTAAS In a stark contrast to domestic tax laws, tax treaties between countries typically do not contain any general overarching anti-abuse provisions in respect of beneficial tax provisions of the treaties. However, it is well-evident that in that there could be interplay between Specific Anti Avoidance Rules (SAAR) and GAAR. The maxim Lex specialis derogat legi genarali (“special

62 63

Supra 55. Ibid

legislation overrides general legislation”) settles this principle that, where a specific rule is available, a general rule will not apply. Highlighting the separate yet collusive functions of SAAR and GAAR the Shome Committee highlights64: “―While SAARs are promulgated to counter a specific abusive behaviour, GAARs are used to support SAARs and to cover transactions that are not covered by SAARs. Under normal circumstances, where specific SAAR is applicable, GAAR will not be invoked. However, in an exceptional case of abusive behaviour on the part of a taxpayer that might defeat a SAAR, as illustrated in Example No. 16 in Annexure E (or similar cases), GAAR could also be invoked.” SAAR in essence covers a specific aspect or situation of tax avoidance and provides a specific rule to deal with specific tax avoidance schemes. For example, transfer pricing regulations in respect of transactions between associated enterprises ensures determination of taxable income based on arm‘s length price of such transactions. In such circumstances GAAR cannot be applied if such transactions between associated enterprises are not at arm‘s length even though one of the tainted elements of GAAR refers to dealings not at arm‘s length. This is so because a pre-existing mechanism to check avoidance of taxes already exists. The Limitation of Benefit (LOB) clause in some of India‘s tax treaties is another specific antiavoidance rule to prevent tax abuse. For instance, the LOB clause65 in the India-Singapore (DTAA) treaty provides that a company A, resident of a Contracting State, is deemed not to be a shell/conduit company if: (a) It is listed on a recognized stock exchange of the Contracting State; or

64 65

Ibid Ibid

(b) Its total annual expenditure on operations in that Contracting State is equal to or more than S$200,000 or Indian Rs. 50, 00, 000 in the respective contracting state as the case may be, in the immediately preceding period of 24 months from the date the gains arise.

Thus, if a company incorporated in Singapore incurs operating expenditure equal to, or in excess of, the aforesaid limits, then GAAR cannot be invoked to look into the genuineness of the company. The Shome Committee in this regard recommended66, “…where SAAR is applicable to a particular aspect/element, then GAAR shall not be invoked to look into that aspect/element. Similarly where anti-avoidance rules are provided in a tax treaty in the form of limitation of benefit (as in the Singapore treaty) etc., the GAAR provisions shall not apply overriding the treaty. If there is evidence of violations of anti-avoidance provisions in the treaty, the treaty should be revisited, but GAAR should not override the treaty.” In these numerous recommendations of the Shome Committee it is a repeated enunciation that in circumstances where pre-existing anti-avoidance mechanism are in place there no treaty override should be invoked.

INTERNATIONAL COMPARISONS – TREATY OVERRIDES In some tax jurisdictions, such as Belgium, tax treaties are accorded a special status so that they prevail over subsequent and domestic legislation.67 In most countries, treaties have a status superior to that of ordinary domestic law (for example, Belgium, France, Greece, Luxembourg, the Netherlands, Russia, and Spain). Yet in some countries treaties can be changed unilaterally

66

Supra 63 Laurent Sykes, Domestic Anti-Avoidance: Treaty and EU Overrides, International Tax Planning Association March 2010 p. 2. Print 67

by subsequent domestic legislation (for example, Australia, Austria, Denmark, Finland, Germany, Sweden, the U.K., and the U.S.).68 Two problems arise from this situation: the clear infringement on international law, and even worse, the helplessness of treaty partners and taxpayers because they only have weak or no legal remedies to restore justice.69 This position is contrasted from the European Union (EU) law position, given that directly effective EU law takes priority over the domestic legislation in all cases.70 United States The U.S. Constitution states, “Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land.”71 This enunciates the ‘supremacy clause’ of the U.S. Constitution and provides for ensuring the supremacy of both U.S. federal laws and treaties to state laws. The U.S. Supreme Court in regards to conflicts between treaties and domestic laws states, “[a]n Act of Congress, which must comply with the Constitution, is on a full parity with a treaty, and... when a statute which is subsequent in time is inconsistent with a treaty, the statute to the extent of conflict renders the treaty null.”72 The general U.S. rule is therefore that any statute that is later in time than a treaty, and that conflicts with it in some way, is a treaty override. The U.S. Supreme Court has however observed that, “A treaty will not be deemed to have been abrogated or modified by a later statute unless such purpose on the part of Congress has been clearly expressed.”73 The U.S. has in a few isolated circumstances observed treaty overrides. An important example in this regard are the multiparty financing regulations, which were adopted in 1995. These

