India: Beneficial ownership provisions may not apply to capital gains article of India-Mauritius treaty

Mumbai Bench of the Income-tax Appellate Tribunal

Mumbai Bench of the Income-tax Appellate Tribunal

The Mumbai Bench of the Income-tax Appellate Tribunal held that the beneficial ownership provisions of the India-Mauritius income tax treaty do not necessarily apply to the capital gains article of the treaty.

The case is: Blackstone FP Capital Partners Mauritius V Ltd v. DCIT.

The taxpayer, a Mauritius-based company, was a wholly owned subsidiary of a Cayman Islands entity. The taxpayer sought protection of the India-Mauritius income tax treaty with respect to certain capital gains. The assessing officer concluded that because the beneficial owner of the capital gains was an entity based outside Mauritius, the taxpayer was not entitled to treaty protection.

The tribunal observed that, unlike in the dividends or interest article, there is no provision specifically requiring beneficial ownership in order to claim treaty protection in the capital gains article. The tribunal concluded that unless a condition is specifically set out in the treaty provision itself, it cannot necessarily be inferred.

Accordingly, the tribunal remitted the matter back to the assessing officer to determine whether the requirement of beneficial ownership can be read into the capital gains article of the treaty.

Read a May 2022 report [PDF 472 KB] prepared by the KPMG member firm in India


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