Treaty reorganisation exception applies to group-level share buy-backs forming part of corporate restructuring under the India-Netherlands DTAA.

Buy-back of shares by an Indian subsidiary can fall within the treaty phrase "corporate organisation, reorganisation, amalgamation, division or similar transaction" under Article 13(5) of the India-Netherlands DTAA where, in ordinary legal sense and read with domestic law, it forms part of a group-level restructuring that materially changes the company's financial structure. The analysis relied on recognised meanings of reorganisation and corporate restructuring guidance, and rejected a narrow reading that would undermine the treaty exception. On the facts, the share buy-back was treated as such a restructuring transaction, so the resulting gains were taxable only in the Netherlands and not in India.

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Issues: Whether gains arising to the assessee from the buy-back of shares by its Indian subsidiary were covered by Article 13(5) of the India-Netherlands DTAA and consequently taxable only in the Netherlands.

Analysis: The expression "corporate organisation, reorganization, amalgamation, division or similar transaction" was held to have to be understood in its ordinary legal sense, read in the context of the treaty and the applicable domestic law. Buy-back of shares was treated as capable of constituting corporate reorganisation where it formed part of a transaction within the same corporate group and resulted in a material change in the financial structure of the company. The reasoning relied on recognised legal meanings of reorganisation, guidance materials on corporate restructuring, and the view that a narrow interpretation would defeat the purpose of Article 13(5). On the facts, the buy-back was accepted as a group-level transaction falling within the treaty exception.

Conclusion: The gains from the buy-back were held to fall within Article 13(5) and were not taxable in India; the assessee succeeded.

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