India Courts Prioritize National Interest in Tax Treaties, Rejecting Foreign Pressure
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In a landmark judgment, the Supreme Court of India has asserted that tax treaties should be guided by national interest, not influenced by foreign governments or corporations. The ruling emphasizes the need for transparency, accountability, and regular reviews of international tax agreements to safeguard India's economic sovereignty and prevent tax base erosion. The court, in a concurring opinion, outlined a set of comprehensive safeguards for India to adopt while negotiating or renewing international tax treaties. These measures include incorporating anti-avoidance laws and limiting benefits clauses to prevent treaty shopping by shell companies. The case involved Tiger Global, a US-based investor firm that exited Flipkart in 2018 after Walmart acquired a controlling stake. The Income Tax Department had ruled that capital gains arising from this transaction were taxable in India. The Supreme Court's decision upholds this ruling, underscoring the importance of protecting India's tax revenue base. Justice JB Pardiwala's opinion highlights the need for tax treaties to reflect broader economic and public interests, rather than solely serving bureaucratic or diplomatic goals. The court's emphasis on national interest in tax treaties is expected to have significant implications for India's international tax policies and its relationships with foreign governments and corporations.
