Article 13(5) of India-Netherlands DTAA – Gains derived from alienation of shares by way of buyback are covered within the ambit of ‘reorganization’ under Article 13(5) of DTAA; hence, taxable only in the country of residence

9. [2026] 184 taxmann.com 602 (Delhi - Trib.)

Huntsman Investment [Netherlands] BV vs ADIT (IT) A.Y.: 2009-10 Dated: 25 March 2026

Article 13(5) of India-Netherlands DTAA – Gains derived from alienation of shares by way of buyback are covered within the ambit of ‘reorganization’ under Article 13(5) of DTAA; hence, taxable only in the country of residence

FACTS I:

The Assessee, a tax resident of Netherlands, held a 99.98% stake in an Indian entity. Pursuant to a buyback under Section 77A of the Companies Act, 1956, the Assessee alienated 24% of equity shares at INR 23.10/share. It filed return of its income declaring capital gain aggregating to INR 49.43 Crores. The TPO determined arm’s length price (“ALP”) of shares at INR 80.77/share. Pursuant to ALP determination, the AO recomputed the capital gains at INR 123.41 Crores.

Before the DRP, the Assessee raised two contentions - (i) transaction of buyback was exempted from capital gains by virtue of Section 47(iv) of the Act and (ii) alternatively, in terms of Article 13(5) of India-Netherlands DTAA, gains, if any, were taxable only in Netherlands. DRP rejected both contentions, and as regards Section 47(iv) of the Act, the benefit was d