Beneficial ownership of treaty interest income confirmed where Mauritian residence certificate supported exemption under the India-Mauritius treaty.

Beneficial ownership of interest income under the India-Mauritius tax treaty was upheld where the assessee held a Mauritian Certificate of Residence and had already been found in its own case to be the beneficial owner. The ITAT Mumbai applied CBDT Circular No. 789 and treated the residence certificate as sufficient evidence of residence and beneficial ownership for treaty purposes, extending that approach to interest income under Article 11(3)(c) even though the circular was framed in relation to dividend and capital gains. On that basis, the assessee was entitled to treaty exemption and the Revenue's challenge failed.

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Issues: Whether the assessee was the beneficial owner of interest income earned from foreign currency loans and securities so as to claim exemption under Article 11(3)(c) of the India-Mauritius tax treaty.

Analysis: The assessee's claim was examined in the light of the earlier co-ordinate bench decision in its own case, CBDT Circular No. 789 dated 13.04.2000, and the principle that a Certificate of Residence issued by Mauritian authorities constitutes sufficient evidence not only of residence but also of beneficial ownership for treaty purposes. The Tribunal held that the circular, though framed in the context of dividend and capital gains, applied equally to interest income under Article 11(3)(c). It also relied on the earlier finding that the assessee was the beneficial owner of the interest income and found no reason to depart from that view.

Conclusion: The assessee was held to be the beneficial owner of the interest income and entitled to treaty exemption; the Revenue's challenge failed.

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