Article
‘Liable to Tax’: History and impact on Treaties
By Ravi Sawana
The article in this issue of Direct Tax Amicus elaborately discusses the recently introduced definition of ‘liable to tax’ in the Income-tax Act, 1961. Tracing the history of the dispute relating to the phrase in determination of residency under Double Taxation Avoidance Agreements (DTAA), the article notes that the Indian Courts have majorly interpreted this term to not mean actual liability or payment of tax by a person in its country. On the question as to is whether the definition of ‘liable to tax’ introduced under the Indian domestic law will have a bearing on determination of residency under DTAA, the article notes that there are two schools of thoughts. Stating three reasons, according to one school, for reading the definition provided under Section 2(29A) in to the Article 4(1) of DTAA, the author observes that as per another school, it is necessary to look at the context in which the definition has been provided for under the domestic law. He is of the view that if the term ‘liable to tax’ under Article 4(1) is understood as it has been defined under Section 2(29A), then it would amount to equating the two terms, ‘liable to tax’ and ‘subject to tax’, under the DTAA...
Notifications & Circulars
- New rules for determining taxability on reconstitution of firms notified
- Manner of computation of Capital Gains and WDV of asset under Section 50 prescribed
- Exemptions – Omission of certain Rules and Forms under Income-tax Rules
Ratio decidendi
- Assessing Officer must follow the procedure laid down under Rule 28AA, while passing an order under Section 197 – Delhi High Court
- Proceeds from sale of certified emission reduction credit, are capital receipt and not business income – Madras High Court
- Whether protection under tax treaties for taxation of dividend in the source jurisdiction extends to DDT under Section 115-O in the hands of a domestic company, even in absence of a specific treaty provision to this effect? – Issue referred to Special Bench of ITAT
- Alteration of book profits (for MAT) as certified by an accountant, is beyond the AO’s powers and re-computation under Section 115JB is not allowable – ITAT Delhi
- Change in domicile of a company would not lead to denial of Treaty benefits – ITAT Mumbai
- Failure on part of Assessing Officer to follow procedure under Section 144C(1) is not a merely procedural or inadvertent error, but a breach of a mandatory provision – Bombay High Court
- DEPB incentives are not subject to arm’s length pricing computation – ITAT Hyderabad
- Notional interest adjustment on delayed receivables not permissible where assessee is a debt-free company – ITAT Delhi
