Delhi Tribunal rules on deduction disallowance and deduction neutrality on application of non-discrimination article of tax treaties

This tax alert summarizes a recent ruling  of the Delhi Income Tax Appellate Tribunal (Delhi Tribunal) in the case of Mitsubishi Corporation India Pvt. Ltd. (Taxpayer) on application of the non-discrimination clause of the India-Japan Double Taxation Avoidance Agreement (Japan DTAA).



The Delhi Tribunal noted that payments made to residents, without deduction of tax at source, were deductible if the recipient included the same in its Return of Income (ROI), paid tax on it etc. On a similar analogy, the Delhi Tribunal, applying the deduction neutrality non-discrimination clause of the Japan DTAA, held that the payments made by the Taxpayer to nonresidents (NRs), without deduction of tax at source, cannot be disallowed.