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Mar 20, 2025
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Govt can act against tax treaty abuse despite PPT clause: Experts
The Central Board of Direct Taxes (CBDT) has clarified that the principal purpose test (PPT) provisions, designed to prevent tax treaty abuse, will apply prospectively only to the double taxation avoidance agreements (DTAAs) that include a PPT clause. It also stated that the PPT will not affect any other treaty provisions that may deny its benefits to taxpayers.
However, experts say that the authorities can still oppose DTAA benefits to taxpayers (companies) involving “grandfathered investments”, which they feel are of genuine tax abuse, by using other anti-abuse rules under the domestic laws, namely general anti-abuse rules (GAAR), specific anti-abuse rules (SAAR), and judicial anti-abuse rules (JAAR).
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