TRC issued by authority of Mauritius is sufficient tax residency evidence

Sarva Capital LLC Vs ACIT (ITAT Delhi)

Introduction: The case of Sarva Capital LLC Vs ACIT (ITAT Delhi) revolves around the validity of the Tax Residency Certificate (TRC) for determining treaty benefits under the India-Mauritius Double Taxation Avoidance Agreement (DTAA). The appellant contested the assessment order by challenging the jurisdiction, taxability of capital gains, denial of treaty benefits, and proposed penalty proceedings.

Issue: Whether the appellant, a resident of Mauritius as per a valid Tax Residency Certificate (TRC), is entitled to claim benefits under the India-Mauritius Double Taxation Avoidance Agreement (DTAA) for capital gains arising from the sale of shares.

Facts:

• The appellant, Sarva Capital LLC, is a non-resident company incorporated in Mauritius and claims residency there based on a valid TRC.
• The appellant invests in Indian companies and derived long-term capital gains from the sale of shares in the assessment year.
• The Assessing Officer (AO) denied the appellant’s claim for treaty benefits, alleging:
  • Tax avoidance through “treaty shopping.”
  • The appellant being a conduit company for real owners residing in different countries.
  • Lack of beneficial ownership of income by the appellant.
  • No commercial rationale for establishing the company in Mauritius.
  • The appellant not being liable to tax in Mauritius due to capital gain exemption in their domestic laws.

ITAT’s Decision: