Treaty between India and Netherlands – Indian decision on applicability of treaty with regard to additional tax imposed for not complying with transfer pricing rules

The Income Tax Appellate Tribunal (ITAT) delivered a ruling dated 27 June 2008 in the case of Deputy Director of Income Tax v. Sun Chemicals BV (unreported) on whether the Indian tax authorities could deny a Dutch company the benefits of the India-Netherlands tax treaty (the Treaty) on the basis that the company had defaulted in complying with certain requirements of the transfer pricing regulations.

(a) Facts. The Taxpayer (i.e. Sun Chemicals BV) is a Netherlands-based comp…