What Goes Around Comes Around: The Multilateral Instrument is Signed by India But Held Not Yet Effective

Volume 13 No 1    /    Read Article

By Abbas Jaorawala (Guest Author)

India has been at the forefront of implementing B.E.P.S. measures. It submitted a ratified M.L.I. with the O.E.C.D. in 2019, with effect from April 1, 2020. However, the Indian Parliament never enacted legislation amending all covered income tax treaties. Relying on a relatively recent Supreme Court of India case involving the relationship between income tax treaties and domestic law (Nestle SA), the Income-Tax Appellate Tribunal (“I.T.A.T.”) for Mumbai held that until Parliament enacts legislation adopting an income tax treaty, the treaty is not the law of the land (Sky High Appeal XLIII Leasing Company Ltd). Abbas Jaorawala, a Senior Director and Head-Direct Tax of Khaitan Legal Associates, Mumbai, discusses the interesting conundrum faced by the Indian tax authorities. On one hand, they can continue litigating the matter, but victory is uncertain and a favorable decision by the Supreme Court is not assured by reason of the Nestle SA case. On the other hand, legislation can be enacted quickly, but it is not clear it can be effective on a retroactive basis.  See more →