Residency proof enough for Mauritius treaty benefit: HC

Court overrules AAR, remands matter back to it

- SURABHI

IN A DECISION that is expected to provide more certainty to investors, the Bombay High Court has held that capital gains on investments made before April 1, 2017 are eligible for tax waiver under the India-Mauritius double taxation avoidance agreement (DTAA), if a valid tax residency certificate (TRC) is produced. The tax waiver is not available to investments made after the cut-off date, owing to the amendments to the treaty in May 2016.

The court also set aside the ruling of the Authority of Advance Rulings (AAR) that had denied the benefit under the DTAA and remanded a matter back to the authority to reconsider the plea of the taxpayer.

Experts welcomed the ruling and said it reiterates the settled principle that the TRC issued by other tax jurisdictions is sufficient evidence to show residence and beneficial interest or ownership. "The Delhi High Court had also pronounced a similar decision in 2022 in the Blackstone Capital Partners (Singapore) versus Assistant Commissioner of Income Tax," PwC said in a recent report, adding that the Limitation of Benefits clause, under the protocol amending the DTAA, has been made effective for investments only from April 1, 2017, and investments effected prior to that would be grandfathered.

S Vasudevan, executive partner, Lakshmikumaran & Sridharan Attorneys, noted that the AAR ruling in 2020 had stirred up a hornet's nest and had also given impetus to a fresh wave of enquiries by the tax department.