Double Taxation Avoidance Agreements (DTAAs) play a crucial role in facilitating international trade and investment by mitigating the adverse effects of double taxation. This abstract provides a comparative analysis of DTAA provisions between India and the United States of America (USA), two significant economies with extensive global connections.

The DTAA between India and the USA aims to eliminate double taxation of income earned by residents of either country in the other. Through the analysis of various aspects, including residency criteria, taxation of various income sources, and dispute resolution mechanisms, this study elucidates the similarities and differences in the DTAA frameworks of both nations.

India’s DTAA with the USA has undergone several revisions over the years, reflecting changes in global tax dynamics and evolving bilateral economic relations. Similarly, the USA’s network of DTAAs is vast and comprehensive, with unique provisions tailored to specific partner countries, including India.

This comparative analysis highlights key areas of convergence and divergence in the DTAA frameworks of India and the USA. It explores the impact of these agreements on cross-border investments, trade, and taxation for individuals and businesses operating between the two countries.

Additionally, this abstract sheds light on recent developments and emerging trends in the DTAA landscape, such as digital taxation and the OECD’s Base Erosion and Profit Shifting (BEPS) initiative, which have implications for both India and the USA.

Understanding the nuances of DTAA provisions between India and the USA is essential for policymakers, tax professionals, and businesses engaged in cross-border activities. By examining the strengths and limitations of these agreements, stakeholders can navigate the complexities of international taxation more effectively and leverage opportunities for economic cooperation and growth between the two nations.

 

 

INTRODUCTION

 

The globalisation of business activities and movement of natural and juridical persons across the geography gave rise to situations such as where a corporate was having activities in one country and ensured that the profit looked as arose in another, incidentally where the tax rate was lower.[1] The host country felt cheated because it provided all production factors but did not earn the resultant tax revenue. National legislation for tax collections alone became insufficient, owing to the complex nature of the transactions. Indiscriminate tax applications resulted in multiple taxations globally, affecting international commerce and global hue and cry.[2] Thus there was a need for harmonisation of taxation systems. While the tax rates could not be made uniform globally, countries realised that as a broad principle, no income should be taxed twice, once in each country and tax paid in one country could be set off against that payable in another country for the same income. The concept of recognising this resulted in bilateral agreements called DTAA (Double Taxation Avoidance Agreements or Treaties).

Double Tax Treaties are international agreements. Therefore, their creation and their consequences are determined according to the rules contained in the Vienna Convention on the law of treaties. However, once accepted as the law of the land, they are enforceable as part of the domestic law. These treaties generally override domestic law.[3] Many tax jurisdictions allow the taxpayers to choose between the treaty and the domestic law provision, whichever is more advantageous to them. Tax treaties involve a negotiated sharing of the tax revenues by the states. Economic and social factors govern these negotiations besides revenue consideration with the passage of time. These treaties had to take care of the possible tax evasions, due respect to differently understood concepts of residence, linkage of tax rates to different taxable categories entities and so on. Again, these treaties that can easily be compared to any national legislation are prone to conflict regarding the true meaning and interpretation of the same. The researcher proposed to expound some aspects of this frontier of knowledge hereafter.

Making a treaty involves negotiation, signing, ratification and incorporation into the Contracting States’ domestic laws. A treaty is an international agreement concluded between States in written form and governed by International law.[4] Making a treaty is an executive act, while the performance of its obligations if they entail alteration of the existing domestic law, requires legislative action. Adoption of a double taxation agreement involves modification to the internal tax laws of the State. In some states, legislation is needed, while in others, it is considered part of the Constitutional law, being a treaty or agreement concluded under international law. This is so done because taxpayers may be subject to the agreement and benefit from its provisions. The said agreement is the interaction between its substantive rules and the national procedure rules.

The Constitution of India does not render the treaties to which India is a party to the law of the land. Obligations arising there from, therefore, are not judicially enforceable, unless backed by legislation. Treaties are not self- operating. It means that a treaty is not a part of the law unless and until it has been incorporated into the law by legislation.

