Key Highlights of International Taxation Case Law (April – June 2025)

The April–June 2025 quarter witnessed several important judicial rulings in international taxation, shaping the interpretation of Double Taxation Avoidance Agreements (DTAAs) and cross-border transactions. Courts and tribunals across India clarified the scope of royalty, fees for technical services (FTS), permanent establishment (PE), and capital gains taxation for foreign entities.

High Court Rulings (April 2025)
The Delhi High Court in Ernst and Young Emeia Services Ltd. v. ACIT held that reopening of assessments without new material was invalid when the taxpayer already claimed exemption under the India-UK DTAA. Similarly, in Lufthansa Cargo AG v. ACIT, the court ruled that reducing the withholding tax rate from nil to 0.10% was unjustified, as earlier certificates had accepted the nil rate under the India-Germany DTAA.

Tribunal Decisions (April 2025)
The Income Tax Appellate Tribunal (ITAT) delivered multiple landmark decisions. In Shell International Petroleum Co. Ltd., payments for software usage and maintenance were held not taxable as royalty, since they involved use of copyrighted software and not the copyright itself. In another case, Bay Lines (Mauritius), the tribunal examined whether a Mauritius-based shipping company could claim DTAA benefits, concluding that treaty protection was unavailable if effective management was not in Mauritius, though an Indian agent’s independence prevented classification as a PE.

Other notable rulings included:

• Invesco UK Ltd. – IT support services were not taxable as “fees for included services” since they did not “make available” technical knowledge.

• Vanguard Funds Public Ltd. – capital gains from rights entitlements were exempt in India under the India-Ireland DTAA.

• JC Bamford Excavators Ltd. – clarified that DTAA benefits cannot be extended to domestic dividend distribution tax unless explicitly covered.

• Wellperform APS – income from oil exploration-related services fell under section 44BB, not as FTS.

High Court Rulings (May 2025)
The Delhi High Court in Aecom Technical Services Inc. reaffirmed that support services do not qualify as royalty or FTS under the India-US DTAA. In Springer Nature Customer Service Centre GMBH, subscription fees for e-journals were not FTS since they were standardized, not tailor-made. Similarly, Six Continents Hotels Inc. held that centralized marketing fees received from Indian hotels could not be taxed as royalty.

Supreme Court Ruling (June 2025)
A landmark pronouncement came in CIT v. Salesforce.com Singapore Pte. Ltd., where the Supreme Court confirmed that subscription fees for CRM software access were not royalty, as there was no transfer of copyright.

Significance
These rulings highlight a consistent judicial trend favoring taxpayers where services do not involve transfer of copyright or technical know-how. The “make available” test under various DTAAs continues to be pivotal. The courts also reinforced that PE cannot be presumed without tangible evidence, and capital gains exemptions under DTAAs must be respected.