3 Article 11(3) of India-Mauritius DTAA – clarification issued by CBDT; Circular No. 789; Tax Residency Certificate can be the basis for determining beneficial ownership of interest income
Geeta Jani , Dhishat B. Mehta, Chartered Accountants
HSBC Bank (Mauritius) Limited vs. DCIT
A.Y: 2011-12; Date of Order: 2nd
Article 11(3) of India-Mauritius DTAA –
clarification issued by CBDT; Circular No. 789; Tax Residency Certificate can
be the basis for determining beneficial ownership of interest income
The Taxpayer was a
limited liability company incorporated, registered and tax resident, in
Mauritius and was engaged in banking business. During the year under
consideration, the Taxpayer earned interest from investments in debt securities
in accordance with the SEBI Regulations. The Taxpayer claimed that its income
was exempt in India in terms of Article 11(3)(c) of the India-Mauritius DTAA.
The AO, in
conformity with the directions of DRP, denied the exemption on the ground that
the Taxpayer did not fulfil the following three conditions prescribed in
Article 11(3)(c) of the India-Mauritius DTAA.
(i)the interest was not “derived” by the
(ii)interest was not “beneficially owned” by the
(iii)the Taxpayer did not carry on bonafide
Taxpayer appealed before the Tribunal. The Tribunal held that the Taxpayer
derived interest income and that it was carrying on bonafide banking
business. As regards the third condition pertaining to ‘beneficial ownership’,
the Tribunal remanded the matter to AO.
agitated the issue through miscellaneous application before the Tribunal.
Thereafter, the Tribunal recalled its order insofar as it pertained to
‘beneficial ownership’. To suppo