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of <h1>Mauritius company gets capital gains exemption under Article 13(4) of India-Mauritius Tax Treaty despite conduit allegations</h1> <h3>ACCION Africa-Asia Investment Company, C/o- Ankul Goyal, Advocate AZB & Partners Versus ACIT, International Taxation, Circle-1 (1) (1), New Delhi</h3> ACCION Africa-Asia Investment Company, C/o- Ankul Goyal, Advocate AZB & Partners Versus ACIT, International Taxation, Circle-1 (1) (1), New Delhi - TMI Issues:The judgment involves the taxability of capital gain arising on the sale of shares by a non-resident corporate entity incorporated in Mauritius, under the India-Mauritius Double Taxation Avoidance Agreement (DTAA).Details of the Judgment:Issue 1: Taxability of Long-Term Capital GainThe Assessing Officer denied treaty benefits to the assessee, alleging it was a conduit company set up for tax avoidance. The DRP upheld this view. However, the Tribunal found the allegations unsubstantiated and ruled in favor of the assessee, stating that the TRC issued by Mauritius determined tax residency and treaty benefits entitlement.Issue 2: Application of General Anti Avoidance Rule (GAAR)The assessee argued that GAAR provisions were erroneously not invoked by the Assessing Officer. The Tribunal noted that GAAR provisions were not applied and found the grounds raised by the assessee on this issue to be of academic nature, as the TRC determined the tax residency and treaty benefits entitlement.Issue 3: Compliance with Treaty ProvisionsThe Tribunal emphasized that the TRC issued by Mauritius determined the entitlement under the treaty provisions, and the departmental authorities failed to establish the assessee as a conduit company. Therefore, the long-term capital gain derived from the sale of shares in Indian entities was exempt from taxation under the India-Mauritius DTAA.Separate Judgment by the Tribunal:The Tribunal allowed the appeal, directing the Assessing Officer to delete the addition of the long-term capital gain. The Tribunal highlighted that the failure to establish the assessee as a conduit company meant that the TRC determined the residential status and treaty benefits entitlement, leading to the exemption of the capital gain from taxation in India.
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