By Geeta Jani | Dhishat B. Mehta | Bhaumik Goda
Chartered Accountants
5 ADIT vs. Asia Today Limited [(2021) 127 taxmann.com 774 (Mum-Trib)] ITA Nos.: 4628-4629/Mum/2006 A.Ys.: 2000-01 and 2001-02; Date of order: 30th July, 2021
Article 4 of India-Mauritius DTAA – Re-domiciliation of company by itself cannot lead to denial of treaty in the country of re-domiciliation
FACTS
The assessee was a company incorporated in 1991 as an international business company in the British Virgin Islands (BVI). It re-domiciled to Mauritius on 29th June, 1998 when the Registrar of Companies issued a Certificate of Incorporation stating that ‘…on and from 29th day of June, 1998, incorporated by continuation as a private company limited by shares’ and that ‘this certificate will be effective from the date of de-registration in BVI’. Simultaneously, the BVI issued a certificate stating ‘The Registrar of Companies of the British Virgin Islands hereby certifies that ________, an international business company incorporated under section 3 of the International Business Companies Act of the law of British Virgin Islands, has discontinued its operations in the British Virgin Islands on 30th June, 1998’.
For the first time, the tax authority contended before the Tribunal that since the assessee was a BVI company, it did not qualify for benefit under the India-Mauritius DTAA. The assessee objected to this contention of the tax authorities.
HELD
On re-domiciliation
Corporate re-domiciliation is a process through which a corporate entity moves its domicile (or place of incorporation) from one jurisdiction to another while at the same time retaining its legal identity.
On re-domiciliation, a corporate entity is de-registered from one jurisdiction and ceases to exist there but simultaneously comes into existence in another jurisdiction.
In the offshore world re-domiciliation of a corporate entity is a fact of life.
While re-domiciliation of a corporate entity may trigger detailed examination per se, DTAA benefits cannot be denied merely because of re-domiciliation.
On facts of the case
The assessee had re-domiciled more than two decades ago. During this period, the tax authority had granted benefit under the India-Mauritius DTAA without raising any question. Hence, the issue was merely academic in nature.
Note: The decision primarily dealt with adjudication of the PE in India of the assessee and attribution of profit to dependent agent. The issue of denial of DTAA benefit on the issue of re-domiciliation was agitated by the tax authority for the first time before the Tribunal. However, only this issue is compiled because it was agitated by tax authority for the first time.
