Indian Supreme Court Rules Double Taxation Agreements Require Government Notification

The Indian Supreme Court has ruled that a government notification is required for the enforcement of Double Taxation Avoidance Agreements (DTAA) and any protocol that alters its terms and conditions. This notification acts as a mandatory condition for the judicial authority to give effect to these agreements, which have the power to change the existing provisions of law. According to the court, a treaty can only be enforced in Indian courts if a notification is issued to give it effect. In the absence of such notification, the treaty is not enforceable. The ruling came as a result of a dispute over the taxation of dividend payouts at different rates. Several multinational companies, including Nestle SA and Concentrix Services Netherlands, argued that the Netherlands, Switzerland, and France should benefit from the most-favoured-nation (MFN) clause in India’s treaties. However, the Supreme Court clarified that for a party to claim the benefits of equal treatment based on a DTAA between India and another OECD member state, the date on which the treaty was signed is crucial. The court emphasized that if the other country becomes an OECD member after signing the DTAA with India, the benefit cannot be claimed. Overall, this ruling by the Indian Supreme Court brings clarity to the interpretation and enforcement of DTAA in the country and is expected to have implications for multinational companies operating in India and their tax compliance.