68

Wolfgang Kessler and Rolf Eicke, German Treaty Overrides: Contractual Duties Meet Fiscal Interests’ Tax Notes International, Volume 60, October, 2010. p.41. Print. 69 Ibid 70 Supra 67 71 U.S. Constitution. Art. VI, cl. 2 72 Reid v. Covert, 354 U.S. 1, 18 (1957) 73 Cook v. United States, 288 U.S. 102, 120 (1933)

regulations provide that where taxpayers use conduits for treaty shopping, the Internal Revenue Service (IRS) has the authority to disregard the conduit even when the conduit is in a treaty jurisdiction and there is no limitation on benefits provision in the treaty (or the LOB article does not apply).74 The regulations embody the principle developed by the courts in treaty shopping cases like Aiken Industries75, where in the case of back to back loan via a treaty country, the court held that the conduit did not have the requisite control of the funds to qualify for treaty benefits. These are similar to the General Anti-Avoidance Rule (GAAR) provisions introduced in the Indian Income Tax Act, 1961 which apply such provisions in the absence of Specific Anti-Avoidance Rules (SAAR) and a Limitation of Benefits (LOB) clause in a Double Taxation Avoidance Agreement (DTAA).

CONCLUDING REMARKS To paraphrase Lord Wilberforce76, the Parliament is not obliged to stand still while the techniques of tax avoidance progress and are technically improved. With the advent of globalisation, deregulation, technological change and the movement of professional firms toward the marketing of tax “products” (or, in the post Sarbanes-Oxley world, tax “ideas” or tax “strategies”) have driven impermissible tax avoidance and abusive avoidance schemes to new levels of complexity and sophistication.77 While it is trite to observe that tax avoidance is not inherently illegal, tax evasion is a practice prohibited by law. With numerous countries invoking various general anti-avoidance provisions to tackle this problem, it is becoming increasingly difficult for taxation authorities to place an effective check over the intricate web of organisational structures of various

74

Reuven S. Avi-Yonah, Tax Treaty Overrides: A Qualified Defence of U.S. Practice” In Tax Treaties and Domestic Law, 65-80. EC and International Tax Law Series, vol. 2. Amsterdam: IBFD Publications, 2006. Print. 75 Aiken Industries v. Commissioner, 56 T.C. 925 (1971). 76 WT Ramsay Ltd. v. IRC [1982] AC 300 77 South African Revenue Service (SARS), Discussion Paper on Tax Avoidance, November 2005 p. 47. Web

multinational corporations. With the conflicting practices across numerous tax jurisdictions to tackle this problem, the use of complex structures to evade taxation in high tax jurisdictions and harbouring of income in low tax jurisdictions (colloquially termed as “tax havens”), treaty overrides pose an overarching attempt by numerous taxing authorities to restrict these practices. However, this mechanism of treaty overrides rests in stark contrast to the established principles of international law. With the ever evolving taxation regimes of numerous states, what shall be an effective check cannot be a singular treaty override. An overwhelming majority of juristic and scholarly advocate against the inclusion of tax treaty overrides in domestic legislative provisions. Such a mechanism is not only an arbitrary act on behalf of one state it is also an encumbrance in mutual cooperation between tax authorities of numerous states. The essence of tax treaties is to foster this cooperation, and enable effective taxation rather than overarching or dominant taxation by a single taxation authority. Overriding tax treaties pose a further threat in not only creating a disincentive to invest in the economies of states but also give unlawful credence to a wholly chaotic system of taxation. Treaty overrides extends the grip of the taxing authorities of a state to a wider ambit of the international fora and with the inclusion of such provisions as is the case of S.90 (2A) of the Income Tax Act, 1961 cause a conflict in the taxation practices, policies and most importantly jurisdiction of taxing authorities of numerous states. The revenue authorities however vociferously argue that the DTAAs provide for a protective cover or blanket for numerous taxpayers to evade taxes. In this regard, it should be observed that tax treaties be effectively formulated so that taxing authorities between states can by mutual participation tackle the problem of tax evasion in the international commercial practices and transactions.

