Search the Internet          Tips  Sites: Finance, Investment

SC stays HC order on Mauritius-based FIIs

The Supreme Court on Monday stayed a Delhi high court judgement quashing a central circular exempting Mauritius-based foreign institutional investors from paying tax on capital gains in India under the Double Taxation Avoidance Treaty.

After hearing Attorney General Soli J Sorabjee, a Bench comprising Justice Ruma Pal and Justice B N Srikrishna issued notice to the respondents and stayed the May 31 order of the high court, which had quashed the April 13, 2000 notification of Central Board of Direct Taxes terming it as violative of the Income-Tax Act.

The Bench directed respondents Azadi Bachao Andolan and a former tax official S K Jha, petitioners before the high court, to file their replies within three weeks and directed listing of the appeal filed by the Centre after eight weeks.

The CBDT notification had put an embargo on probe by the Income-Tax officials against FIIs, which were routing their investments through Mauritius to save tax on capital gains on investments made in Indian share market.

The Double Taxation Avoidance Treaty provided for payment of tax in either of the two countries. The FIIs were paying a nominal tax in Mauritius and enjoying huge tax exemption in India, the petitioners had alleged before the HC in their PILs.

The high court had held that since the government circular declared that certificates of 'residence' issued by the competent authorities of Mauritius to be conclusive for the purposes of the Double Taxation Convention between India and Mauritius, it purported to whittle down the powers of the assessing authority and therefore, was bad in law.

Giving an important clarification, the government in its petition said notwithstanding the circular, "it would nevertheless still be open to the assessing authority to determine whether the asseeee is also a resident of India under the Indian Income-Tax Act.

"Hence the said circular does not circumscribe the powers of the assessing officer in any way," it said.

The government said the high court failed to appreciate that the circular sought to only clarify that even in case of 'capital gains' tax, the certificate of residence issued by competent Mauritian authorities should be accepted and there should be no levy of capital gains tax if the assessee was a resident of Mauritius alone.

"The circular does not purport to obviate an inquiry into whether the assessee is also a resident of India," it said.

ALSO READ:
Bill Gates in India
More Money Headlines