Beneficial ownership and capital gains treaty relief under Article 13(4) require treaty-text support before any factual inquiry.

Article 13(4) of the India-Mauritius tax treaty was analysed as taxing gains from alienation of property in the residence State, and the text was found not to expressly make capital gains relief dependent on beneficial ownership, unlike the dividend and interest articles. The view that beneficial ownership was an implied condition under Article 13 was treated as unsustainable because a treaty restriction must be grounded in the text or a clearly established interpretive basis. Earlier decisions were not regarded as conclusively importing that test into Article 13. The matter was therefore remitted for a speaking order on the threshold question whether beneficial ownership is legally relevant before any factual inquiry on share ownership.

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Issues: Whether the requirement of beneficial ownership can be read into Article 13(4) of the India-Mauritius tax treaty for denying capital gains treaty protection, and whether the matter required remand for reconsideration of that foundational question.

Analysis: Article 13(4) confers taxing rights on the State of residence for gains from alienation of property other than the specified categories, and unlike the dividend and interest articles, it does not expressly make treaty relief dependent on beneficial ownership. The reasoning adopted below proceeded on the assumption that beneficial ownership was an implied condition under Article 13, but that assumption was found to be unsustainable because a condition not found in the treaty text cannot be read into it without clear basis. The reliance placed on earlier decisions was held not to conclusively establish that beneficial ownership is inherent in Article 13. Since the core legal foundation itself was unresolved, the factual inquiry into who beneficially owned the shares could not be undertaken first without determining whether that test was legally applicable at all.

Conclusion: The requirement of beneficial ownership was not accepted as automatically embedded in Article 13(4), and the assessment was set aside with a remand to decide that foundational legal issue by a speaking order after hearing the assessee.

Final Conclusion: The appeals succeeded only to the extent of remitting the matter for fresh adjudication on the threshold treaty-interpretation question, leaving the merits of the capital gains taxability open for reconsideration.

Ratio Decidendi: A treaty condition restricting relief must be found in the text of the relevant article or in a clearly established interpretive basis, and a beneficial ownership test cannot be implied into a capital gains article merely by analogy with other treaty provisions.

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