International buyers from Mauritius prone to preserve taxman at bay

International buyers coming from Mauritius are sometimes denied capital features tax reduction on the grounds that individuals controlling the tax haven corporations are based mostly in different international locations. This will likely change now.

One such try by the Revenue tax (I-T) division to carry the ‘company veil’ was struck down this week by a courtroom which dominated that the tough topic of ‘helpful possession’ (BO) of the Mauritian entity can’t be linked to capital features.

The ruling by Revenue tax Appellate Tribunal (ITAT), a quasi-judicial authority, referring to Blackstone FP Capital Companions Mauritius V Ltd, pertains to monetary yr 2015-16 when it booked capital features of over ₹900 crore after promoting shares of


The tax officer’s rivalry was that the efficient management of the corporate in Mauritius lay with entities within the Caribbean tax haven Cayman Islands. Thus, Blackstone can not derive the capital features tax advantages – with no tax required to be paid on the market of shares purchased earlier than 2017 – as offered within the amended treaty between India and Mauritius. The tax officer believed it was a match case to carry the proverbial company veil to level fingers at the true BOs.

‘Certificates of Residence Sufficient’

Nevertheless, ruling on the attraction by Blackstone, the Mumbai bench of the Tribunal, comprising judicial member Pavan Kumar Gadale and vice chairman Pramod Kumar, mentioned the “idea of BO of the capital features” can’t be learn into the scheme of Article 13 (coping with capital features) of the treaty.


“The Tribunal has held that the Treaty doesn’t require the BO check to be met for capital features tax exemption. The (apex tax physique) CBDT had already issued Round no. 789 in 2000 stating that wherever a Certificates of Residence is issued by the Mauritian Authorities, such a Certificates will represent adequate proof for accepting the standing of residence in addition to BO for making use of the Treaty. This round has been upheld by the Supreme Court docket within the case of Azadi Bachao Andolan in addition to in Vodafone. This round doesn’t look like handled within the ruling,” mentioned Shefali Goradia, Accomplice (Enterprise Tax) at Deloitte Touche Tohmatsu India.

Whereas the ruling has gone down nicely, ITAT’s choice to ship the matter again to the assessing officer (AO) has evoked combined emotions.
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