[Opinion] The International Tax Roundup | Tracking the Significant Tax Treaty Decisions

Dr Sunil Moti Lala – [2026] 185 taxmann.com 381 (Article)

1. Introduction

The International Tax Roundup for March 2026 is a comprehensive digest of critical judicial developments in the realm of international tax law. This edition covers 35 significant tax treaty decisions, providing readers with essential insights into the evolving landscape of cross-border taxation. The digest is structured to address complex legal controversies on Resident, Income from Immovable Property, Permanent Establishment (PE), Business Profits, Dividends, Interest, Royalties, Fees for Technical Services (FTS), Capital Gains, Dependent Personal Services, Non-Discrimination and Foreign Tax Credit (FTC) mechanisms. This edition covers the judicial precedents dealing with:

(a) Resident (2 cases) [see Para 2]

(b) Income from Immovable Property (1 case) [see Para 3]

(c) Subsidiary PE, Dependent Agent PE, Service PE, Onus on AO to establish PE (4 cases) [see Para 4]

(d) Business Profits, covering Head office expenditure (3 cases) [see Para 5]

(e) Dividends – Relevant DTAA is that of source country (1 case) [see Para 6]

(f) Interest, covering Beneficial rate Vs Slab rate, Disallowance u/s 94 B, article 11(2) Vs S.44 C (3 cases) [see Para 7]

(g) Royalty, covering design support, telecommunication & marketing support services, software, database & Surcharge /Health & education cess etc. (7 cases) [see Para 8]

(h) FTS, covering reimbursement, aircraft engine repair 7 architectural designs (3 cases) [see Para 9]

(i) Treaty benefits in respect of capital gains qua Buy-back of shares & stock derivatives (2 cases) [see Para 10]

(j) Dependent Personal Services – Taxability of services partly rendered in India & partly abroad (1 case) [see Para 11]

(k) Non-Discrimination qua disallowance u/s 94 B (1 case) [see Para 12]

(l) Availability of foreign tax credit due to inter alia procedural lapses (4cases) [see Para 13]

(m) Others (3 cases) [see Para 14]

2. Resident

2.1 US LLC

Where assessee, a US-incorporated single-member LLC engaged in aircraft engine repair and offshore supply to Indian airlines, was fiscally transparent and its income was taxable in hands of its sole member, a US corporation holding valid tax residency certification, assessee was entitled to India-USA DTAA benefit as being ‘liable to tax’ under article 4 despite absence of direct US tax liability [India-U.S.A DTAA ]

GE Engine Services LLC v. ACIT [2026] 184 taxmann.com 238 (Delhi – Trib.)

Assessee, a US-incorporated single-member LLC engaged in offshore aircraft engine repair/overhaul services and offshore supply of spare parts to Indian airline customers, filed return declaring income of about Rs. 37.72 lakhs and claimed applicability of India-USA DTAA u/s 90(2). During assessment, AO following earlier year, treated receipts as taxable and, without prejudice, held that assessee, being an LLC fiscally transparent under US law and not itself liable to tax in USA, was not a resident under article 4 of India-USA DTAA and therefore not entitled to treaty benefits. DRP upheld the said view. On appeal, assessee furnished Tax Residency Certificate showing allotment of US Tax Identification Number and certification by US tax authorities that assessee LLC was a branch, division or business unit of a U.S. corporation resident in USA for U.S. taxation purposes and contended that liability to tax was a legal status independent of actual tax payment. The Tribunal held that assessee, being an LLC, was entitled to benefit of India-USA DTAA [Wild West Domains, LLC v. ACIT [IT Appeal No. 1774 (Delhi) of 2022, dated 29-7-2024] and Go Daddy. Com LLC v. Dy. CIT [2023] 146 taxmann.com 318 (Delhi-Trib.) followed]

2.2 Tiebreaker

Where assessee, after completing India assignment, shifted to Kazakhstan and exercised employment with closer personal and economic ties to Kazakhstan, he was to be regarded as a tax resident of Kazakhstan under Article 4(2), so salary for overlapping period was taxable only in Kazakhstan and not in India. [India-Kazakhstan DTAA].

Pradeep Narasimhan v. ITO [2026] 184 taxmann.com 442 (Bangalore Trib.)

Assessee, a New Zealand national, was on assignment in India from 01-8-2007 to 06-8-2017. Post completion of his assignment in India, assessee was sent on assignment to Kazakhstan from 07-8-2017. Assessee filed his original return of income as a ‘Resident’ offering to tax in India his global income. Subsequently, assessee filed a revised return of income wherein he did not offer salary for 01-1-2018 to 31-3-2018 (Overlapping Period) on the ground that he was a resident of Kazakhstan for that period under Article 4(2) of India-Kazakhstan DTAA and that employment was exercised in Kazakhstan during that overlapping period. AO rejected claim of assessee, held assessee to be resident in India and brought to tax salary for overlapping period. Tribunal noted that a) assessee did not have permanent home in India thereafter, b) was residing in Kazakhstan and on assignment to Kazakhstan, c) his payroll was also shifted to Kazakhstan, d) assessee had closer personal and economic ties with Kazakhstan at the time of exercise of employment. Consequently, it held that as per Article 4(2)(a)/(b) of the DTAA, assessee would be regarded tax resident of Kazakhstan and the salary for the overlapping period was taxable in Kazakhstan only.

Note – Also see case no 3.1 under INCOME FROM HOUSE PROPERTY, case no. 6.1 under DIVIDEND & case no. 7.1 under INTEREST

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