The OECD opines that, “Tax treaties aim primarily at the avoidance of double taxation and the prevention of fiscal evasion but also have the objective of allocating tax revenues equitably between to Contracting States. Thus, any interpretation achieving these objectives would be preferable to one leading to double taxation or to an inappropriate double exemption.”78 This is the underlying purpose of tax treaties. If a treaty is overridden for achieving this underlying purpose, it can be construed to be a logical defence to the legal argument against treaty overrides. Reuven S. Avi-Yonah79 opines that the seriousness of the issues of treaty override has largely been exaggerated and that in practice most countries including the US rarely override treaties and when they do they can be justified as consistent with the underlying purpose of the relevant treaty. Further, treaty overrides can sometimes be an important tool in combating tax treaty abuse and that if used correctly, treaty overrides can be a helpful feature of the international tax regime, albeit one that should be used sparingly and with caution. Reuven S. Avi Yonah however also opines that overriding a treaty constitutes a, “serious threat to the bilateral tax treaty network.”80 The OECD81 has stated, “The motive for enacting legislation that overrides treaties can be less strong if all countries agree that they will promptly undertake bilateral or multilateral consultations to address problems connected with treaty provisions, whether arising in their own country or raised by countries with which they have tax treaties.” While the debate unfolds in the Indian context, what must be proactive solution is a middle path to tackle sham structures and the evasion of tax along with maintaining international cooperation and reciprocity amongst the States. The balance between International Law and

78

Supra 4 “Tax Treaty Overrides: A Qualified Defence of U.S. Practice.” In Tax Treaties and Domestic Law, pp. 65-80, EC and International Tax Law Series, Vol. 2, Amsterdam: IBFD Publications, 2006. Print 80 Ibid 81 Supra 4, R (8). Tax treaty override. 79

countervailing domestic legislation is a delicate one and the conflicts must be adequately resolved between the both to ensure effective taxation practices. There is a pressing need for developing bilateral or multilateral mechanisms to regulate tax treaties. What is essentially required are standards, and a comprehensive framework for making minor treaty revisions. In finality the observations of Jan Wouters and Maarten Vidal82 summarize the scenario of treaty overrides: “Even if a tax treaty override is perfectly lawful under the municipal law of the overriding State, and even if there are good economic reasons for it, it is very likely that the application of this legislation will be unlawful under international law. Hence, the overriding State’s international responsibility will be incurred unless circumstance precluding wrongfulness can be demonstrated. These circumstances are to be interpreted restrictively and have to be proven by the overriding State.”

82

Wouters, Jan & Vidal, Maarten, An International Law Perspective of Tax Treaties and Domestic Law Working Paper No.90 Institute for International Law, University of Leuven, January 2006 p. 19 ¶36. Print

BIBLIOGRAPHY BOOKS  Mathur, C.S., Görl, Maximilian & Sonntag, Karl (2013), Principles of Model Tax Conventions and International Taxation, Lexis Nexis, Haryana.  Mittal, D.P. (2007), Indian Double Taxation Agreements & Tax Laws, Taxmann Allied Services (P.) Ltd. New Delhi.  Direct Taxes Circular (2005), Taxmann, New Delhi.  Sykes, Laurent (2010), Domestic Anti-Avoidance: Treaty and EU Overrides, International Tax Planning Association.

STATUTES  United States Constitution, 1789.  Income Tax Act, 1961.

COMMITTEE REPORTS  Shome, Parthasarathi (2012), Final Report on General Anti Avoidance Rules (GAAR) in Income-tax Act, 1961.  South African Revenue Service (SARS) (2005), Discussion Paper on Tax Avoidance.  OECD Committee on Fiscal Affairs (1990) Report on Tax Treaty Overrides.  Organisation for Economic Co-operation and Development (OECD) (1989), Recommendation of the Council concerning Tax Treaty Override.  The International Chamber of Commerce (1987), Inequitable Taxation of International large projects contracting, document no. 180/ 267, Paris.

