17 Nov 2023    Working Papers

MFN Dilemma in India’s DTAAs Post Concentrix Ruling: A Ticking Time Bomb

WTI Working Paper No. 12/2023 by Saurabh Sharma and Mukesh Rawat

Treaty interpretation has always been an arduous task for courts and scholars alike. The subject becomes even more confounding and contentious in the wake of the imprecise drafting of the terms within certain treaties. In one such instance, India was on the receiving end when the Most-Favour-Nation (MFN) clause in the Convention between the Republic of India and the Kingdom of Netherlands (Member States) for the avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital (Dutch-India DTAA or subject DTAA) was at the core of the adjudication in a Writ Petition namely the Concentrix ruling before Delhi High Court.

Concentrix’s ruling had sent a strong shockwave in the corridors of power when the High Court summarily rejected India’s Income Tax Department submission regarding the interpretation of the MFN clause of Dutch-India DTAA and ruled in favour of the taxpayer. The deconstruction of the condition, as provided for in the MFN clause, regarding the membership of a third state in the Organization of Economic Cooperation and Development either at the time of claiming the MFN benefit by the petitioner or at the time of treaty negotiation was the apple of discord. Many scholars have criticized the Concentrix ruling as the Delhi High Court, on the one hand, buttresses the principle of Common Interpretation for decrypting the given issue and, on the other, relies on the unilateral declaration made by the Directorate-General for Tax Affairs, International Tax Affairs (Netherlands Tax Department). The ruling also falls short of adherence to the principles entrenched within the Vienna Convention on the Law of Treaties (VCLT), 1969.

The ruling has challenged the normative underpinnings of the MFN clause under the Dutch-India DTAA, which has the potential to open the floodgates to litigation against the Department and an impending threat of erosion of India’s tax base due to treaty shopping. It may have spillover effects on many developing countries following source-based tax principles and would warrant a reassessment of their DTAAs with developed nations. The present paper will reflect upon these issues by critically analyzing the Concentrix Ruling, rationalizing its legal consequences, and addressing the concerns it gives rise to by suggesting ways to narrow these legal gaps. It concludes by acknowledging the growing jurisprudence in this domain.

About the author: Saurabh Sharma

Mr. Saurabh Sharma is a graduate from Guru Gobind Singh Indraprastha University, New Delhi. He completed his Master’s (LLM) in International Law from South Asian University and his dissertation topic involved perusing issues pertaining to Base Erosion and Profit Shifting specifically from developing countries perspective. He has cleared the UGC (NET) exam in the subject of Law in 2019. Prior to joining RGNUL, as an Assistant Professor in Legal Research he was working as an Assistant Professor (Law) with Sheds College of Law (Affiliated to Himachal Pradesh University), Solan, Himachal Pradesh. He has worked with Centre for Trade and Investment Law dealing (CTIL) in capacity of Research Associate (Law) and carried out research for addressing intricate legal issues pertaining to India’s WTO obligation, Free Trade Agreements, Bilateral Investment Treaties, and International Law. He also had an opportunity to work with the Directorate General of Foreign Trade as a Young Professional (Law) and had first-hand experience.

His area of research and teaching interest includes Public International Law, Private International Law, Human Rights, International Trade Law, International Investment Law, Taxation of Digital Economy etc. He is a recipient of R.P. Anand Essay Competition Scholarship, 2017 for his paper titled “Withdrawal from United Nations and has also contributed in 7th & 11th SIELPEPA Conference, through his research work. As a research scholar, he was actively engaged with Indian Society of International Law (ISIL), Delhi and participated in various academic events. Presently he is selected for the position of Assistant Professor in Legal Research by RGNUL, Patiala. He is also the member in various Research Centres such as Centre for Business Law and Taxation, Centre for Environmental Legal Studies and Centre for Advanced Studies in International Humanitarian Law, along with being editor of RGNUL Law Review Journal and RGNUL Journal of Social Sciences.

About the author: Mukesh Rawat


Mukesh Rawat is an Assistant Professor at the Department of Law, Hemvati Nandan Bahuguna Garhwal University. He is a doctoral candidate at Rajiv Gandhi School of Intellectual Property Law, Indian Institute of Technology, Kharagpur (IIT-KGP). He is writing his doctoral thesis on ‘Regulating Public Procurement in India: Need for a Legislative Framework’. He holds a bachelor degree in law from the University of Delhi. He has an LLM degree in International Law from South Asian University (SAARC University), Delhi. His research interests include International Trade Law, and International Sports Law. In the past, he has worked with organisations of international repute like UNHCR NADA, AIFF, and FIFA.

MFN Dilemma in India’s DTAAs Post Concentrix Ruling: A Ticking Time Bomb