Retro amendments don't automatically alter analogous DTAA provisions and can't be read into DTAA provisions

WNS NORTH AMERICA INC. v. ADIT (Mumbai - Trib.)   If a particular term has been specifically defined in the treaty, the retrospective amendment to the definition of such term under the Act would have no bearing on the interpretation of such term in the context of the Convention. In the instant case, the Mumbai Tribunal decides on the issue of applicability of retrospective amendments to the provisions of treaty as under: Para 1 of Article 23 of India-Mauritius treaty provides that "the laws in force in either of the Contracting States shall continue to govern the taxation of income in the respective Contracting States except where provisions to the contrary are made in this Convention"; When we read full text of Para 1 of Article 23, it becomes manifest that if there is some provision in the Treaty contrary to the domestic law, then it is the provision of the treaty which shall prevail; If the retrospective amendment is in the realm of a provision of which no contrary provision is there in the Treaty, then such amendment will have effect even under the DTAA and vice versa; If a particular term has been specifically defined in the Treaty, the amendment to the definition of such term under the Act would have no bearing on the interpretation of such term in the context of the Convention;  A country who is party to a Treaty cannot unilaterally alter its provisions. Any amendment to Treaty can be made bilaterally by means of deliberations between the two countries who signed it;  The term "royalty" has been defined in the DTAA as per Article 12(3) of Indo-US DTAA. Such definition of the term "royalty" as per this Article is exhaustive. Pursuant to the insertion of Explanation (5) by the Finance Act, 2012, no amendment has been made in the DTAA to bring the definition of royalty at par with that provided under the Act. Subject matter of the Explanation is otherwise not a part of the definition of Royalty as per Article 12; and  Thus, the retrospective insertion of Explanation 5 to section 9(1)(vi) couldn't be read in the DTAA.

For Sec. 56 method of valuation of unquoted shares modified to include DFCF method within its realm

The CBDT comes out with changes in Rule 11UA through Income-tax (Fifteenth Amendment) Rules. In view of Section 56(2)(viib), in case a closely held company receives from any resident any consideration for issue of shares that exceed the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be taxable as income from other sources in the hands of recipient. Such fair market value of unquoted equity shares is governed by Rule 11UA. As per revised Rule 11UA, value of unquoted equity shares for such purpose shall be determined at the option of the assessee using any of the following method: a) As per method specified in Rule 11UA(3)(ii)(a); or b) As determined by a merchant banker or an accountant as per the "Discounted Free Cash Flow method"

Income-tax (Fifteenth Amendment) Rules, 2012 - Amendment in Rules 11U and 11UA Notification No. 52/2012 [F.No. 142/19/2012-SO (TPL)]/SO 2805(E), dated 29-11-2012 In exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:- 1. (1) These rules may be called the Income-tax (15th Amendment) Rules, 2012.     (2) They shall come into force on the date of their publication in the Official Gazette. 2. In the Income-tax Rules, 1962, (hereinafter referred to as the said rules), in rule 11U,— (A)  for clauses (a) and (b), the following clauses shall respectively be substituted, namely:- '(a)  "accountant" ,-  (i)  for the purposes of sub-rule (2) of rule 11UA, means a fellow of the Institute of Chartered Accountants of India within the meaning of the Chartered Accountants Act, 1949 (38 of 1949) who is not appointed by the company as an auditor under section 44AB of the Act or under section 224 of the Companies Act, 1956 (1 of 1956); and (ii)  in any other case, shall have the same meaning as assigned to it in the Explanation below sub-section (2) of section 288 of the Act;  (b)  "balance-sheet", in relation to any company, means,-  (i)  for the purposes of sub-rule (2) of rule 11 UA, the balance-sheet of such company (including the notes annexed thereto and forming part of the accounts) as drawn up on the valuation date which has been audited by the auditor of the company appointed under section 224 of the Companies Act, 1956 (1 of 1956) and where the balance-sheet on the valuation date is not drawn up, the balance-sheet (including the notes annexed thereto and forming part of the accounts) drawn up as on a date immediately preceding the valuation date which has been approved and adopted in the annual general meeting of the shareholders of the company; and (ii)  in any other case, the balance-sheet of such company (including the notes annexed thereto and forming part of the accounts) as drawn up on the valuation date which has been audited by the auditor appointed under section 224 of the Companies Act, 1956 (1 of 1956);'; (B)  for clause (j), the following clause shall be substituted, namely:- '(j) "valuation date" means the date on which the property or consideration, as the case may be, is received by the assessee.'. 3. The rule 11UA of the said rules shall be renumbered as sub-rule (1) thereof, -  (i)  in sub-rule (1) as so renumbered, in clause (c), for sub-clause (b), the following shall be substituted, namely:- "(b) the fair market value of unquoted equity shares shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner, namely:— the fair market value of unquoted equity shares = (A-L) × (PV),  (PE) where, A = book value of the assets in the balance-sheet as reduced by any amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act and any amount shown in the balance-sheet as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset; L = book value of liabilities shown in the balance-sheet, but not including the following amounts, namely:—   (i)  the paid-up capital in respect of equity shares;  (ii)  the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company; (iii)  reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation; (iv)  any amount representing provision for taxation, other than amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;  (v)  any amount representing provisions made for meeting liabilities, other than ascertained liabilities; (vi)  any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares; PE = total amount of paid up equity share capital as shown in the balance-sheet; PV = the paid up value of such equity shares;"; (ii) after the sub-rule (1) as so renumbered, the following sub-rule shall be inserted, namely:- "(2) Notwithstanding anything contained in sub-clause (b) of clause (c) of sub-rule (1), the fair market value of unquoted equity shares for the purposes of sub-clause (/) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner under clause (a) or clause (b), at the option of the assessee, namely:— (a) the fair market value of unquoted equity shares = (A-L) × (PV),  (PE) where, A = book value of the assets in the balance-sheet as reduced by any amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act and any amount shown in the balance-sheet as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset; L = book value of liabilities shown in the balance-sheet, but not including the following amounts, namely:—   (i)  the paid-up capital in respect of equity shares; (ii)  the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company; (iii)  reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation; (iv)  any amount representing provision for taxation, other than amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;  (v)  any amount representing provisions made for meeting liabilities, other than ascertained liabilities; (vi)  any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares; PE = total amount of paid up equity share capital as shown in the balance-sheet; PV = the paid up value of such equity shares; or (b) the fair market value of the unquoted equity shares determined by a merchant banker or an accountant as per the Discounted Free Cash Flow method.".