Departmental authorities cannot question validity of Tax Residency Certificate

Saif II-SE Investments Mauritius Limited Vs ACIT (ITAT Delhi)

ITAT Delhi held that that the departmental authorities cannot question the validity of Tax Residency Certificate. Once the assessee holds a valid TRC, it proves the residential status of the assessee as resident of Mauritius, hence, it will be eligible to treaty benefits.

Facts- The assessee is a non-resident corporate entity incorporated in Mauritius and is a tax resident of Mauritius. As stated by AO, the assessee operates as an investment holding company, undertaking various investments. AO noted that the assessee holds a valid Tax Residency Certificate (TRC) issued by the Mauritius Tax Authorities. The assessee also holds a valid Global Business Licence (Category 1) (GBL-1) issued by the Financial Service Commission in Mauritius. The assessee’s holding companies are SAIF II Mauritius Company Ltd. (SAIF II), which owns 51% of the shareholding, and SAIF III Mauritius Company Limited (SAIF III), which holds 49% of the shareholding in the assessee company. AO noted that two of the directors of the assessee company are residents of Mauritius, whereas two other directors are from Hong Kong.

The assessee received dividend income of Rs. 47,64,37,500/- on equity shares of National Stock Exchange (NSE), whereas it received net long-term capital gain of Rs. 465,99,50,702/- on part disposal of equity shares of the NSE. The assessee claimed the dividend income as exempt u/s. 10(34) of the Act. Whereas he claimed the net long-term capital gain to be exempt under Article 13(4) of the India-Mauritius tax treaty.

AO ultimately held that the assessee could not be treated as a tax resident of Mauritius, hence, would not be entitled to treaty benefits. Accordingly, AO framed the draft assessment order. DRP upheld the decision of AO.

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