The Financial Express. By. Sameer Gupta Tax Leader, Financial Services, EY India. The India-Mauritius treaty (IM treaty) has had a chequered destiny and has . The Double Tax Avoidance Agreement (herein referred as “DTAA”) entered into between India and Mauritius provides for potential tax exemption to the foreign. Jun 7, Negotiations to amend the Mauritius-India DTAA finally came to an end last May, when officials of both governments signed what is now termed.

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The New Mauritius-India DTA – Still the Best Route to India | Vistra

Copyright Registration ph no: The Indian Revenue have in the past questioned the eligibility of capital gains tax exemption under the Tax Treaty on the ground that the Mauritian Company has no real commercial substance ineo it has been merely set-up for Treaty Shopping.

This approach has resulted in significant long-drawn litigation in a number of cases involving investments in India through Mauritius.

Article 13 4 of the DTAA provides that the profits made by a resident of a contracting state from the alienation of shares shall be taxable only in that state. However, the debate is not yet settled down despite the Apex Court ruling and the tax authorities have been examining investments from Mauritius and have sought to deny the Treaty benefits under the pretext of Treaty Shopping. The applicant in this case sold its entire stake in Quippo Telecom Infrastructure to another Mauritius based Company.

What the changes in the tax treaty with Mauritius mean for India, investors

Gains derived by a resident of a Contract State from the alienation of any property other than those mentioned in paragraphs 12 and 3 of this article shall be taxable only in that State. The relevant extract of the Circular No. Agreement for avoidance of double taxation with Mauritius — Clarification regarding.


Paragraph 4 deals with taxation of capital gains arising from the alienation of any property other than those mentioned in the preceding paragraphs and mxuritius the right of taxation dtaa capital gains only to that State of which the person deriving the capital gains is a resident.

In terms of paragraph 4, capital gains derived by a resident of Mauritius by alienation of shares of companies shall be taxable only in Mauritius according to Mauritius tax law. Therefore, any resident of Mauritius deriving income from alienation of shares of Indian companies will be liable to capital gains tax only in Maritius as per Mauritius tax law and will not have any capital gains tax liability in India.

India-Mauritius tax treaty: An end and a new beginning

Now the issue that arises for consideration is that if we go by the Income Tax Act the profit arising from the transfer of shares of Indian company is chargeable to capital gains tax under the Income-tax Act. However, the position of taxability of capital gains is otherwise under the provisions of DTAA between India and Mauritius.

Article 13 4 of the Msuritius confers kauritius power of taxation of the gains derived by a resident of a contracting state from the alienation of specified property only in the state of residence i. The fact that the capital asset is located in India is immaterial.

The Double Tax Avoidance Agreement between India and Mauritius

The tax payer is entitled in law to seek the benefit under the DTAA if the provision therein is more advantageous than the corresponding provision in the domestic law. This well settled principle has been re-stated by the Supreme Court in the case of Union of India vs.

Azadi Bachao Andolan, cited supra, in the following passage: When that happens, the provisions of such an agreement, with respect of cases to which where they apply, would operate even if inconsistent with the provisions of the Mauitius Act. We approve of the reasoning in the decisions which we have noticed. The very object of grafting the said two sections with the said clause is to enable the Central Government to issue a notification under section 90 towards implementation of the terms of the DTAs which would automatically override the provisions of the Income- tax Act in indp matter of ascertainment of chargeability to income-tax and ascertainment of total income, to the extent of inconsistency with the terms of the DTAC.


As we have pointed out, Circular No. In other words, the circular shall prevail even if inconsistent with the provisions of the Income-tax Act,in so far as assessees covered by the provisions of the DTAC are concerned. This Circular was a clear enunciation maugitius the provisions contained in the DTAC, which would have overriding effect over the provisions of sections 4 and 5 of the Income-tax Act, by virtue of section 90 1 of the Ctaa After a series of high-profile court hearings, the status quo mauritjus to have been restored.

However, rumblings from the Indian authorities with regard to the alleged ‘abuses’ are still continuing in and and it was announced in June that discussions between the two countries to amend the treaty are to commence soon. For Further Details Contact: Online Copyright Registration in India Call us at: File Your Copyright – Right Now! File Divorce in Delhi – Right Now!

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