Compendium

Whirlpool Corporation Vs Registrar of Trade Marks Mumbai and Ors on 26 Oct 1998
division bench of the Apex Court. From Paras 14 and 15,
But the alternative remedy has been consistently held by this Court not to operate as a bar in at
least three contingencies, namely, where the writ petition has been filed for the enforcement of
any of the Fundamental Rights or where there has been a violation of the principle of natural
justice or where the order  or proceedings are wholly without jurisdiction or the vires of an Act is
challenged.
Sanofi Pasteur Holding SA v. Deptt. of Revenue, 2013 SCC OnLine AP 422
The AAR in November 2011 ruled that the capital gain arising from sale of shares of ShanH by
MA and GMID was taxable in India in terms of Article 14(5) of the tax treaty.
Whether retrospective amendments to provisions of the Act (by the Finance Act, 2012) alter the
trajectory or impact provisions of the DTAA and/or otherwise render the transaction liable to tax
under the provisions of the Act?
 The Court observed that ShanH has a commercial existence, which is distinct from that of MA
and GMID. Main object of incorporation of ShanH was to serve as a an investment vehicle in
other words for pumping foreign direct investment in India and this was done by way of
participation in SBL. Also, the receipt of dividends by ShanH as a shareholder in SBL is
indicative of the fact that ShanH is a distinct entity as the dividends distributed by SBL are
chargeable tax under the Indian law.
 Court restrained itself from applying the principle of lifting of corporate veil because according
to its observations the present transaction was not for the purpose of avoiding tax and
circumventing Indian Taxation laws. 
DIT v. New Skies Satellite BV (2016) 382 ITR 114 / 238 Taxman 577 (Delhi)(HC)
The assessees derived income from the “lease of transponders” of their respective satellites. The
assessees were chosen because the footprint of their satellites, i.e. the area over which the
satellite could transmit its signal, included India. Having held the receipts taxable under of the
Act, the Assessing Officer also held that the assessees would not get the benefit of the DTAA.
Income deemed to accrue or arise in India – Royalty – Non-resident – Providing data
transmission services were not taxable in India – Amendment inserted by Finance Act, 2012
have no effect unless DTAA is amended jointly by both parties

In Canada v. Alta Energy Luxembourg S.A.R.L. (SCC, 2021) the Supreme Court of Canada
reviewed treaty law, in the context of a tax treaty:
 R. v. Melford Developments Inc., 1982 CanLII 201 (SCC), [1982] 2 S.C.R. 504, at p. 513,
this Court applied the principle that tax treaties do not themselves levy new taxes, they simply
authorize the contracting parties to do so. Reciprocity is a fundamental principle underlying tax
treaty, as they confer rights and impose obligations on each of the contracting states. Hogan J.
observed that “[p]arties to a tax treaty are presumed to know the other country’s tax system when
they negotiate a tax treaty; they are presumed to know the tax consequences of a tax treaty when
they negotiate amendments to that treaty” (para. 84). This only makes sens
Another important consideration is the dual nature — contractual and statutory — of tax treaties.
Consideration of the contractual element is crucial to the application of the GAAR because it
focuses the analysis on whether the particular tax planning strategy is consistent with the
compromises reached by the contracting states. As
Vodafone International Holdings BV v. Union of India
The Supreme Court observed that the current act of Vodafone International holding was within
the ambit of tax planning many offshore companies situated in Mauritius and Cayman Islands
use these arrangements for legitimate tax planning reasons which were done by Vodafone and
Hutchison group in this case. The court held that doctrine of piercing of corporate veil can only
be applied if it is proved that the transaction is sham or tax avoidant. However, the court held
that the action was not a colorable device and was not done to avoid
tax. https://blog.ipleaders.in/vodafone-international-holdings-bv-v-union-of-india-case-analysis/
GE India Technology Centre P. Ltd. v. CIT, [2010] 327 ITR 456 (SC).

