India: Application of “most favoured nation” clause under treaty with the Netherlands (tribunal decision)

A tribunal decision concerning application of “most favoured nation” clause

A tribunal decision concerning application of “most favoured nation” clause

The Kolkata Bench of the Income-tax Appellate Tribunal held that interest on an income tax refund was not taxable under the “most favoured nation” (MFN) clause under the India-Netherlands income tax treaty.

The taxpayer, a Dutch company, received interest on an income tax refund from the Indian government and claimed that such interest was not taxable in India. Specifically, the taxpayer argued that under the MFN clause of the India-Netherlands income tax treaty, the beneficial treatment in the subsequent income tax treaty with Italy for interest earned by a resident of Italy from the Indian government (i.e., not taxable in India) applied to the interest it received from the Indian government. The tribunal agreed with the taxpayer and held that the taxpayer was not subject to tax on such interest income in India under the Dutch treaty.

The case is: Koninklijke Philips N.V. v. DCIT.

Read a September 2022 report [PDF 441 KB] prepared by the KPMG member firm in India


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