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September 2023

Article 13(4) of India-Mauritius DTAA (prior to its amendment) — Capital gain arising on sale of shares of Indian company is not taxable in India.

By Geeta Jani | Dhishat B. Mehta | Bhaumik Goda
Chartered Accountants
Reading Time 2 mins
6. [TS-389-ITAT-2023(Del)]
SAIF II SE Investments Mauritius Limited vs. ACIT
[ITA No: 1812/Del/2022]
A.Y.: 2018-19               
Dated: 14th August, 2023

Article 13(4) of India-Mauritius DTAA (prior to its amendment) — Capital gain arising on sale of shares of Indian company is not taxable in India.

FACTS

Assessee is a Mauritius-based investment-cum-holding company. It derived long-term capital gains from sale of shares of NSE, an Indian company. Assessee contended that such long term capital gains were exempt under Article 13(4) of India-Mauritius DTAA. AO denied such exemption on the following grounds:

(a) Assessee was a conduit and the real owners of the income were ultimate holding companies, which were based in Cayman Islands.

(b) TRC was not sufficient to establish the tax residency of assessee, if substance established otherwise.

(c) There was no commercial rationale for establishment of the assessee company in Mauritius.

(d) Control and management of assessee was not in Mauritius.

DRP upheld order of AO.

Being aggrieved, assessee appealed to ITAT.

HELD

•    NSE was a regulated entity. Acquisition and sale of shares of NSE was approved by various regulatory authorities, such as, FIPB, S
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