A treaty does not apply internally. It requires an enabling Act of the Parliament. Section 90 of the Indian Income-tax Act, 1961, is such an Act. It empowers the Central Government to enter into an agreement with any country to grant relief from and avoidance of double taxation, exchange of information, recovery of tax, and make such provisions as may be necessary for implementing the agreement by notification in the Official Gazette. That section empowers the Central Government to enter into an agreement on behalf of the State. It also serves another purpose, and the concluded agreement is incorporated in the Income-tax Act. Its enforceability and applicability have the legislative backing. Double taxation agreements have the status of a treaty. In case of conflict between the domestic law and the provisions of the treaty, the latter prevails. Article 73 of the Constitution of India extends the executive power to the matters enumerated in List-1, including the matters in entry 14 thereof on entering into treaties and implementation of treaties and to exercise of such rights, authority and jurisdiction as are exercisable by the Government of India by virtue of any treaty agreement. Accordingly, the Central Government is competent to represent the State and may by treaties incur obligations and to give effect to treaties.

DOUBLE TAXATION AVOIDANCE TREATIES IN INDIAN LEGAL SYSTEM

Although the fundamentals of Indian Legislative on tax are relatively simple, the Indian Legislative on International Taxation is considered complex. The complexity is not only with India but also with the other world countries. In India, before one individual or company may act upon to consider the effect of Double Taxation Avoidance Treaties (DTAT’s) the Income of that particular individual or company has to be calculated under the domestic law. If the taxpayer’s Income exempted under domestic law, relief from DTAT’s does not arise. When it comes to Double Taxation Avoidance Treaties (DTAT’s), it is only on the lesser of the two Income as one calculated under the domestic law and one calculated under Double Taxation Avoidance Treaties (DTAT’s) that would form the basis for relief. Double Taxation Avoidance Treaties (DTAT’s) spares the tax on an individual or a company only on a doubly taxed income.^[5]

CONSTITUTIONAL PROVISIONS

The power to enter into treaties, agreements, and conventions is one of a sovereign power’s attributes. Entry 14 of the Union List in the Seventh Schedule to India’s Constitution confers exclusive power on Parliament to enter into treaties, agreements, and conventions. Naturally, foreign affairs and relationships with foreign countries is part of the Union List vide Entry 10.31.^[6] The Government of India Act, 1935 did not contain Entry 10 or Entry 14 as the power to enter into treaties is an incident of a sovereign country and India was not sovereign before 1947. Article 253 of the Constitution, empowers Parliament to make any law for implementing any treaty, agreement or convention with another country or countries or any decision made at an international conference, association or other body. Article 253 is to be read in conjunction with Articles 51(c) and 73. Article 51 is part of the Directive Principles of State Policy, and cl (c) requires that the State endeavour to “foster respect for international law and treaty obligations in the dealings of organized people with one another”. Article 73 sets out the extent of executive power of the Union of India and reads as follows: – Article 73. The extent of executive power of the Union—

• Subject to the provisions of this Constitution, the executive power of the Union shall extend—
  • to the matters with respect to which Parliament has power to make laws; and
  • to the exercise of such rights, authority and jurisdiction as are exercisable by the Government of India by virtue of any treaty or agreement: Provided that the executive power referred to in sub clause (a) shall not, save as expressly provided in this constitution or in any law made by Parliament, extend in any State to matters with respect in which the Legislature of the State has also power to make laws.

As mentioned above, Entry 14^[7] of the Union List confers power on Parliament to enter into treaties, agreements and conventions. When read with Article 73, the executive Government signs treaties or agreements, which must be made into a law by suitable Parliamentary legislation. In India and Commonwealth countries, the power to enter into a treaty is with the Government or the Executive, but if such a treaty or agreement results in alteration of the existing domestic law, it will require legislative action. Thus, unless the treaty is technically converted into Parliamentary legislation, one view is that it will not have the force of law because Parliament has constitutional control over the Executive.^[8] The Supreme Court has held that different countries have varying procedures when it comes to fiscal treaties dealing with double taxation avoidance. In the United States, such a treaty becomes a part of municipal law upon ratification by the Senate. In the United Kingdom, such a treaty would have to be endorsed by an order made by the Queen-in-Council. Since in India such a treaty would have to be translated into an Act of Parliament, a procedure which would be time- consuming and cumbersome, a particular procedure was evolved by enacting Section 90 of the Act.¹ It is submitted that Section 90 eliminates the need for each treaty to be made into a Parliament law. It may be pointed out briefly that there is a distinction between “monism” that prevails in the US and Europe whereby a treaty does not need to be signed by the Government to be converted into municipal law by legislation and dualism, which operates in India and Commonwealth countries, whereby a treaty has to be translated into an Act of Parliament.^[9] Section 90 enables the Central Government to enter into an agreement, and this enabling power derives its authority from Article 253 of the Constitution. Thus, a treaty or agreement entered into by India cannot become the law of the land, and it cannot be implemented unless the Parliament passes a law as required under Article 253.

