Foreign Courts Decisions - International Taxation - Income Tax

Foreign Courts Decisions Tax treaties may be interpreted differently by the different countries. A treaty signed between country A and B, may be interpreted by courts of Country A and B differently. Therefore, there may be no harmonization in the interpretation of tax treaties. A same income may be classified as royalty by one country and business income by another country. Therefore, reliance on foreign court rulings may result in harmonious interpretation. In many of the rulings Indian courts have referred to the foreign court cases for interpretation of treaty provisions. In CIT v. Vishakhapatnam Port Trust s case [1983] 144 ITR 146, the Andhra Pradesh High Court observed that, in view of the standard OECD Models which are being used in various countries, a new area of genuine international tax law is now in the process of developing. Any person interpreting a tax treaty must now consider decisions and rulings worldwide relating to similar treaties. The maintenance of uniformity in the interpretation of a rule after its international adoption is just as important as the initial removal of divergences. Therefore, the judgments rendered by courts in other countries or rulings given by other tax authorities would be relevant. In the under-noted cases, foreign court cases have extensively been quoted for interpretation of treaty provisions: Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (SC) CIT v. Vishakhapatnam Port Trust [1983] 144 ITR 146 Abdul Razak A. Meman s case [2005] 276 ITR 306(AAR)