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TMI Blog2011 (3) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... alid and sufficient evidence of residential stat us under India - The tax payer is entitled in law to seek the benefit under the DTAA if the provision therein is more advantageous than the corresponding provision in the domestic law. The applicant is not liable to pay capital gains tax in India in respect of the transfer of shares held in Quippo Telecom Infrastructure Limited (Indian Company) to Geraldton Finance Limited, a Mauritius based company having regard to the provisions of India-Mauritius DTAA X X X X Extracts X X X X X X X X Extracts X X X X ..... 10, 2009 attracts capital gain tax liability in terms of provisions of Income Tax Act 1961 and Double Taxation Avoidance Agreement between India and Mauritius? 4. Whether, in respect of the transaction of sale of shares explained in statement of facts, there is any withholding tax liability under section 195 of the Income-tax Act, 1961. Question No.1 was unnecessary and therefore deleted at the time of passing order under section 245R (2) of the Act. 3. The Learned Advocate submits that the applicant is holding a Tax Residence Certificate issued by the Mauritius Revenue Authority. It is filing tax returns as Mauritian resident and is entitled to claim benefits provided under the DTAA between India and Mauritius. Article 13(4) of the DT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s extracted as under: "Article 13- Capital gains: 1. ………. 2. ………… 3. …………… 4. Gains derived by a resident of a Contract State from the alienation of any property other than those mentioned in paragraphs (1),(2) and (3) of this article shall be taxable only in that State." 6. The applicant seeks to fortify its claim for non-liability to pay Indian income-tax on the strength of the Tax Residency Certificate issued by the Mauritius Revenue Authority. The applicant has placed reliance on the two Circulars issued by the CBDT. The relevant extract of the Circular No.682, dated 30th March, 1994 is as under: "Subject: Agreement for avoidance of double ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Maurit ius. Art icle 4 of the DTAC defines a resident of one State to mean "any person who, under the laws of that State is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature." Foreign inst itutional investors and other investment funds, etc., which are operating from Mauritius are invariably incorporated in that country. These entit ies are "liable to tax" under the Maurit ius Tax Law and are, therefore, to be considered as residents of Mauritius in accordance with the DTAC. 2. Prior to 1st June, 1997, dividends distributed by domestic companies were taxable in the hands of the shareholder and tax was deductible at source under the Income-tax Act, 1961. Und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al asset is located in India is immaterial. The tax payer is entitled in law to seek the benefit under the DTAA if the provision therein is more advantageous than the corresponding provision in the domestic law. This well settled principle has been re-stated by the Supreme Court in the case of Union of India vs. Azadi Bachao Andolan, cited supra, in the following passage: "A survey of the aforesaid cases makes it clear that the judicial consensus in India has been that section 90 is specifically intended to enableand empower the Central Government to issue a notification for implementation of the terms of a double taxation avoidance agreement. When that happens, the provisions of such an agreement, with respect of cases to which where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dity of the Circular, in Azadi Bachao Andolan case, cited supra, it is said as under: "As early as on March 30, 1994, the Central Board of Direct Taxes had issued Circular No. 682 (see [1994] 207 ITR (St.7)) in which it had been emphasized that any resident of Mauritius deriving income from alienation of shares of an Indian company would be liable to capital gains tax only in Mauritius as per Mauritius tax law and would not have any capital gains tax liability in India. This Circular was a clear enunciation of the provisions contained in the DTAC, which would have overriding effect over the provisions of sections 4 and 5 of the Income-tax Act, 1961 by virtue of section 90(1) of the Act…." 9. On the facts presented by the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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