Article
Benefit of Most Favoured Nation clause for dividend income of non-resident – Interesting battle to watch out for before Apex Court
By Harshit Khurana and Devashish Jain
Lately, in the context of dividend income, the applicability of MFN clause has been a subject matter of dispute between the taxpayers and the Revenue authorities. The controversy revolves around the fact that the dividend income is taxable in India at the rate of 5% (provided in tax treaty with Slovenia) instead of higher rate of 10% provided in earlier treaties like those with Netherlands and France. The article in this issue of Direct Tax Amicus attempts to explain the controversy and the key arguments which, in authors’ view, weigh in favour of both the taxpayer and the Revenue authorities. The taxpayers have argued that for claiming benefit of MFN clause, the country needs to be an OECD member country at the time when the applicability of MFN clause is being tested. Whereas the Revenue authorities have taken a position that the third country need to be OECD member country at the time of entering into tax treaties with said countries. According to the authors, though the case weighs more in favour of the taxpayer, the tussle before the Supreme Court will be an interesting one to watch out for. They also state that considering the tax impact of the debate, a pro-active analysis must be conducted by MNEs…
Notifications & Circulars
- Faceless Appeal Scheme, 2021 – Jurisdiction of Commissioners of Income-tax (Appeals) notified
- TDS statement – Due date for filing extended
- Form 10A for exemption to trusts, institutions, universities, etc. – Condonation of delay in filing
- Draft common Income-tax return for all taxpayers notified
Ratio decidendi
- Relaxation provided by first proviso to Section 43B is not applicable to deduction with respect to employees' contributions to EPF, ESI etc. under Section 36(1)(va) – Supreme Court
- Depreciation allowable on exclusive business rights recorded as ‘goodwill’ in the books of accounts, and not ‘goodwill’ itself – Delhi High Court
- ‘Deemed dividend’ under Section 2(22)(e) must be computed by excluding current year's profits and opening balance of advances previously given – ITAT Bangalore
- Exemption under Section 10(5) for LTC payments not available if journey undertaken by employees involved foreign leg – Supreme Court
- Income from managerial training service is not exempt under Section 11, being non-incidental to the charitable trust’s main objective of imparting ‘education’ – ITAT Delhi
- Applicability of Section 144C – Conflicting decisions of two non-jurisdictional High Courts – ITAT follows decision by division bench over single-judge bench – ITAT Mumbai
