India draws a line on the Principal Purpose Test
The Big Picture: India’s tax tribunal just told multinationals that the mere whiff of a tax benefit isn’t enough for authorities to invoke the OECD’s principal purpose test (PPT). That signal, coming from a country that has been leaning hard on anti-avoidance tools, matters for every cross-border deal routed through India.
The Details: In a closely watched case, the Income-tax Appellate Tribunal held that the PPT inside the Multilateral Instrument (MLI) can’t be triggered solely because a structure delivers a lower tax bill, International Tax Review reports in its deep-dive analysis (ITR). The judges said authorities must still prove that securing that benefit was a principal purpose of the arrangement. As Khaitan & Co’s Sanjay Sanghvi put it, the ruling is “welcome” because it keeps the PPT from becoming a catch-all weapon.
Why It Matters: The reaction was swift. Tax advisers say the decision could trim the number of PPT disputes clogging India’s Mutual Agreement Procedure pipeline. It also gives multinationals a clearer playbook: have solid commercial drivers, and the anti-avoidance net loosens. But expect the revenue department to keep testing the boundaries, this is only a tribunal ruling, not Supreme Court law.
Around the Tax World
- Swedish court sides with gold-tinged Canadian fund. A Swedish appellate court okayed a withholding-tax refund for a Canadian mutual fund, even though it dabbled in precious metals, saying perfect asset alignment isn’t required to be “comparable” to a Swedish special fund (KPMG).
- Sri Lanka taps global muscle to hunt tax crime. Colombo rolled out the Tax Inspectors Without Borders, Criminal Investigation programme, getting hands-on help from the OECD and UK HMRC to chase illicit flows and beef up prosecutions (Ceylon Daily News).
- OECD trains 800+ officials on CRS policing. The Global Forum’s six-month “Train the Trainer” marathon armed 102 officials from 50 jurisdictions to supervise banks’ Common Reporting Standard duties, who then cascaded the lessons to hundreds more (OECD).
- India’s ITR portal clocks out, on deadline day. Individual taxpayers raced to hit the 16 September filing cut-off amid fresh reports of portal glitches, the Financial Express notes (Financial Express).
By the Numbers
Prime Number: 102, the cadre of officials from 50 jurisdictions who became trainers on CRS administrative compliance, multiplying into 800+ newly trained tax enforcers worldwide (OECD).
Looking Ahead
All eyes are now on whether India’s revenue service appeals the PPT ruling, any move to the High Court could reset the tone on treaty shopping disputes. For insights on modern tax reform and administrative practices in line with global standards, readers might also explore the Nigeria Tax Administration Act, 2025.