A U.S. Appeals Court ruled on Tuesday against New York City in its long-running dispute with India and Mongolia over whether they owe about $47 million in taxes on property that houses staff assigned to consulates and United Nations missions.

The demands by the city that hosts the United Nations headquarters for property taxes from several foreign governments had become an irritant in diplomatic relations, according to a U.S. Department of State notice cited by the three-judge panel.

The June 2009 notice granted an exemption from property taxes on property owned by foreign governments and used to accommodate their personnel in the United States. The City of New York argued the properties should be taxable, despite the department's order under the Foreign Missions Act.