Tax Residency Certificate supports treaty benefit where no cogent evidence shows a shell or conduit entity.

A Mauritius tax resident holding a valid Tax Residency Certificate was entitled to treaty protection under Article 13(4) of the India-Mauritius DTAA on capital gains from sale of shares of Indian companies, because the assessee substantiated residence with bank records, foreign currency investment documents and related evidence. The revenue's allegation that the entity was a mere paper company failed, as no cogent material showed it was a shell or conduit, or that there was round-tripping or other illegality. In the absence of reliable evidence to displace the residency claim, the treaty benefit was available and the capital gain was not taxable in India.

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Issues: Whether the assessee, a Mauritius tax resident holding a valid Tax Residency Certificate, was entitled to exemption under Article 13(4) of the India - Mauritius Double Taxation Avoidance Agreement in respect of capital gains arising from sale of shares of Indian companies, and whether the amount in dispute was taxable in India.

Analysis: The assessee produced material to establish its Mauritius residence, including the Tax Residency Certificate, bank records, foreign currency investment documents and other supporting evidence. The departmental authorities denied treaty benefit on the basis that the assessee was a mere paper company, but no cogent material was brought on record to show that it was a shell or conduit entity or that there was round-tripping or other illegality. The fact that the investments were made before the relevant cut-off date was also not disputed. In the absence of reliable evidence to displace the treaty claim, the assessee was entitled to rely on Article 13(4) of the treaty and the CBDT circular governing the effect of the Tax Residency Certificate.

Conclusion: The assessee was entitled to treaty protection and the capital gain was not taxable in India.

Ratio Decidendi: A valid Tax Residency Certificate, absent cogent evidence that the foreign resident is a shell or conduit entity, entitles the assessee to treaty benefits and the revenue cannot deny such benefit by vague allegations.

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