Huntsman Investment [Netherlands] BV Vs ADIT (ITAT Delhi)
Why This Case Matters
The question at the heart of this judgment is deceptively simple: when an Indian subsidiary buys back shares from its Dutch parent company, do the resulting capital gains stay taxable in India — or does the India–Netherlands tax treaty return exclusive taxing rights to the Netherlands?
The answer turned out to be complex enough to divide a bench, trigger a Third Member reference under Section 255(4) of the Income Tax Act, and generate three distinct judicial opinions before a final 2:1 majority emerged in favour of the assessee.
At the centre of the case is one phrase: ‘corporate organisation, reorganisation, amalgamation, division or similar transaction’ — as it appears in the second proviso to Article 13(5) of the India–Netherlands DTAA. That phrase is the gateway to a provision that protects intra-group share transfers from source-state taxation. The question is whether a partial buy-back of 24% of an Indian subsidiary’s shares by its Dutch parent qualifies as such a transaction.
The case is also procedurally significant. It demonstrates the Section 255(4) Third Member mechanism in operation; shows how dictionary selection, parallel treaty analysis, and professional guidance from the ICAI can tip a finely balanced legal question; and draws a clean line between an ‘exit’ transaction (which does not qualify) and a ‘continuity’ transaction (which does).
