India-Mauritius tax treaty: is a tax residence certificate (TRC) sacrosanct for capital gains exemption under Art. 13(4)?

 By: Dr. Amar Mehta  -  March 22, 2024

As per Art. 13(4) of the India-Mauritius tax treaty, a Mauritius company’s capital gains from sale of Indian companies’ shares—acquired on or before 31 March 2017—are exempt from Indian taxation. In light of that provision, a significant number of companies based in Mauritius have been claiming that the capital gains they accrue from the sale of shares in Indian companies are exempt from taxation in India.

For supporting that claim, the Mauritius companies have primarily depended on the tax residence certificates (TRCs) issued by the Mauritian tax authorities. Nonetheless, the Indian tax authorities have persistently argued that a TRC does not serve as conclusive evidence for claiming tax treaty benefits.

This article highlights a recent Indian judicial precedent that affirms the entitlement of a Mauritius company to exemption from Indian capital gains tax under Article 13(4) of the India-Mauritius tax treaty.

Of greater significance is the evaluation of whether, moving forward, Mauritius companies could depend—solely—on the TRCs to establish treaty entitlement. That is the primary subject matter addressed in this article. 

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