“TRC”
The decision most relied on for TRC is India Vs. Azadi Bachao Andolan 263 ITR 706 (SC); and Vodafone International Holdings B.V v. Union of India (341 ITR 1), cited in 295 judgments on BharatTax.
Leading authorities on TRC
Legitimate tax planning is permissible, allowing taxpayers to arrange their affairs to minimize tax liabilities while respecting the "look at test" for transaction genuineness and the separate entity principle in corporate taxation. The source of funds for treaty-beneficial structures does not automatically invalidate the transaction.
A deductor's bonafide belief or reliance on a Tax Residency Certificate (TRC) can influence whether they are deemed an 'assessee in default' under Section 195 for failing to deduct tax at source on payments to non-residents. The decision clarifies the due diligence required when interpreting tax treaties and TRCs for TDS compliance.
The case is authority for the proposition that where a tax treaty provides for a more beneficial treatment than the Income Tax Act, the treaty provisions will prevail, provided certain conditions under section 90(2) are met.
Receipts for offshore designing and engineering services are not taxable in India if there is no permanent establishment (PE) in India. A payer withholding tax does not automatically make the receipts taxable in India.
