AAR grants Capital Gain exemption under the India-Mauritius Tax Treaty to E*Trade Mauritius – Treaty Shopping permissible within the legal framework

The Authority for Advance Rulings (AAR) in the case of  E*Trade Mauritius Ltd. (AAR No. 826 of 2009) has held that that capital gains arising from the sale of shares in an Indian company would be exempt from tax in India under Article 13(4) of the India-Mauritius Tax Treaty (tax treaty). The AAR, while relying on the principles laid down by the Supreme Court in the case of Union of India Vs. Azadi Bacho Andolan [2003] 263 ITR 706 (SC) , observed that – if a resident of a third country seeks to take advantage of the tax relief and economic benefits under any tax treaty through a conduit...