JOURNALS/ ARTICLES  Wouters, Jan & Vidal, Maarten (2006), An International Law Perspective of Tax Treaties and Domestic Law Working Paper No.90 Institute for International Law, University of Leuven.  Klaus Vogel (1986), Double Tax Treaties and Their Interpretation, International Tax & Bus. Law.  Felix, G. (1958), Flick, Zur Auslegung von Normen des internationalen Steuerrechts in Von der Auslegung Und Anwendung Der Steurgesetze.  Infanti, Anthony (2001), Curtailing Tax Treaty Overrides: A Call to Action.  Vagts, Detlev (2001), The United States and Its Treaties: Observance and Breach.  Doernberg, Richard (1995), Overriding Tax Treaties: The US Perspective.  Sachs, David (1994), Is the 19th Century Doctrine of Treaty Override Good Law for Modern Day Tax Treaties.  OECD Committee on Fiscal Affairs (1990), Report on Tax Treaty Overrides.  S. Avi Yonah, Reuven (2006), “Tax Treaty Overrides: A Qualified Defence of U.S. Practice.” In Tax Treaties and Domestic Law, EC and International Tax Law Series: IBFD Publications, Amsterdam.  Wolfgang Kessler and Rolf Eicke (2010), German Treaty Overrides: Contractual Duties Meet Fiscal Interests’ Tax Notes International.

CONVENTIONS/ TREATIES  United Nations, Vienna Convention on the Law of Treaties, 23 May 1969, U.N.T.S., vol. 1155.

 OECD (2012), Model Tax Convention on Income and on Capital 2010 (2010 updated), OECD Publishing.

CASES  Union of India v. Azadi Bachao Andolan, (2004) 10 SCC 1.  Vodafone International Holdings v. Union of India, (2012) 6 SCC 613.  State of West Bengal v. Jugal Kishore, AIR 1969 SC 1171.  Gregory v. Helvering, U.S. (1935).  Elkem Spigerverket A/s. v. ITO, (1988) 32 TTJ (Cal.) 5.  Austria Micro Systems International AG v. ITO, (2004) 85 TTJ 767 (Mum.).  AEG Aktiengesselschaft v. IAC, (1994) 48 ITD 359 (Bang.).  CIT v. Visakhapatnam Port Trust, (1983) 144 ITR 146 (AP).  CIT v. Hindusthan Paper Corpn. Ltd, (1994) 77 Taxman 450 (Cal.).  Gujarat Narmada Valley Fertilisers Co. Ltd. v. ITO, (1982) 2 ITD 515 (Ahd.).  Foramer S.A. v. Dy. CIT, (1995) 52 ITD 115 (Delhi).  Dy. CIT v. ITC Ltd., (2002) 82 ITD 239 (Kol.).  CIT v Raman & Co, (1968) 67 ITR 11 (SC).  Jiyajeerao Cotton Mills v. CIT, AIR 1959 SC 270 (4).  Reid v. Covert, 354 U.S. 1, 18 (1957).  Cook v. United States, 288 U.S. 102, 120 (1933).  Aiken Industries v. Commissioner, 56 T.C. 925 (1971).  WT Ramsay Ltd. v. IRC, (1982) AC 300.  McDowell & Company Ltd. v CTO, AIR 1986 SC 649.  Duke of Westminster v. Inland Revenue, 19 TC 490 HL.  CIT v. VR.S.R.M. Firm, (1994) 208 ITR 400 (Mad.).  Agencia Geral (P.) Ltd. v. First ITO, (1993) 45 ITD 243 (Pune - Trib.)  CIT v. R.M. Muthiah, (1993) 202 ITR 508 (Kar.).

 Banque National De Paris v. IAC, (1991) 94 CTR 57 (Bom. - Trib.).  CIT v. Davy Ashmore Ltd, (1991) 190 ITR 626 (Chd.).  DCM Ltd. v. ITO, (1989) 29 ITD 123 (Delhi).  Elkem Spigerverket v. ITO, (1988) 32 TTJ 5 (Cal. - Trib.).  ITO v. Degremont International, (1985) 11 ITD 564 (JP).  CIT v. P.V.A.L. Kulandagan Chettiar, (2004) 267 ITR 654 (SC).  E Trade Mauritius AAR No.826 of 2009.

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