I-T Dept Denied IRS Assistance

The effort to develop a global consensus towards co-operation in exchange of information between tax administrations has increased tremendously. In effect, the tax administrations have taken an aggressive stance for obtaining tax information. Under the current standards regarding exchange of information, the requested authority can refuse cooperation if the tax administration of the requesting country fails to demonstrate that the information sought is relevant for the administration or enforcement of its domestic laws.

In most cases, several inevitable questions arise regarding whether the information request is valid under both the relevant tax treaty and domestic law. In response, taxpayers have moved to block such information requests, especially when the nature of the request appears to be more of a 'fishing expedition' having no nexus with the taxability of the transaction.

Recently, the U.S. District Court of Illinois ("Court") in Bikramjit Singh Kalra v. United States of America quashed summons that were issued by the U.S. Internal Revenue Service ("IRS") pursuant to a request made by the Indian tax authorities concerning the tax liability of Bikramjit Singh Kalra (the "taxpayer"), on grounds of lack of statutory procedure and purpose.

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