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Two countries tax the same profit in the hands of two associated enterprises, one in each country, and the applicable tax treaty lets the taxpayer seek assistance from the competent authorities.…

Question and options

Two countries tax the same profit in the hands of two associated enterprises, one in each country, and the applicable tax treaty lets the taxpayer seek assistance from the competent authorities. What kind of double taxation is this, and which route resolves it?

  1. Economic double taxation, resolved through unilateral relief under section 160

  2. Juridical double taxation, resolved through the mutual agreement procedure

  3. Economic double taxation, resolved through the mutual agreement procedure

  4. Juridical double taxation, resolved through unilateral relief under section 160

Answer and explanation

Correct answer: C - Economic double taxation, resolved through the mutual agreement procedure

Taxing the same profit in the hands of two different persons is economic double taxation, as distinct from juridical double taxation of the same person in two countries. Where a treaty applies, its mutual agreement procedure lets the competent authorities resolve the case; unilateral relief under section 160 of the Income-tax Act, 2025 is available only to a resident's own foreign tax where there is no agreement.

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