The Central Board of Direct Taxes (CBDT) has given effect to the provisions in the Protocol that amended the double taxation avoidance pact between India and Israel.
This Protocol, which was signed at Jerusalem in October 2015, had entered into force on December 19, 2016.
The Protocol has introduced a new article on exchange of information based upon international best practices.
It also permits the application of domestic General anti avoidance rules (GAAR) in case of treaty misuse.
The newly inserted limitation of benefit clause provides that treaty benefit will not be available “if one of the main purposes of the creation or existence of such resident or of the transaction undertaken by it, was to obtain benefits under this Convention that would not otherwise be available”.
The Protocol also takes away the benefit of reduced tax rate on royalty, fee for technical services and PE under any other tax treaty which India has entered with other jurisdiction, on said payments made to Israeli companies.
After Singapore, this (India-Israel) is another treaty wherein it has been specifically provided that GAAR will override the treaty.