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2016 (11) TMI 1008 - AT - Income TaxALP adjustments non permissibility under Article 9 of the Indo Dutch Tax treaty - Held that:- While the relief in the cases of economic double taxation due to application of arm’s length standards under article 9(1) is available under article 9(2), no such relief is available, under article 9(2), in respect of the juridical double taxation caused by the application of arm’s length standards. That does not, however, matter. The non availability of relief under article 9(2) does not fetter application article 9(1). In a situation in which the residence jurisdiction has yielded limited source taxation rights to a type of income of an assessee, the mere increase in quantum of such a taxable income in the source jurisdiction, due to application of arm’s length principle, need not always be visited with corresponding adjustment under article 9(2) in the residence jurisdiction. In our humble understanding, the restriction to the effect that only economic double taxation can be remedied by the scope of article 9, as learned counsel urges us to infer, does not exist. In view of these discussions, as also bearing in mind entirety of the case, we see no merits in this new plea raised by the assessee. Given our above findings, it is not even necessary to take the judicial call on whether or not article 9 of the Indo Dutch tax treaty, or, for that purpose, OECD Model Convention, restricts or regulates the domestic transfer pricing legislation. That aspect of the matter is academic as on now, because, even if we are to hold that it does restrict or regulate the domestic law provisions on transfer pricing, the application of arm’s length standard cannot be declined because it is a case of juridical double taxation and not economic double taxation. However, as we deal with this interplay between article 9 and transfer pricing legislation, it is important to bear in mind the fact that there is a school of thought that a domestic arm’s length principle, which is what transfer pricing legislation represents, goes much beyond a tax treaty’s normal rule making scope since this arm’s length principle governs taxation of an enterprise in general and the tax treaties do not restrict domestic law in this respect. - Decided against assessee
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