Application of GAAR Provisions cannot be a ground for denial of Tax benefit under India- Singapore DTAA

Last updated: 21 March 2023

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The Income Tax Appellate Tribunal (ITAT) in New Delhi has ruled that the application of General Anti-Avoidance Provisions (GAAR) cannot be used to deny tax benefits available under the India-Singapore Double Taxation Avoidance Agreement (DTAA). The tribunal affirmed that Section 90(2) of the Income Tax Act allows DTAA provisions to take precedence over domestic tax laws if they are more advantageous to the assessee. This decision clarifies that even if GAAR provisions are applicable, treaty benefits can still be claimed, provided certain conditions related to the transaction date and tax thresholds are met.

Court :
ITAT, New Delhi

Brief :
The ITAT, New Delhi in Reverse Age Health Services Pte Ltd v. DCIT [ITA No.1867Del/2022 dated February 17, 2023] has directed the Revenue Department to delete the disallowance of Short Term Capital Gains ("STCG") and allow the benefit of the provisions of an India- Singapore Double Taxation Avoidance Agreements ("DTAA") to the assessee on the grounds that Section 90 (2) of the Income Tax Act, 1961 ("the IT Act") allows the provisions of a DTAA to supersede the provisions of the IT Act, in case their application is more beneficial. Held that, though domestic GAAR provisions are applicable, the treaty benefit cannot be denied to the assessee.

Citation :
ITA No.1867 Del/2022 dated February 17, 2023

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