Arbitral Award for Non-Payment of Supplies Is Business Income, Not Taxable Under Article 7 of Japan-India DTAA: Delhi HC

The Delhi High Court has ruled that an "arbitral award for non-payment of supplies is business income" and thus "not taxable under Article 7 of the Japan-India DTAA." The case involved a Japanese company receiving an arbitral award from an Indian entity for non-payment related to business supplies. The court clarified that such an award, arising directly from commercial transactions, constitutes business income. Under the Double Taxation Avoidance Agreement (DTAA) between India and Japan, business profits are generally taxable only in the country of residence unless there's a Permanent Establishment (PE) in the other country.