Clarification regarding the Most-Favoured-Nation (MFN) clause in the Protocol to India\’s DTAAs with certain countries Circular No. 3/2022:
Central Board of Direct Tax clarified regarding the DTAA with certain countries as The Protocol to India\’s Double Taxation Avoidance Agreements (DTAAs) with some of the countries, especially the European States and OECD members contains a provision, referred to as the Most-Favoured-Nation (MFN) clause. Though each MFN clause in these DTAAs has a different formulation, the general underlying provision is that if after the signature/ entry into force (depending upon the language of the MFN clause) of the DTAA with the first State, India enters into a DTAA with another OECD Member State, wherein India limits its source taxation rights in relation to certain items of income to a rate lower or a scope more restricted than the scope provided for those items of income in the DTAA with the first State, such beneficial treatment should also be extended to the first State.
