Mauritius treaty residence upheld for share sale gains, with Article 13(4) exemption applied to pre-2017 acquisitions.

A Mauritius company with a valid Tax Residency Certificate and Category 1 Global Business Licence was treated as entitled to India-Mauritius treaty benefits, as the residency certificate and treaty framework were not displaced by allegations of conduit status, lack of Mauritius tax payment, absence of employees, or ownership structure. The shares had been acquired in 2009 and transferred after Indian regulatory scrutiny, supporting commercial substance. Because the shares were acquired before 1 April 2017, Article 13(3A) did not apply, and the long-term capital gain on sale of shares of an Indian company was treated as exempt from Indian tax under Article 13(4).

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Issues: Whether the assessee was a resident of Mauritius entitled to treaty benefits, and whether long-term capital gain arising from sale of shares in an Indian company was exempt under Article 13(4) of the India-Mauritius Double Taxation Avoidance Agreement.

Analysis: The assessee held a valid Tax Residency Certificate issued by the Mauritius tax authorities and a Category 1 Global Business Licence. The shares were acquired and subsequently transferred after regulatory scrutiny and approval by Indian authorities, which undermined the allegation that the assessee was merely a conduit with no commercial substance. The allegations regarding lack of tax payment in Mauritius, absence of employees, and ultimate ownership structure were treated as insufficient to displace the evidentiary value of the residency certificate and the treaty framework. Since the shares sold in the relevant year had been acquired in 2009, prior to 1 April 2017, Article 13(3A) did not apply, and the capital gain fell within Article 13(4).

Conclusion: The assessee was held entitled to treaty protection as a resident of Mauritius, and the long-term capital gain from sale of shares was held not taxable in India under Article 13(4) of the treaty.

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