In the context of dividend income of French and Netherlands shareholders, the applicability of MFN clause has been a subject matter of dispute between the taxpayers and the Revenue authorities. The taxpayers have argued that MFN clause is applicable on dividend income received by Netherlands and French shareholders, and as a result, the dividend income is taxable in India at the rate of 5% (provided in tax treaty with Slovenia) instead of the higher rate of 10% provided in respective treaties.

The High Court of Delhi has decided the above matter in favour of the taxpayers. The Revenue authorities have preferred SLP against said Orders which is pending for consideration before the Supreme Court. The Revenue authorities have also clarified their stance by issuing a circular.

In this podcast, the authors attempt to explain the controversy and the key arguments which in the authors’ view weigh in favour of both the taxpayer and the Revenue authorities.

Audio Source: An article published on the LKS website in November 2022
https://www.lakshmisri.com/insights/articles/benefit-of-most-favoured-nation-clause-for-dividend-income-of-non-resident-interesting-battle-to-watch-out-for-before-apex-court/#

Author: Harshit Khurana, Principal Associate (LKS), Devashish Jain, Senior Associate (LKS)