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Indian Supreme Court Rules In Favour Of Indo-Mauritius Double Tax Treaty

by Lorys Charalmabous, Tax-News.com, Cyprus

08 October 2003


The Indian Supreme Court has upheld the validity of an Income Tax circular which gives exemption on capital gains tax to foreign investors registered in Mauritius in order to avoid double taxation.

The decision overturns a previous ruling by the Delhi High Court in May last year which quashed the circular on the grounds that it gave an unnecessary tax holiday to foreign institutional investors and deprived the exchequer of tax revenue.

"We are unable to agree with the submissions that an Act which is otherwise valid in law can be . . . (set aside) . . . merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudicious to the national interest as perceived by the respondents," said the Bench which consisted of Justices Ruma Pal and B N Srikrishna.

According to reports, nearly 60% of India's $4 billion worth of foreign direct investment comes through firms registered in Mauritius, taking advantage of the circular issued by the Central Board of Direct Taxes in April 2000.

The Circular provided 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 (Double Tax Treaty) accordingly".


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