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Capital Gains From Transfer Of Shares Held By A Mauritian Company

India

The Authority for Advance Rulings ("AAR") has delivered an important ruling in the case of D.B.Zwirn Mauritius on the taxability of capital gains arising on the transfer of shares of an Indian Company held by a Mauritian Company. The AAR ruled that such gains would not be chargeable to tax in India under the Double Taxation Avoidance Agreement ("Tax Treaty") between India and Mauritius.

Taxand India analyses the case in detail. The ruling of the AAR found that under the act, gains arising from transfer of shares of an Indian company were chargeable to tax in India. However, under the provisions of Article 13(4) of the Tax Treaty between India and Mauritius, such gains arising to a resident of Mauritius were taxable only in Mauritius. The AAR held that the capital gains arising from transfer of shares of Quippo Telecom Infrastructure Ltd by the applicant was not chargeable to tax in India.

Taxand's Take


This is a reaffirmation of the principle that capital gains arising to a resident of Mauritius from transfer of shares in an Indian company would not be chargeable to tax in India.

Although the ruling is binding only on the applicant, the outcome of this ruling would encourage other Mauritian holding companies to secure a ruling in their cases as well, particularly since the AAR has been consistent in its approach and rulings on this aspect. It is interesting that the Revenue did not challenge the contentions of the Applicant.

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Mukesh Butani
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E. mukesh.butani@bmrlegal.in

Taxand's Take Author