India: Principal purpose test under MLI cannot be applied without specific notification in India-Ireland treaty (tribunal decision)
Absence of a notification meant treaty benefits could not be denied
The Mumbai Bench of the Income-tax Appellate Tribunal ruled that the principal purpose test provisions under the Multilateral Instrument (MLI) cannot be invoked to deny treaty benefits unless a separate notification formally incorporates those provisions into the India-Ireland tax treaty. The tribunal found that, despite both countries ratifying the MLI, the absence of a notification meant treaty benefits could not be denied.
The tribunal further determined that the taxpayer did not have a permanent establishment in India and that rental income from aircraft leasing was not taxable in India, as the business activities were genuine and commercially driven.
The case is: TFDAC Ireland II Limited v. DCIT
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