The theory generally floated is those treaty agreements with another state is an inherent part of Sovereign Power. In the context of Indian Democracy, the State becomes a creature of the Constitution.^[10] In such a case, the theory of inherent power to enter into a treaty as perceived becomes entirely questionable. More so in the case of tax treaties, the power to enter into the treaty is provided under section 90 to the Union Government. While describing the constitutional limitations, H. M. Seervai^[11] states:

 The power to make treaties or enter into binding agreements with other nations has an international as well as an internal aspect. In International Law, nations are assumed to know where the treaty- making power resides and the internal limitations on that power. Regarding the internal aspect of a treaty or agreement, the Constitutional limitations, if any, on the treaty making power would come into play…… Again, where a treaty imposes an obligation which affects the rights of the inhabitants of a Sovereign State, say, India, the treaty would have to be implemented by a law, and the same would be the position if the treaty involved expenditure of public funds because these can only be appropriated in the manner provided for in the Constitution. Although the power to enter into treaties and implement them is in terms absolute, having regard to the fact that we have a written federal Constitution, a Court would imply limitations on that power as they have been implied in the United States although no treaty entered into by the United States has been held constitutionally void. A treaty, for instance, cannot make provisions which would, in effect, amend the Constitution, or give up the form of Govt. set up by the Constitution, for it could not have been intended that a power conferred by the Constitution should, without an amendment of the Constitution, alter the Constitution.¹

ELIMINATION OF DOUBLE TAXATION UNDER TREATIES

The jurisdiction to tax the income of an individual or an entity is traditionally based on that person’s personal status, such as residence, domicile or citizenship where individuals are concerned, or incorporation or effective management, concerning corporations. This type of jurisdiction is referred to as ‘domiciliary jurisdiction’ or ‘residence rule’. As a general rule, the country of residence enjoys absolute power to tax an assessee on all his global income. Besides, a State may base its jurisdiction to tax on the source of the income being situated within the territory of that State. This is referred to as the ‘source jurisdiction’ or ‘source rule’. The latter type of jurisdiction is typically restricted to the income that arises from sources within that State. However, depending on the provisions of the relevant DTAAs, in the country of residence, assessees either get an exemption of income on which taxes are paid in the source country or get credit for taxes paid in that country.^[12] The simultaneous sovereign right of all countries to tax their residents on global income, and the sovereign right of all countries to tax any income where “source” is within its territory results in the possibility of double taxation. For example, country A can levy income-tax because the recipient of income is a resident of that country even though the income has arisen or has its source in another country B. The latter country B also has the right to tax the same income because its source is within its territory, even though the recipient may be a resident of the other country A. Thus, the same income can be legitimately taxed by the two countries A and B, leading to double taxation because of the “residence” rule and the “source” rule. On this basis, treaties are entered into between countries whereby there is a division of taxing power. By an agreement, each country surrenders a part of its taxing power in favour of the “other Contracting State”. This is done to promote mutual cooperation and economic development. The reader may note an interesting article on this subject.^[13] On the other hand, DTAAs place a number of restrictions on the source country’s powers to tax an income. These limitations come, typically, in three forms: a. the source country’s power to tax that income is unlimited; b. the source country’s power to tax that income is limited, or c. the source country has no power tax that head of income.

