Case Law Details
Authority for Advance Ruling (AAR) in the case of D.B.Zwirn Mauritius (AAR No. 879 of 2011) (Judgment date: 28 March 2011) dealt with the issue of tax ability of capital gains on sale of shares by a Mauritian entity under the Income-tax Act, 1961 (the Act) or India-Mauritius tax treaty (the tax treaty). The AAR held that the applicant, holding tax residence certificate, was eligible for the tax treaty benefits. Accordingly, under Article 13(4) of the tax treaty the taxpayer is not liable to pay capital gains tax in India in respect of the transfer of shares held in an Indian company.
The AAR while coming to the conclusion relied on CBDT Circular No. 682 and 789, dated 30 March 1994 and 13 April 2000 respectively and the Supreme Court decision in the case of Union of India v. Azadi Bacho Andolan [2003] 263 ITR 706 (SC).
Facts of the case
• The applicant, a company incorporated in Mauritius, an investment company was holding a tax residence certificate issued by the Mauritius Revenue Authorities.
• The applicant bought shares of an Indian company in 2007 for a consideration of INR 245 million. The taxpayer sold these shares to another Mauritian company and realised capital gain of INR 347 million.
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