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May 2010

DTC not to override tax treaties

By Raman Jokhakar
Tarunkumar G. Singhal
Chartered Accountants
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The government might drop the draft Direct Taxes Code (DTC)
proposal that virtually gives Indian tax laws supremacy over the Double Taxation
Avoidance Agreements (DTAAs) with other countries.

The move’s implication is that the India-Mauritius DTAA,
which underpinned the emergence of the small island nation as the largest source
of foreign investment in India, along with more than 70 other bilateral tax
treaties, would not automatically become subservient to the Code when it kicks
in from April 1, 2011.

The revised draft would be ready in about two months. While
the proposed EET (exempt-exempt-tax) method for taxation of savings is a concern
for individual taxpayers, the proposal to impose MAT on gross assets (opposed to
book profits now) is worrisome to corporate India. When asked about these
proposals, Moorthy said, the revised DTC draft would reflect conceptual changes
in these proposals as well.

(Source : The Financial Express, dated 25-3-2010)

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