The Supreme Court has delivered the much awaited judgment on interpretation of the Most Favoured Nation (MFN) clause in India’s tax treaties with several countries.
The judgment will have far reaching implications for multinational companies and it throws up several interesting questions, such as:
- Impact of the decision vis-à-vis dividend payable to shareholders in Netherlands, France, Switzerland, etc
- Impact of the decision on taxation of royalty, fees for technical services, dividend and interest income under tax treaties entered into by India where the MFN clause is not yet notified by India or where the notification is at variance with the protocol to the tax treaty
- Impact on taxpayers who have claimed benefit of MFN clause in the past by relying on the favourable High Court rulings and the ability of tax authorities to recover the tax under paid/withheld
- How should MNCs plan their tax affairs in respect of investment in India going forward.
