[Opinion] The International Tax Roundup – Significant Tax Treaty Decisions [April 2026]

Dr Sunil Moti Lala – [2026] 186 taxmann.com 403 (Article)

1. Introduction

The International Tax Roundup for April 2026 is a comprehensive digest of critical judicial developments in the realm of international tax law. This edition covers 35 significant tax treaty decisions, providing readers with essential insights into the evolving landscape of cross-border taxation. The digest is structured to address complex legal controversies on Permanent Establishment (PE), Business Profits, Shipping & Transport, Dividends, Royalties, Fees for Technical Services (FTS), Capital Gains, Independent Personal Services, Dependent Personal Services and Foreign Tax Credit (FTC) mechanisms. This edition covers the judicial precedents dealing with:

(a) Liason Office PE, Service PE (2 cases) [see Para 2]

(b) Business Profits, covering Attribution of Income,Reimbursement without mark up, Commission (4 cases) [see Para 3]

(c) Shipping & Air Transport covering Ocean Freight (1 case) [see Para 4]

(d) Dividends – Refund of DDT in excess of rate under DTAA and Form 10 F & TRC (2 cases) [see Para 5]

(e) Royalty, covering voice termination services, shared service agreement & Surcharge/Health & education cess etc. (3 cases) [see Para 6]

(f) FTS, covering Online Learning Platform, Surveyor fees, Legal Advisory services, Recruitment & IT services, corporate support services, voice termination services, underwriting commission, reimbursement (payment to self), salary reimbursement of seconded employees, scouting services, surcharge/health & education cess (11 cases) [see Para 7]

(g) Capital gains on sale of derivatives and shares of real estate companies (2 cases) [see Para 8]

(h) Independent Personal Services – Article 12 Vs Article 14 – Scouting services (1 case) [see para 9]

(i) Dependent Personal Services – Not applicable to companies (1 case) [see Para 10]

(j) Availability of foreign tax credit including cases of delay in filing form 67 (5 cases) [see Para 11]

(k) Others (1 case) [see Para 12]

2. Permanent Establishment

2.1 Liason Office

Where assessee, a Japan-based company, closed its liaison office and set up a branch office with RBI approval, said branch office was held to be an expanded continuation of the liaison office and, therefore, constituted a PE in India, however, since attribution of income had not been properly examined in light of assessee’s contentions regarding scope of its activities, matter was remanded to AO for fresh de novo adjudication. [India – Japan DTAA]

Deputy Director of Income-tax, International Taxation vs. Mitsubishi Corporation [2026] 185 taxmann.com 785 (Delhi – Trib.) [23-04-2026] -AY 2009-10.

Assessee, a Japan based company, was engaged in trading activities catering to different industries. It had a LO in India which was closed in March 2008. During relevant AY, assessee obtained RBI approval and established branch office. AO treated Branch Office as a continuation of liaison office and proposed to attribute income from sales made in or through India across all divisions to branch office by treating it as a PE in India. Assessee contended that branch officer was merely catering to machinery division of Head Office (HO) and no income should be attributed to branch office. Tribunal noted that issues raised in instant appeal were similar to issues involved in earlier AY s 2005-06 to 2008-09 which were pending before AO for de novo consideration – It was also noted that RBI had granted permission to assessee upgrade Liaison Office in India to a Branch Office. Thus, Indian branch office was to be regarded as a continuation and expanded version of earlier LO and was a PE in India. However, matter was to be restored for de novo consideration by AO with direction to pass a fresh assessment order after duly considering and examining assessee’s submissions including those relating to its contention that Branch Office was merely catering to Machinery division of Head Office.

2.2 Service PE-Legal Services Personnel in India for Brief Period (21 Days )

Where a Singapore law firm provided legal services to a UK entity with its personnel present in India for only 21 days without any office or fixed place, such brief presence in hotels or client premises did not amount to a fixed place or Permanent Establishment under Article 5, and, therefore, receipts were not taxable in India. [India–Singapore DTAA]

Linklaters Singapore Pte. Ltd. vs. Assistant Commissioner of Income-tax (International Taxation) [2026] 186 taxmann.com 19 (Mumbai – Trib.) [30-03-2026] – IT Appeal No. 765 (Mum) of 2026 – AY 2019-20

Assessee, a Singapore-incorporated law firm, provided legal services to Barclays, U.K. largely from outside India, with occasional visits by personnel for meetings. It filed a nil return. AO sought details of number of days during which personnel were in India. Assessee furnished passport copies and details, stating its personnel were present in India for only 21 days in year, below 90-day threshold in Article 5(6), and contended that no Service PE existed. AO was of view that places used by partners/staff in India, including hotels or client premises, constituted a place of business and led to a PE under Article 5. Tribunal held that since none of employees had stayed in India for an aggregate period of more than 21 days, it could not be held that places where professionals stayed would amount to a fixed place or Permanent Establishment in India for assessee.