Direct Tax Amicus, January 2026

Read full newsletter in pdf here above.

Article

Bombay High Court resolves the DDT-DTAA controversy: Treaty rate held applicable notwithstanding domestic levy mechanism

By Siddhesh Khandalkar, Shubham Sankhala and Isha Chauhan

In a significant and precedent-setting ruling, the Bombay High Court has settled the long-standing controversy concerning the applicability of tax treaty protection to Dividend Distribution Tax (‘DDT’). The article in this issue of Direct Tax Amicus discusses this decision wherein it was held that dividend income distributed to a UK resident shareholder cannot be subjected to tax in India at a rate exceeding the limitation prescribed under the India-UK Double Taxation Avoidance Agreement (‘DTAA’), merely because the levy is collected as DDT under domestic law. According to the authors, the Court has aligned Indian jurisprudence with internationally accepted principles of treaty interpretation. They also note in this regard that while DDT has since been abolished, the ruling carries significant relevance for legacy disputes including the ones relating to the refund claims of DDT paid in excess of the treaty rate.

Notifications & Circulars
 

• Exemption under Section 10(46) granted to West Bengal Building and Other Construction Workers Welfare Board

Ratio decidendi
 

• Fees received for satellite transmission services is not taxable as royalty under India Hong Kong DTAA – ITAT New Delhi
   
• Commissioner empowered under Section 264 to grant relief for mistakes committed by assessee in return of income – Bombay High Court
   
• Assignment of life interest in trust property is not a transfer of land or building for purposes of Section 50C – ITAT Mumbai
   
• Depreciation on block of assets cannot be denied merely due to non-use of certain units during the relevant assessment year – Madras High Court
   
• No taxable income where charitable trust incurs overall deficit even if activity alleged to be commercial – ITAT Mumbai
   
• Maintenance support and training services inextricably linked to software sale are not taxable as FTS under India Singapore DTAA – ITAT New Delhi