Treaty exemption for Mauritius bank interest income depends on bona fide banking business in Mauritius, not an RBI licence.

Interest income earned in India by a Mauritius-resident bank was treated as exempt under Article 11(3)(c) of the Indo-Mauritius tax treaty because the recipient was a bank carrying on bona fide banking business in Mauritius. The relevant condition was residence in the other Contracting State and genuine banking activity there; a separate Reserve Bank of India banking licence, or banking operations in India, was not required for the treaty exemption. The tax authorities had already accepted that the assessee carried on bona fide banking business in Mauritius, so the exemption applied.

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Issues: Whether interest income earned in India by a Mauritius-resident bank was exempt from tax under Article 11(3)(c) of the Indo-Mauritius Double Taxation Avoidance Agreement despite the absence of a banking licence from the Reserve Bank of India.

Analysis: The exemption under Article 11(3)(c) applies when the recipient is a bank carrying on a bona fide banking business and is a resident of the other Contracting State. The relevant requirement is residence in Mauritius and carrying on bona fide banking business there. A separate banking licence from the Reserve Bank of India, or the carrying on of banking activity in India, is not a for the treaty exemption. The tax authorities had already accepted that the assessee carried on bona fide banking business in Mauritius.

Conclusion: The interest income was exempt from tax in India under Article 11(3)(c) of the treaty, and the appeal failed.

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