“Maybe taxed”, “Shall be taxable only.”. — The first two cases use what the renowned authority on double taxation, Philip Baker, calls “permissive” terminology, such as “maybe taxed” or “may also be taxed”.^[14]

In the third case, the treaty typically states that the income “shall be taxable only” in the country of residence.^[15] Importantly, in DTAAs, no provision grants the country of source the sole right to tax income. The Karnataka High Court in CIT v. R. M. Muthiah^[16], and the Madras High Court in CIT v. VR. S.R.M. Firm^[17], had held that the expression “may be taxed” in the country of source implied that the income could not be taxed in the country of residence. This position is incorrect since such an interpretation would make the credit provisions in the treaty ineffectual since credit can only arise when the treaty gives both countries the power to tax a transaction. It is mistakenly assumed that the Supreme Court affirmed this view.^[18] The Supreme Court ruling on the India-Malaysia DTAA found that the assessee was a resident of Malaysia. The question of whether the term “may be taxed” meant “may only be taxed” did not arise at all in light of this finding. However, Kulandagan Chettiar was wrongly relied upon by the Madhya Pradesh High Court. to hold that when the treaty states that an income “may be taxed” in the country of source means that it cannot be taxed in the country of residence. The Supreme Court affirmed this judgment, but there is no discussion on this aspect.

According to the OECD / G20 Base Erosion and Profit Shifting project report on ‘Prevention of Treaty Abuse – Peer Review Report on Treaty Shopping’ was approved by the Inclusive Framework on BEPS published in the Year 2019, India has 95 Double Taxation Avoidance Treaties (DTAT’s). Among that 95 treaties, India signed 93 under the BEPS Multilateral Instrument by 2017.

It was stated in the report mentioned above that India is implementing the Preamble statement of Multilateral Instruments (Article 6)¹ and the Principle Purpose Test (PPT) of Multilateral Instrument (Article 7).² India also opted for the simplified Limitation on Benefits (LOB) under Article 7 (6)³ of the Multilateral Instrument. It was mentioned in the report that India has no jurisdiction issues in the implementation of the Double Taxation Avoidance Treaties (DTAT’s) with the partner countries.

 

COMPLEXITIES IN DOUBLE TAXATION AVOIDANCE TREATIES

Ample research has been conducted and plenty of literatures available regarding the substantive provisions of Double Taxation Avoidance Treaties and its relationship between those provisions and the provisions available in the specific country’s domestic law. However, when it comes to the practical application of the tax treaties, there is relatively less information available. Therefore, the researcher analysed the complexities involved in applying Double Taxation Avoidance Treaties and attempted to distinguished the difference between the substantive rules of Double Taxation Avoidance Treaties and the procedural aspects of applying those substantive rules.[19]

There is a direct connection between the country’s legal system and the provisions of Double Taxation Avoidance Treaties. The Double Taxation Avoidance Treaties status in a particular country depends upon the relationship between the tax treaties and the domestic law. There is the number of variations in the status of Tax Treaties in the domestic legal system of many countries, for instance, in countries like Belgium, Argentina, Italy and Netherlands, the Tax Treaties and International Law are taken into consideration as the highest source of law, maybe because of those countries Constitution or the establishment of Courts in such a way. Contrary to this in some other countries like Canada, Australia, Norway, Germany, Sri Lanka, Russia and the United Kingdom, the Double Taxation Avoidance Treaties have the same status as domestic law.[20] Apart from this country, few countries have a relationship between Double Taxation Avoidance Treaties, and domestic law is not clear.

Many scholars traditionally debated the above-mentioned distinction, and all those debates are categorized into three: Monism, Dualism, Moderate Dualism. The Monist approach argues that international law and domestic law are part of one system in which international law always succeeds over the domestic law, the Dualistic approach argues both international law and domestic law are different and separate legal system which does necessarily not succeed over other, finally, the Moderate Dualism argues both the Monist and Dualist approaches are two simplistic to accommodate the variations in practice.[21] The country’s approach determines the application of Double Taxation Avoidance Treaties and its provisions, and the country follows monism considered the treaties and always prevails over domestic law. The country following dualism gives priority accorded to treaties may be a constitutional requirement, in which case rules for the application of a treaty raise issues of constitutional validity. On the other hand, it is also possible to adopt domestic rules and restrict or qualify access to a treaty’s benefits; in some cases, the country may deny treaty benefits entirely. It is also to be noted here, in the federal set up the complexity is even higher, because, tax treaties may not be legally binding on the subnational governments, which raises the potential for conflicts between the implementing legislation and treaty.¹ At last, the researcher also found that there are good number of countries with considerable freedom and flexibility towards both international law and domestic law regarding the application of Double Taxation Avoidance Treaties. Apart from this general complexity with regard to the relationship between international law and domestic law, the researcher confined the scope of this Chapter towards the particular complexities from the following areas/fields/items:[22]

