Offshore sector: The Indian Supreme Court justified the practice of "treaty shopping"

The tax treaty between India and Mauritius is a cornerstone of Mauritian offshore sector. Thanks to him, Maurice is the first line of foreign investment in India more than 40%. This classification created with envy as Singapore tax treaty with India is not as beneficial.

In its ruling recently, the Indian Supreme Court emphasized that tax treaties are the result of a negotiation between two parties, each seeking to get the most benefit for his country. The final agreement is often filled with compromise and it is not certain that each party is fully satisfied.

Indian Supreme Court noted that the''Treaty''shopping is often an incentive used by developing countries to attract foreign capital. The''Treaty''is shopping for investors to seek the court or the tax is most advantageous to locate.There is a profession called tax or tax planner. They are specialists in this kind of problem and advise their clients.

There are many principles in the world of tax planning may seem bad at first glance. But for developing countries it is useful to attract capital to finance the deficit, for example, and the''Treaty''shopping is one such tool that may seem questionable at first glance.

The judge noted that the Indian treaty is''binding''to the authorities of Mauritius and India. Despite the sound and fury''''Indian tax authorities around the so-called " Treaty-shopping ", maybe it was intentional at the time of the signing of the agreement double taxation between the two countries , says he.

In another case raised by the Indian tax authorities, the Supreme Court had decided that no action would be given to the case. The Indian tax authorities wanted to question the non-taxation of capital gains (capital gains) in Mauritius.

In this case a company had opened a company in the jurisdiction of Mauritius for 10 years. Maybe it had a view of the reduced tax treaty but it is not a crime.