The Supreme Court dismissed a petition to review last year’s decision on most favoured nation clause in tax treaties.
The Supreme Court dismissed a petition to review last year’s decision* that held that a notification under section 90 of the Income-tax Act, 1961 is necessary and a mandatory condition to give effect to a tax treaty or any protocol that has the effect of altering the existing provisions of the law. With reference to the most favoured nation (MFN) clause already agreed as part of the original treaty, the beneficial provisions entered into with the third country cannot be made applicable automatically unless a notification is issued.
*The case is: AO v. Nestle SA
Taxpayers may need to assess the effects of the decision on their pending proceedings, the potential reassessment, and the consequential tax and interest liability. Such taxpayers may also need to analyse whether their case is fit for a waiver of interest liability.
Read an August 2024 report prepared by the KPMG member firm in India