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“On general consideration of info and materials obtainable on document, we’re of the view that the assessee, being entitled to say exemption below Article 13(4) of India-Mauritius Treaty, the addition made is unsustainable,” Delhi Bench of ITAT stated in its ruling dated March 19 whereas directing the Assessing Officer (AO) to delete it.
The matter is said to Mauritius-based Norwest Enterprise Companions X and for the Evaluation Yr 2020-21. The agency is a tax resident of Mauritius. The corporate is registered with SEBI and invests in shares right here. I it supplied Brief-Time period Capital Achieve of over ₹15 crore whereas, the Lengthy-Time period Capital Achieve of over ₹300 crore was not supplied to tax because it claimed exemption below Article 13(4) of India Mauritius DTAA.
India-US DTAA
Nevertheless, after evaluation, AO concluded that the assessee was managed and managed from outdoors and doesn’t have any business substance or actual financial exercise in Mauritius. He noticed, the final word guardian firm of the assessee is beneficially owned by the entity in USA. He noticed that below India-USA DTAA, the long run capital achieve would have been chargeable to tax.
Referring to sure judicial precedents, the AO finally concluded that the assessee being a shell/conduit firm isn’t entitled to avail advantages below India-Mauritius DTAA. Accordingly, he framed the draft evaluation order by bringing to tax the revenue derived from long-term capital achieve on sale of shares. It was additionally stated that Tax Residency Certificates (TRC) not sufficient to show the tax residency of the assessee.
On document
Primarily based on info offered and arguments made, the Bench stated that for the reason that capital achieve is derived from shares acquired previous to April 1, 2017 they aren’t taxable in phrases DTTA.. “In our view, the Assessing Officer has failed to ascertain on document that the assessee is a shell/conduit firm by means of correct proof. Due to this fact, in our view, assessee stays entitled to treaty advantages,” it unhappy.
India and Mauritius signed DTAA in 1983. Due to this, Mauritius turned the popular channel for international portfolio and international direct traders because of the tax benefit. The settlement laid down that capital good points tax needed to be paid within the nation the place the international investor was primarily based. Because the charge of capital good points tax in Mauritius was zero, traders from this nation paid no capital good points tax.
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Nevertheless, state of affairs modified in 2016, with the double tax avoidance treaty with Singapore being linked to the settlement with Mauritius, investments from Singapore have additionally been introduced in to the Indian tax web. As a part of the modification, achieve made on or earlier than March 31, 2017 was grandfathered.
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