Mumbai Tribunal clarifies the tax treaty benefit

A recent case involving a Singapore investment bank serves as a reminder of the complexity of tax planning on cross-border transactions and interpretation of tax treaties by local tax authorities.  In the case of Citicorp Investment Bank (Singapore) Ltd v DCIT the Income Tax Appellate Tribunal held that capital gains earned by a Singapore company on the sale of Indian debt securities were exempt from capital gains tax in India under the Singapore-India double tax treaty.  Furthermore, it clarified that the “Limitation of Relief” clause only applies where the source state (in this case, India) has source taxing rights under the treaty.