• Residence;
• Business Connection and Permanent Establishment;
• Income from Immovable Property;
• Transfer Pricing;
• Royalty and Technical Fees;
• Capital Gains; and
• Capital

COMPLEXITIES IN RESIDENCE

Article 4 of the OECD Model, the UN Model and US Model, discusses the resident’s definition and provisions. Since the Double Taxation Avoidance Treaties refer to the relief of Double Taxes or liability of the resident from both the partner countries. Therefore, it becomes significant to decide the claimant to relief who is considered as a resident. Hence, the definition in the Double Taxation Treaties of resident becomes vital. Every Double Taxation Avoidance Agreement makes it clear about the resident to whom it applies; however, there is a chance that the taxpayer may be resident of both the partner countries having dual status. In those cases, the test may be based upon the physical residence, domicile, place of management or location of permanent establishment and it is to be noted that the criteria adopted in the local laws or not recognized. There are two categories of residential status in India: 1) Ordinarily Resident; and 2) Not Ordinarily Resident. The difference between these two categories is simple, i.e., Not Ordinarily Resident’s foreign income is not assessable; in other words, Not Ordinarily Resident’s treated on par with Non-Resident.

As discussed above, the complexities arise due to dual status, and there are various alternatives to avoid those complexities provided by both the OECD and UN Model. In case of an individual, the residential status is determined based on the following residential test, if the individual completes the test satisfactorily no need for the second test:

1. Permanent home of the individual;
2. Where there are permanent homes in both the States, where there is personal and economic relations or closer centre of vital interest;

• Where vital interest in both the countries are the same or cannot be determined, where there is a habitual abode;

1. Where there is habitual abode in both the countries or in neither, the country or which he is a national/citizen;
2. If he is a national of both the States or neither of them, the tie- breaker that is applicable is only by mutual agreement.

There is a difference in the determination of domicile in international law and residential status in Double Taxation Avoidance Treaties. According to international law to constitute domicile, residence combined with the intention of making it home of the party, such party being animo et facto[23] is required. Domicile has been found as a mixed question of law and fact. Therefore, the determination of residence is becoming important in the Double Taxation Avoidance Treaties. Regarding the residence of the companies, the OECD and UN Model have given elaborate guidelines for determining residential status. The qualified government bodies are treated as a residence of the state where the body is established, and the fiscal transparency is recognized in both the countries.[24] In the case of a partnership company, the income is assessed based on the partner’s hands and the partner’s eligibility for relief is based on his individual capacity residential status.

CONCLUSION & SUGGESTIONS

With the advancement of technology, evolving various business models due to globalization, there is a tussle between sovereign states because of Cross Border Transactions and their tax implications. The economic globalization and the crisis that the world has seen have led to International Treaties that acquired a greater significance in the 20^th Century. Various International Institutions were established, and modern International Law developed accordingly to maintain a harmonious relationship among the states. Tax Treaties from and essential aspect of International Laws in framing the Tax Rules in negotiations between the states. Understanding the role, scope and power under which the sovereign states enter a Treaty Agreement or a Convention or an Instrument. These agreements carry rights and obligations which need to be fulfilled by the States in good faith. The principle of good faith equally applies to Tax Treaties. The sovereign states derived their authority from the domestic law to enter into various treaties or agreements. Bilateral Tax Treaties, Tax Information Exchange Agreements, the recent Multilateral Instrument come within the preview of the sovereign authority under which each state may exercise subject to their domestic law sanctions.