The term “sum chargeable under the provisions of the Act” is found only in this section. It
implies that obligation under this section arises only when there exists a sum chargeable under
this Act. The term “sum chargeable under the provisions of the Act” is to be read in consonance
with § 4, 5 and 9 of the Act.
Union of India Vs Azadi Bachao Andolan 2 judge 2003

By the circular issued by Central Board of Direct Taxes (CBDT), Government of India clarified
that capital gains of any resident of Mauritius by alienation of shares of an Indian company shall
be taxable only in Mauritius according to Mauritius taxation laws and will not be liable to tax in
India.
tax authorities also issued show cause notice to those companies that operated in India and
Mauritius to justify why they should not be taxed which created panic

specific provision is made in the Double Taxation Avoidance Agreement, that provision will
prevail over the general provisions contained in the Income-tax Act, 1961.
rejected the contention that the income tax authorities the power to lift the corporate veil of the
entity to decide in order to decide if they should be awarded the benefit of double taxation under
the Income Tax Act, 1961

Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT, (2021) 125 taxmann.com 42.

The appellant, in this case, was an Indian resident who sells shrink-wrapped computer software
that was imported straight from a non-resident corporation. As the transactions comprised a sale
of goods, the appellant did not deduct tax on the payments made to the non-resident entity. But
on the other hand, the claim of the Department of Revenue, Ministry of Finance (Revenue) was
that the transaction between the parties was a copyright for the right to use the software, which
resulted in royalty payments, and consequently assessed that tax should be deducted at source
under Section 195 of the Act.
The Finance Act of 2012 added Explanation 4 to Section 9(1)(vi), which increased the concept of
“royalty” under the Act (with retroactive effect from 1 June 1976). A person who made a
payment before 2012 cannot be expected to use the extended definition of royalty, which did not
exist at the time the payment was made, to determine withholding requirements under Section
195 of the Act. The substantive revision to the Act does not force a person to perform the
impossible, i.e., where a disability prevents a person from obeying the law, the alleged
disobedience of the law is pardoned.

 When the DTAA is applied, the Act’s provisions can only be applied to the degree that
they are more beneficial to the assessee.
 If a non-resident is obligated to pay tax under Section 9 read with Section 4 of the Act
and the DTAA then only a tax deduction at source can be allowed under Section 195 of the Act.

Respondent
ACM Partnership v. Commissioner, 157 F.3d 231 (3d Cir. 1998).
 Pursuant to the partnership agreement, Colgate bore effectively all of the $3 million in
transaction costs. The Internal Revenue Service (IRS) (defendant) disapproved of this plan,
finding that the parties undertook the transactions solely for tax-avoidance purposes, with no
intent to make a profit. The United States Tax Court affirmed. ACM appealed. There was no
dispute that the partnership’s transactions complied with the literal letter of the Internal Revenue
Code.
To determine economic substance, whether the transaction has any practical economic effects
apart from than the creation of income-tax losses is a fact to be considered.
Holding that "these distinct aspects of the economic sham inquiry do not constitute discrete
prongs of a rigid two-step analysis, but rather represent related factors both of which inform the
analysis of whether the transaction had sufficient substance, apart from its tax consequences, to
be respected for tax purposes."
CTO v. McDowell and Co. Ltd, [1985] 154 ITR 148 (SC).
The Supreme Court judgment in the case of Mc Dowell & Co. Ltd. vs. CTO (1985) 154 ITR 148
(SC) had marked dividing line between the tax evasion and avoidance of tax through tax-
planning. In this case hon’ble Supreme Court held that tax planning may be legitimate provided
it is within the framework of law. Colourable devices cannot be part of tax planning and it is
wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by
resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly
without resorting to subterfuges.

State of West Bengal v. Kesoram Industries, (2004) 10 SCC 201.

Royalty is not a tax.

