CBDT grandfathers treaty benefits with Mauritius, Cyprus, Singapore

NEW DELHI: The income tax department has come out with a fresh guidance note on applicability of Principal Purpose Test (PPT) for claiming tax treaty benefits, which will apply prospectively.

The Central Board of Direct Taxes (CBDT) in its note on principal purpose test also clarified that the grandfathering provisions under the India-Cyprus DTAA, India-Mauritius DTAA and India-Singapore DTAA would remain outside the purview of the newly issued PPT provision.

India has made certain treaty-specific bilateral commitments in the form of grandfathering provisions in the DTAAs signed with Singapore, Mauritius and Cyprus.

“These commitments, as reflected in the bilaterally agreed object and purpose of such grandfathering provisions, are not intended to interact with the PPT provision as such,” CBDT pointed out.

The grandfathering provision in these treaties would be governed by the specific provisions specified in the respective DTAAs.