Article 73 of the Indian Constitution delegate this authority to the Union Government. In respect of taxation matter, the Union derives its power from Article 246 of the Indian Constitution read with List I of the 7^th Schedule. The treaty-making power under the Income Tax Act is provided in Section 90 (1), enabling the Central Government to enter into the treaty with the Government of another state for the purposes specified therein. The Courts have held that the power of entering into a treaty is an inherent part of the sovereign. However, the treaty-making power is to be traced through Article 53, 73, 246, and 253 of the Constitution of India. In general, Treaty making power is a power exercised by the Heads of the State or the concerned governments. India also follows a system where treaty-making is a function of the President of India by a statutory delegation; the conclusion and implementation are made in the President’s name by the Union Government.

India follows a monistic approach as far as tax treaties are concerned. It implies that the provisions of the treaty shall not override the domestic law, and instead, the domestic law shall serve the purpose of the International Treaty. The researcher traced the history of the evolution of Double Taxation Avoidance Treaties (DTATs) post World War-II. There are two models of agreements which are usually followed, i.e., OECD Model and UN Model. Both models have undergone amendments from time to time. Double Taxation Avoidance Treaties (DTATs) are basically agreements between the sovereign states for granting relief against Double Taxation.

Further, to address the International community’s various problems with reference to Double Taxation of the G20 OECD countries under 2K Project, i.e., Base Erosion and Profit Shifting (BEPS). Base Erosion and Profit Shifting (BEPS) Project dealt with tax planning strategies that exploit gap and mismatches in tax rules to shift profits to low or no-tax jurisdictions artificially, where there may be low or minimum economic activity. The Multilateral Instruments to which India is a signatory is the Base Erosion and Profit Shifting (BEPS) Project outcome.

Action point 15 of the Base Erosion and Profit Shifting (BEPS) Reports highlights that developing a Multilateral Instrument to modify the bilateral treaties wherein Multilateral Instrument providing an innovative approach to enable the countries to modify the bilateral tax treaties to implement measure developed in the course of Base Erosion and Profit Shifting (BEPS). Therefore, Multilateral Instruments can be considered the Multilateral Treaty, which should be applied along with the existing Double Taxation Avoidance Treaties (DTATs). The Multilateral Instruments suggests a series of tax treaty amendments for contracting states to incorporate measures against tax avoidance and evasion measures. However, the Multilateral Instruments sets a different threshold regarding what constitutes an unacceptable transaction and differs from the domestically legislated General Anti-Avoidance Rules (GAAR). India implemented General Anti- Avoidance Rules (GAAR) in the year 2017, which is still at a nascent stage, and there are several unanswered questions regarding its interpretation. The language of the General Anti-Avoidance Rules confers a wide range of powers on the tax authorities. Indiscriminate application or applying the provisions of General Anti-Avoidance Rules (GAAR) without application of mind will undoubtedly give rise to litigation and will also harm the investors. The revenue as invoked General Anti-Avoidance Rules (GAAR) on transactions such as mergers and re-structuring deals is suspected that the primary motive of these arrangements is to evade tax. One of the pre- requisites for adopting Multilateral Instrument is adherence to minimum standards, i.e., an amendment to the Preamble of the Bilateral Tax Treaties, adoption of Principal Purpose Test (PPT) and adoption of Mutual Agreement Procedure. Excluding these minimum standards, member states are free to make any reservation that may or may not apply to a particular treaty.

The contracting parties are required to modify the Preamble of the bilateral treaties to include a provision regarding the parties’ intention to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance tactics. This amendment to the bilateral treaty to clarify the intent and the purpose of the treaty. An anti-abuse provision is inserted through the second minimum standard, i.e., the Limitation of Benefits (LOB) clause in the tax treaties. This clause ensures that the treaties’ benefits are only availed by the parties to whom it is intended for. This clause primarily intends to avoid the practice of Treaty Shopping, which enables third-party entities getting away with minimal incidence of tax. The Principal Purpose Test (PPT) states that a benefit shall not be granted if it is reasonable to conclude that obtaining that benefit was one of the arrangement’s principal purposes. Mutual agreement procedure is a third minimum standard that deals with the dispute resolution between entities and contracting states.

