TaxTMI 
TaxTMI 
2011 (3) TMI 16
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.... acquired on 19th September, 2007, for a consideration of Rs. 2,13,33,320. On 10th November, 2009, the applicant entered into a share purchase agreement to sell these 5,33,333 shares to Geraldton Finance Limited, a Mauritius based company, for a consideration of Rs.5,59.99,965. The applicant realized capital gain of Rs.2,98.67.010. 2. The Applicant has approached this Authority to determine whether by virtue of being a Mauritius resident, it is eligible to the benefits of the India-Mauritius DTAA and hence not subject to tax in India on the capital gains realized. It has sought the ruling of this Authority on the following questions: 1. Whether the application filed by the Applicant before the Authority of Advance Ruling is main....
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....f one state shall mean any person who is liable to tax under the laws of that state. In the case of Azadi Bachao Andolan reported in 263 ITR 706, the Hon'ble Supreme Court has held that the certificate of residence issued by Mauritius Revenue Authority constitutes a valid and sufficient evidence of residential status under India - Mauritius DTAA. The CBDT in Circular No. 682 dated 30.03.1994 has further clarified that under the DTAA, a resident of Mauritius having income from alienation of shares of Indian company shall be liable to tax only in Mauritius. In the case of E*Trade Mauritius, AAR No. 862 of 2009, and, the Delhi ITAT in the case of Saraswati Holding Corporation, 2009, held the view that the gains arising out of alienation of sha....
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....e capital gains is a resident. In terms of paragraph 4, capital gains derived by a resident of Mauritius by alienation of shares of companies shall be taxable only in Mauritius according to Mauritius tax law. Therefore, any resident of Mauritius deriving income from alienation of shares of Indian companies will be liable to capital gains tax only in Mauritius as per Mauritius tax law and will not have any capital gains tax liability in India. 4. Paragraph 5 defines "alienation" to mean the sale, exchange transfer or relinquishment of the property or the extinguishment of any right in it or its compulsory acquisition under any law in force in India or in Mauritius." 7. Then there is further clarification issued by the CBDT regarding ta....
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....nds in the hands of investors from Mauritius. It is hereby clarified that wherever a certificate of residence is issued by the Mauritian authorities, such certificate will constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for applying the DTAC accordingly. 3. The test of residence mentioned above would also apply in respect of income from capital gains on sale of shares. Accordingly, FIIs, etc. which are resident in Mauritius should not be taxable in India on income from capital gains arising in India on sale of shares as per paragraph 4 of article 13." 8. The issue that arises for consideration is that if we go by the I.T. Act the profit arising from the transfer of shares of Indian ....
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....ment of total income under section 5 of the Act, then there was no purpose in making those sections "subject to the provisions" of the Act. The very object of grafting the said two sections with the said clause is to enable the Central Government to issue a notification under section 90 towards implementation of the terms of the DTAs which would automatically override the provisions of the Income-tax Act in the matter of ascertainment of chargeability to income-tax and ascertainment of total income, to the extent of inconsistency with the terms of the DTAC. 3.1 The contention of the respondents which weighed with the High Court, viz., that the impugned Circular No.789 (see [2000] 243 ITR (St.)57) is inconsistent with the provisions of th....