TMI Blog2011 (3) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by Mauritius Revenue Authority constitutes a valid and sufficient evidence of residential status under India - Mauritius DTAA – Accordingly it was held that all the questions are answered in the affirmative. the applicant is not liable to pay capital gains tax in India in respect of the transfer of shares held in Quippo Telecom Infrastructure Limited (Indian Company) to Geraldton Finance Limited, a Mauritius based company having regard to the provisions of India-Mauritius DTAA. - AAR NO. 878 OF 2010 - - - Dated:- 28-3-2011 - P.K. BALASUBRAMANYAN, CHAIRMAN J. KHOSLA AND V.K. SHRIDHAR, MEMBERS RULING By Mr. V.K.Shridhar. The applicant, D.B. Zwirn Mauritius Trading No. 3 Ltd. is a company incorporated in Mauritius and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Income Tax Act 1961 and Double Taxation Avoidance Agreement between India and Mauritius? 4. Whether, in respect of the transaction of sale of shares explained in statement of facts, there is any withholding tax liability under section 195 of the Income-tax Act, 1961. Question No.1 was unnecessary and therefore deleted at the time of passing order under section 245R (2) of the Act. 3. The Learned Advocate submits that the applicant is holding a Tax Residence Certificate issued by the Mauritius Revenue Authority. It is filing tax returns as Mauritian resident and is entitled to claim benefits provided under the DTAA between India and Mauritius. Article 13(4) of the DTAA provides that the profits made by a resident of a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. 4.Gains derived by a resident of a Contract State from the alienation of any property other than those mentioned in paragraphs (1),(2) and (3) of this article shall be taxable only in that State." 6. The applicant seeks to fortify its claim for non-liability to pay Indian income-tax on the strength of the Tax Residency Certificate issued by the Mauritius Revenue Authority. The applicant has placed reliance on the two Circulars issued by the CBDT. The relevant extract of the Circular No.682, dated 30th March, 1994 is as under: "Subject: Agreement for avoidance of double taxation with Mauritius Clarification regarding. 1. . .. 2. . .. 3. Paragraph 4 deals with taxation of capital gains arising from the aliena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y reason of his domicile, residence, place of management or any other criterion of a similar nature." Foreign institutional investors and other investment funds, etc., which are operating from Mauritius are invariably incorporated in that country. These entities are "liable to tax" under the Mauritius Tax Law and are, therefore, to be considered as residents of Mauritius in accordance with the DTAC. 2. Prior to 1st June, 1997, dividends distributed by domestic companies were taxable in the hands of the shareholder and tax was deductible at source under the Income-tax Act, 1961. Under the DTAC, tax was deductible at source on the gross dividend paid out at the rate of 5% or 15% depending upon the extent of shareholding of the Mauritius res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 v. Azadi Bachao Andolan, cited supra, in the following passage: "A survey of the aforesaid cases makes it clear that the judicial consensus in India has been that section 90 is specifically intended to enable and empower the Central Government to issue a notification for implementation of the terms of a double taxation avoidance agreement. 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 Income-tax Act. We approve of the reasoning in the decisions which we have noticed. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued Circular No. 682 (see [1994] 207 ITR 7 (St.)) in which it had been emphasized that any resident of Mauritius deriving income from alienation of shares of an Indian company would be liable to capital gains tax only in Mauritius as per Mauritius tax law and would not have any capital gains tax liability in India. This Circular was a clear enunciation of the provisions contained in the DTAC, which would have overriding effect over the provisions of sections 4 and 5 of the Income-tax Act, 1961 by virtue of section 90(1) of the Act ." 9. On the facts presented by the applicant and in the light of legal position discussed, the applicant is not liable to pay capital gains tax in India in respect of the transfer of shares held in Quippo Te ..... X X X X Extracts X X X X X X X X Extracts X X X X
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