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Capital Gains Exemption Under the India-Mauritius Treaty
The Authority for Advance Ruling (AAR) has delivered an important ruling in the context of capital gains exemption under the India-Mauritius Double Taxation Avoidance Agreement (DTAA). The AAR has ruled that the General Anti-Avoidance Rules (GAAR) are effective only from 1 April 2013 and until then the law proclaimed by the Supreme Court (SC) in Azadi Bachao Andolan stands good. Taxand India provides a summary of this important ruling upholding the sanctity of Tax Residency Certificate (TRC).
This is an important ruling from the AAR as it follows the decision of SC in the case of Azadi Bachao Andolan and re-emphasises the sanctity of TRC in the context of benefits under the India Mauritius DTAA. Importantly, given some of the recent rulings, where the AAR appeared to have applied principles of anti-avoidance to disregard the form of certain transactions, there has been a lot of apprehension with respect to adequacy of the TRC to claim the benefits under the India Mauritius DTAA. This ruling should provide adequate comfort to investors in this regard.
Although the ruling has left a window open to the RA to apply these provisions as and when they come into effect, it does provide some degree of certainty for transactions undertaken prior to the implementation of GAAR.