Treaty exemption for Mauritius bank interest upheld where residency certificate and beneficial ownership supported Article 11(3)(c) relief.

A Mauritius resident bank's interest income was treated as exempt in India under Article 11(3)(c) of the India-Mauritius tax treaty because the assessee held a valid Tax Residency Certificate, a banking licence, and was found to be the beneficial owner of the income. The Tribunal followed earlier coordinate bench rulings in the assessee's own case, and treated CBDT Circular No. 789 as supporting the treaty claim. It accepted the Mauritian authority's certificate as sufficient evidence of residence and beneficial ownership, and rejected the Revenue's conduit company argument for want of contrary material evidence. The first appellate relief was sustained, and the interest income was held not taxable in India.

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Issues: Whether interest income earned by a Mauritius resident bank was exempt from tax in India under Article 11(3)(c) of the India-Mauritius tax treaty on the basis that it was beneficially owned by the assessee and the assessee carried on bona fide banking business in Mauritius.

Analysis: The assessee produced a Mauritius Tax Residency Certificate and banking licence, and the dispute centered on whether this was sufficient to establish beneficial ownership of the interest income. The earlier coordinate bench decisions in the assessee's own case had already held that the interest income was derived and beneficially owned by the assessee and that Article 11(3)(c) applied. The Tribunal also treated CBDT Circular No. 789 dated 13.04.2000 as applicable to the treaty claim for interest income, and followed the prior view that the certificate issued by the Mauritian authority constituted sufficient evidence of residence and beneficial ownership. The Revenue's contention that the assessee was a conduit company was not accepted.

Conclusion: The assessee was held to be the beneficial owner of the interest income, and the income was not taxable in India under Article 11(3)(c).

Final Conclusion: The Revenue's appeal failed, and the relief granted by the first appellate authority was sustained on the basis of the settled treaty position applied to the assessee's interest income.

Ratio Decidendi: For a Mauritius resident bank, a valid Tax Residency Certificate together with the applicable treaty and circular framework can establish beneficial ownership of interest income for the purposes of Article 11(3)(c), unless the Revenue discharges a contrary case on material evidence.

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