Don’t let ‘treaty’ tax ghost rise from the grave

THE SUPREME COURT ruling in Tiger Global (denying benefits of India-Mauritius tax treaty exemption of capital gains on the facts of the case) has once again brought centre stage the age-old judicial principles and controversies about “tax planning” vs “tax avoidance”.

- ■SUDHIR KAPADIA

The most famous origin of this principle can be found in the judgment in Duke of Westminster in the UK where it was opined that every man is entitled to order his affairs so that he pays as minimum tax as his ingenuity allows him! However, as noted by the Supreme Court in India in the Mcdowell case, post World War IL, attitude of Courts in UK towards tax avoidance changed perceptibly and in many cases in the 1980s the Courts in UK effectively buried the “ghost of Westminster” and started adopting a more purposive interpretation of the tax laws in relation to tax planning.