Facts- This Court held that the agreement between the two Prime Ministers did not seek to
interpret the Radcliffe Award or to determine the boundary between the two States. It Was
agreed by the two Prime Ministers that a part of the Berubari Union which was allotted to India
under that Award and was in occupation of India was to be ceded to Pakistan, and enclaves
within Pakistan but in occupation of India de lure were to be exchanged for similar enclaves of
Pakistan within Indian territory. This Court advised the President that the appellant could be
implemented under the authority of a constitutional amendment only.

When construed in this backdrop, the non-obstante clause only carves out an exception to the
federal scheme and confers upon Parliament powers over subject items where the power has
otherwise been conferred upon the State Legislatures especially in relation to international
instruments.

Balaji v. Income-Tax Officer, 1962 AIR 123, 1962 SCR (2) 983.

T. Rajkumar v. Union of India, (2016) 3 CTC 681; 2016 SCC OnLine Mad 2001.
Madras High Court: In the present case where questions were raised on the constitutionality of
Section 94A(1) of the Income Tax Act, 1961 on the ground that the impugned provision
contravenes Articles 14, 19, 51, 253 and 265 read with Entry 82 of List 1 of VII Schedule of the
Constitution and is beyond the legislative competence of Parliament under Articles 246 and 248
read with Entry 10, 14, 82 and 97 of List 1 of VII Schedule of the Constitution, the Division
Bench of V. Ramasubramanian and T. Mathivanan, JJ., upheld the constitutionality of Section
94A (1) of the Income Tax Act stating that in the present times when scams like Panama Leaks
are being revealed, the provisions related to tax avoidance are the need of the hour.
India had entered into an ‘Agreement for the Avoidance of Double Taxation and the Prevention
of Fiscal Evasion with respect to Taxes on Income and on Capital’, with the Republic of Cyprus
in 1994. The challenge against Section 94A (1) came up before the Court as the petitioners via
their counse
Arvind P. Datar argued that the provision has conferred sweeping powers upon the Central
Government to specify any country as a notified jurisdictional area in relation to transactions
entered into by any assessee, irrespective of whether such country is one, with whom a bilateral
Treaty has already been entered into or not. It was further contended that since the State has an
obligation under Article 51(c) of the Constitution to foster respect for Treaty obligations. So to
specify by notification, any country as a notified jurisdictional area, without reference to the
existence of a Treaty with that country, violates Articles 14, 19(1)(g), 51, 245, 253 and 269 of
the Constitution and suffers from the vice of excessive delegation.
Observing the constitutional scheme and the contentions of the petitioner, the Court at length
discussed the Constitutional provisions enshrined in Articles 245-255 and Article 51(c) along
with the 7th Schedule of the Constitution. It was observed by the Court that it is clear from the
language of Section 94A (1) that the Parliament did not show any disrespect to the bilateral tax
avoidance Treaty as the provision was enacted in consonance with the resolution passed by the
G-20 Nations to take action against non-cooperative jurisdictions including tax havens. The
Court further stated that ‘haven’ practically means ‘a place of safety’, and in the recent past
where revelations of stashed money in foreign countries for the purposes of tax avoidance are
getting exposed, the term ‘tax haven’ has assumed different connotations. [T. Rajkumar v. Union
of India, 2016 SCC OnLine Mad 2001, decided on 12.04.2016]

Syamal Mandal v. Municipal Board AIR 1951 Ass. 126.

R.K. Garg And Ors. v. Union of India And Ors., 1982 133 ITR 239 SC.

Secretary of Agriculture v. Central Reig Refining Company, 338 U.S. 604 (1950).

V. Dhamodaran v. Bruhat Bangalore Mahanagara Palike, WP Nos. 3881-3883/2014 (LB-

Assistant Commissioner (CT) LTU, Kakinada & Ors. v. M/s. Glaxo Smith Kline Consumer
Health Care Limited, 2020 SCC OnLine SC 440.

CIT & Ors. v. Chhabil Dass Agarwal, Civil Appeal No. 6704 of 2013(SC).