Taxpublishers.in - InterestingDecision/IDDTF_119.htm - Tax Publishers Your Tax Solution Hub

Share via Whatsapp 87 Views


The Tax Publishers Most favoured nation clause CBDT Circular override of DTAA - Indo-Sweden DTAA *Facts :* Assessee a Swedish Company was availing shared centre services from its Indian subsidiary besides earning income by way of sale of software. Plea of the revenue was that the shared centre services were Fee for technical services as per the Indo-Swedish DTAA and was taxable in India via reassessment proceedings. On appeal to DRP assessee cited their own favourable case of prior years and it was also denied by revenue that the assessee could not avail the MFN clause of Indo-Portugal treaty as there was no separate notification issued by CBDT to apply the same as per the CBDT Circular No.. 3/2022. On higher appeal -- Held in favour of the assessee that the shared centre services were not fee for technical services and the MFN clause was available to them. The prescription of CBDT Circular 3/2022 by way of a special/separate notification was uncalled for once the treaty is signed and the protocol comes into effect from the signing date of the DTAA. Besides these, the make available condition was also not satisfied in these services to make them taxable in India. *Applied :* Own case of assessee of earlier and subsequent asst. years. *Ed. Note :* The MFN circular of CBDT 3/2022 imposes conditions which are uncalled for and override amendments thru specific circular/notification akin to making unilateral DTAA amendments. There are a number of decisions in the recent verdicts which have gone against the revenue due to the above. *Case:* Qlik Tech International AB v. Asstt. CIT2023 TaxPub(DT) 2275 (Bang-Trib)

The Tax Publishers

Most favoured nation clause CBDT Circular override of DTAA - Indo-Sweden DTAA

Facts :

Assessee a Swedish Company was availing shared centre services from its Indian subsidiary besides earning income by way of sale of software. Plea of the revenue was that the shared centre services were Fee for technical services as per the Indo-Swedish DTAA and was taxable in India via reassessment proceedings. On appeal to DRP assessee cited their own favourable case of prior years and it was also denied by revenue that the assessee could not avail the MFN clause of Indo-Portugal treaty as there was no separate notification issued by CBDT to apply the same as per the CBDT Circular No.. 3/2022. On higher appeal --

Held in favour of the assessee that the shared centre services were not fee for technical services and the MFN clause was available to them. The prescription of CBDT Circular 3/2022 by way of a special/separate notification was uncalled for once the treaty is signed and the protocol comes into effect from the signing date of the DTAA. Besides these, the make available condition was also not satisfied in these services to make them taxable in India.

Applied : Own case of assessee of earlier and subsequent asst. years.

Ed. Note : The MFN circular of CBDT 3/2022 imposes conditions which are uncalled for and override amendments thru specific circular/notification akin to making unilateral DTAA amendments. There are a number of decisions in the recent verdicts which have gone against the revenue due to the above.

Case: Qlik Tech International AB v. Asstt. CIT2023 TaxPub(DT) 2275 (Bang-Trib)