There have been several instances where the Indian tax authorities have declined to accept a tax residence certificate (TRC) as undeniable evidence of a taxpayer’s residential status for tax treaty purposes. However, in numerous decisions pronounced prior to January 2024, the Indian high courts and the Income Tax Appellate Tribunal (ITAT) rejected the Indian tax authorities’ approach. A leading example is the Delhi High Court’s decision in Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd. v. Asst. CIT (dated 18 January 2023).

But in January 2024, the Indian Supreme Court stayed operation of the Delhi High Court’s decision.

The taxpayers have consistently—and correctly—relied on two circulars (Nos. 682 and 789) of the Central Board of Direct Taxes (CBDT) for supporting their claims that a TRC must be accepted as evidence for treaty entitlement.

Additionally, in some cases, the taxpayers have also cited a 2013 press release of the Indian Government’s Finance Ministry.

The above-mentioned press release clarified that a TRC produced by a resident of a Contracting State would be accepted as the evidence that the taxpayer is, indeed, a resident of that jurisdiction. The press release also stated that the Indian income tax authorities will not go behind the TRC and that the tax authorities will not question the taxpayer’s residential status for tax treaty purposes. Further, that press release included a reference to the tax treaty between India and Mauritius.

Now that the Indian Supreme Court has stayed operation of the Delhi High Court’s landmark decision in Blackstone Capital Partners, and (at least) until the Supreme Court eventually pronounces a decision on merit on the TRC issue, can the taxpayers argue that the above-mentioned press release is binding on the Indian tax authorities? In other words, can the taxpayers contend that the Indian tax authorities must accept a TRC as the evidence of residential status for tax treaty purposes?

One might wonder that, since the two CBDT circulars (No. 682 and No. 789) are undeniably binding on the Indian tax authorities, why bother about the above-mentioned press release? In my view, because the CBDT is not forbidden from withdrawing those circulars, it is crucial to examine as to whether the above-mentioned press release is binding on the Indian tax authorities.

This article examines that aspect.