TaxTonic Session: Contours of Sovereign's Taxing Rights - Defining the Undefined!

Episode Duration:
85 minutes

Episode Background:
'TaxTonic', a 'subscriber only' thought leadership series, is Taxsutra's endeavour to consistently deliver top notch technical content to it's readers. The labyrinth of tax rulings on convoluted transactions keeps the world of taxation unpredictable and ever-evolving. This series will feature engrossing presentations, incisive analyses and a deep-dive by the tax experts on burning issues & controversies. So, gear up for a 'tonic' to chisel your tax mind and challenge your wit.

Speaker:
Mr. Anish Thacker (SRBC & Associates LLP)

Moderator:
Mr. Sachin Sastakar (Chartered Accountant)

What shall the episode cover?

The Hon’ble Supreme Court in the case of Turquoise Investments & Finance Ltd. paved the way for taxation rights only with the country of source by interpretation of the term 'may be taxed' used in the relevant Double Taxation Avoidance Agreement (DTAA). The tussle between Article 3(2) of the DTAA with Section 90(3) of Income tax Act, 1961 (ITA) is here to stay as it establishes the sovereign’s right to tax. It also has an impact on the understanding between the treaty parties as defining the terms under the domestic law amounts to unilateral amendment of the DTAAs.

In this episode of TaxTonic, Taxsutra presents a discussion on nuances of rights and obligations between the DTAA partners and the principle of good faith (as contained in the Vienna Convention on Law of Treaties). This episode primarily covers:

1. Scope of DTAA Article 3(2)

2. Scope of Section 90(3) of ITA read with relevant notifications

3. Static Vs Ambulatory approach

4. Impact of defining the term on unilateral amendment

5. Reference to definition under ITA and other laws

6. Impact of Article 3(2) and Section 90 on the interpretation of:

a.     May Vs Shall be taxed – Taxing rights

b.     Liable to tax

c.     Other defined and undefined terms