Exchange of Information under tax treaty.

 another interesting thread in the saga of Treaty analysis, which has recently caught the attention of the Indian Tax authorities, is the dictum passed by the Canadian Federal Court of Appeal with respect to Article 26 of the Canada-France tax treaty.

In the instant case, the Canadian authorities were requested by the French authorities under Article 26 of the Canada-France tax treaty for information on the particulars of several Trusts. The Appellant approached the Canadian Federal Court against the information sought from it by the Canadian authorities and contended that they were responsible for ensuring that the condition “taxation…not contrary to the Convention” contained in Article 26 was satisfied before any information was shared with the French authorities. The Trustee feared that French authorities' purpose behind seeking the information was to assess the Canadian trusts to wealth tax in France. Rejecting the appellant’s contention, the Court held that the information requested by France was likely to be relevant for applying the provisions of the tax treaty and the Trustee's fear of taxation by France would need to be substantiated by a satisfactory evidence. Thus, the treaty ought not to be interpreted in a way so as to hamper the effective functioning of the provisions of the tax treaty. The judgement is expected to lay the stepping stones for the Indian tax authorities to seek information from its French counterparts under the Income-tax Act, 1961 (Article 28(1) of the India- France tax treaty). Thus, the ruling shall prove salubrious for India in the long-term, given its introduction of recent legislations such as Benami Transactions (Prohibition) Act, 1988, Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, and Prevention of Money Laundering Act, 2002, to curb its growing parallel economy.