General Anti-Avoidance Rules (GAAR) would invalidate a transaction if the primary purpose of the transaction of the arrangement were to obtain a tax benefit. On the other hand, the provision of anti-avoidance in a multilateral instrument stipulates that a transaction or arrangement fails the Principal Purpose Test (PPT) if one of the transaction arrangements’ primary purposes was to obtain a benefit. Prima Facie Principal Purpose Test (PPT) lays down a stricter threshold compared to General Anti-Avoidance Rules (GAAR). The dual application of these provisions causes uncertainty among the interested parties. The domestic application of General Anti-Avoidance Rules (GAAR) in a host of transactions has severely affected the Indian incorporations and is aggrieved by the fact that Multilateral Instruments has an overlapping effect on the taxpayers. The parties will re-evaluate the existing transaction’s structure, and it was contended that the dual application of both the legislation would result in the taxpayers being unable to reap the benefits of the Bilateral Tax Treaties. The implementation of Multilateral Instruments also brings a shift in the existing jurisprudence. It questions the validity of various Indian Supreme Court judgments. The Indian Supreme Court always relied on the literal interpretation of the law and consistently upheld the practice of tax planning and avoidance as a legitimate economic recourse for businesses.

 

 

 

 

[1] Vito Tanzi, Globalization, Tax Competition and the Future of Tax Systems 26-32 (1996).

[2] Peter Birch Sørensen, Measuring the Tax Burden on Capital and Labor 129-170 (2004).

[3] Guglielmo Maisto, Tax Treaties and Domestic Law 3-12 (2006).

[4] Bimal N Patel, India and International Law, 2 49-98 (2008).

[5] R Santhanam, Commercial’s Handbook on Double Taxation Avoidance Agreement & Tax Planning for collaborations with special chapter on Service Tax on Taxable Rendered outside India 127-135 (2007).

[6] Arvind P Datar, Kanga and Palkhivala’s, The Law and Practice of Income Tax 1197-1999 (11^thed. 2020).

[7] Treaties, Agreements and Conventions with foreign countries.

[8] Lynne Oats, Angharad Miller and Emer Mulligan, Principles of International Taxation 142-154 (2017).

[9] National Commission to Review the Working of the Constitution, A Consultation Paper on Treaty Making Power under Our Constitution (2021).

[10] S.R. Bommai v. Union of India 1994 AIR 1918: 1994 SCC (3) 1.

[11] Hormasji “Homi” Maneckji Seervai (1906–1996) was an Indian eminent jurist, lawyer, author and considered to be a renowned Constitutional Expert.

[12] David Kleist, Methods for Elimination of Double Taxation under Double Tax Treaties 98-126 (2012).

[13] James W. Garner, Limitations on National Sovereignty in International Relations, 19 American Political Science Review 1-24 (1925).

[14] Philip Baker, Double Taxation Conventions and International Tax Law 64-75 (2001).

[15] Articles 7, 8 and 12 of OECD Model Tax Convention (2017) – Art. 7.1 The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment. Art. 8.1 Profits from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated. Art. 12.1 Royalties arising in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in that other State.

[16] (1993) 202 ITR 508.

[17] (1994) 208 ITR 400.

[18] CIT v. P.V.A.L. Kulandagan Chettiar (2004) 267 ITR 654.

[19] Ton H. M Daniels, Issues in International Partnership Taxation 126-148 (1991).

[20] Joseph J Cordes, Robert D Ebel & Jane Gravelle, The Encyclopedia of Taxation & Tax Policy 215-245 (2005)

[21] Harry Tonino, Dominika Halka & Aleksandr Vasilʹevič Trepelkov, United Nations handbook on selected issues in administration of double tax treaties for developing countries 4 (2013).

[22] Harry Tonino, Dominika Halka & Aleksandr Vasilʹevič Trepelkov, United Nations handbook on selected issues in administration of double tax treaties for developing countries 5 (2013).

[23] Guglielmo Maisto, Residence of Companies under Tax Treaties and EC Law 58-66 (2009).

[24] S. Rajaratnam and B. V. Venkata Ramaiah, Treaties on Double Taxation Avoidance Agreements (As Amended by the Finance Act, 2016)) 1.193 (8 ed. 2016).