Right to Exemption from Taxes on Capital Gains in Favour of Indian Company Incorporated in Mauritius

A judgment of the Authority for Advance Rulings (AAR) dated July 18, 2012 came to put the record straight regarding the precedence of the Indian tax provisions of the Convention that India and Mauritius have signed for elimination of double taxation regime between the two countries.

Indeed, the presiding judge the work of the Authority for Advanced Rulings held that Dynamic India Fund I is fully within its rights to collect capital gains, ie gains from the trading of its shares, without to discharge any obligation to the Indian tax authorities. Dynamic India Fund I is an Indian company registered as a foreign investor (Foreign Venture Capital Investor (FVCI) with Securities and Exchange Board of India.

By adopting such a posture, the court of the Authority for Advanced Rulings has only implement the existing provisions of the Convention Indo-Mauritian regarding the taxation of capital gains generated by a foreign company, including Indian, domiciled in Mauritius.

The judgment of the judge of the Authority for Advanced Rulings however, has no direct or indirect relationship with a new system of Indian tax authorities, namely the General Anti Avoidance Rules (GAAR). It shall enter into force in 2013 in India.In some cases, the provisions of the GAAR can be applied to take action against any investor suspected of using the Convention as Indo-Mauritian subterfuge to avoid its tax obligations to India.

The debates inspired by some Indian politicians are moving increasingly towards a questioning of the provisions of the Convention for the suppression of the system of double taxation between India and Mauritius. In the view of some quarters in India, the provisions of this convention causes a considerable loss for India.

However, there are legal in this country to ensure strict compliance with existing laws. One such provision, is the Authority for Advance Rulings (AAR). This is the epitome of Indian ingenuity innovation in the field of tax law.

The main objective of the Authority for Advance Rulings is to allow residents and nonresidents who deal with non-residents to obtain, within six months, a decision on a statute or a subject likely to lead to conflict.

The decision of this body is final. He agrees and the complainant and the Indian tax office. The AAR is chaired by a former Supreme Court judge. He is assisted by two assessors. It operates under the aegis of the Indian Ministry of Finance since June 1, 1993.

" The judgment of the judge of the Authority for Advance Rulings should encourage the Mauritian authorities to be very vigilant during the negotiations in the framework of the Joint Working Group between India and Mauritius. When things around domestic laws are clarified, we must ensure that domestic laws of India, for example the General Anti Avoidance Rules do not have precedence over the provisions of the Convention for the suppression of the regime a double taxation between India and Mauritius as Dr. Arvin Boolell, Minister of Foreign Affairs, the arch has shown , "says Kamal Hawabhay, president of the Association of Trust and Management Cies, an association of managers and trusts companies specializing in business management.