India owes New York US$ 39.4 mn

Under international treaties, consulates and embassies are generally tax exempt. Their status as sovereign territory often puts them outside the reach of US law.

But in New York’s case, the city argued that it had a right to collect taxes on portions of the structures used for non-diplomatic purposes.

India’s 26-story tower near the UN holds 20 floors worth of apartments, all occupied by diplomatic employees. Mongolia’s six-story building has two floors that serve as staff residences. The Philippines’ building, on a prime stretch of Fifth Avenue, has had a variety of commercial tenants, including a restaurant, a bank and an airline office.

For years, the three countries simply ignored their New York City tax bills, but the legal tide turned in the city’s favor when the Supreme Court ruled in June that the nations could, indeed, be sued over the matter in US courts.

In a written opinion issued yesterday, US District Judge Jed Rakoff sided with the city, which could put the three countries on the hook for a big payout.

As of September, the city claimed India owed it USD 39.4 million, a total that includes millions of dollars in interest. Mongolia owed USD 4.2 million.

The long-running legal dispute had attracted attention from the US Department of State, which had sided with the foreign countries against the city. State Department officials had warned that if New York City won, the US might be forced to pay millions of dollars in taxes on various properties it controls abroad.