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2015 (8) TMI 1219 - HC - Income TaxTaxation of income from dividents and capital gains under the Indo-Mauritius Double Tax Avoidance Convention - Application for advance ruling - Whether the capital gains arising in the hands of Blackstone GPV Capital Partners Mauritius V-B Ltd. (‘Blackstone Mauritius’) and Barclays (H&B) Mauritius Limited (‘Barclays Mauritius’) (Collectively referred to as the ‘Sellers’) on account of the sale of shares of SKR BPO Services Private Limited is not chargeable to tax having regard Article 13(4) of the Agreement for the Double Taxation and Prevention of Fiscal Evasion with Mauritius (‘India Mauritius DTAA’) read with Section 90(2)? - Held that:- Capital gains arising from the sale of the said shares can only be brought to tax in Mauritius. This is also clear from Article 13. Clause-4 of Article 13 provides that the gains derived by a resident of a contracting State (Blackstone Mauritius and Barclays are residents of Mauritius a contracting State), from the alienation of any property other than those mentioned in paragraphs (1) (2) and (3) thereof (the shares of SKR BOP sold by Blackstone Mauritius and Barclays do not fall within paragraphs (1), (2) and (3) of Article 13 shall be taxable only in that State i.e. Mauritius. The gains derived from the alienation of any property would include the gains derived on account of the sale of shares. The words ‘any property’ are wide enough to cover shares in a company incorporated under the Companies Act, 1956. The gains from the sale of shares are taxable under the Income Tax Act, 1961. Article 2 of the DTAC, which stipulates the existing taxes to which the convention applies in the case of India, includes income tax including any surcharge thereon imposed under the Income Tax Act, 1961. The words ‘contracting States’ obviously refers to Mauritius. This is obvious as the reference in first part of paragraph-4 of Article 13 is to the ‘Contracting State’. The concluding words therein viz. ‘that State’ therefore refer to the Contracting State. Thus the capital gains that arose on account of the sale of the shares of SKR BPO by Blackstone Mauritius and Barclays are derived by a resident of a Contracting State from the alienation of property other than property mentioned in paragraphs 1, 2 and 3 of the Article 13 and are, therefore, taxable only in ‘that State’ i.e. Mauritius. It is declared that no capital gain tax was payable by Barclays (H&B) Mauritius Limited. and Blackstone GPV Capital Partners (Mauritius) V-B Ltd. in respect of the sale of the shares of SKR BPO by them to the petitioner. The petitioner was, therefore, not liable to withhold the tax in respect thereof under the Act. - Decided in favour of assessee.
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