The Supreme Court of India’s verdict in the Tiger Global (TG) case this January raises aspects of vital importance for taxation of non-residents in India under the tax treaties as well as domestic law. Debate will continue whether a particular finding by the Court is ratio decidendi, binding legal principle, or obiter dicta, remarks or observations made along the way that are not essential to the decision and have only persuasive authority. Be that as may, there is heavy chance that the tax officer will follow each of these as law laid down by the Supreme Court.

Guidance at the earliest for the Assessing Officers on each of these aspects is therefore need of the day in the interest of tax certainty. First and foremost, the Court has held that a Tax Residency Certificate (TRC) issued by a foreign authority alone is not sufficient to avail the benefits under the tax treaty and it has a limited evidentiary role. Delhi High Court in the same case had held that the TRC must be considered to be sacrosanct and doubting the presumption of validity attached to the TRC would inevitably result in an erosion of faith and trust reposed by the treaty partner countries in each other.

The Delhi High Court, in another case, Blackstone, had held that questioning the TRC is fully contrary to the Government of India’s repeated assurances to foreign investors by way of Central Board of Direct Taxes (CBDT) circulars as well as press releases, legislative amendments and decisions of the court. The Supreme Court has now held that subsequent to the Vodafone decision of the Court, amendments in the domestic law, in particular inserting General Anti Avoidance Rule (GAAR) provisions have completely changed the scenario and the circulars issued earlier by the (CBDT) operate only within the legal regime in which they were issued.

There is urgent need for clarity on the circumstances in which TRC issued by treaty partner countries would........

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