The assessee is a limited liability company incorporated in Mauritius and it had submitted the copy of the tax residency certificates issued by the Mauritius Tax Authorities for the relevant period during the assessment proceedings. It derived income by way of gains from transfer of shares of Indian companies and claimed that such income was taxable only in Mauritius as per the DTAA between India and Mauritius.

The AO accepted the claim of the assessee and passed an order u/s 143(3) r.w.s. 144C (13) of the Income-tax Act, 1961 (the Act) allowing the benefit of the DTAA to the assessee. The Revenue filed an appeal against the order of the AO before the Tribunal.

The Tribunal dismissed the appeal of the Revenue and upheld the order of the AO. It held that the assessee was entitled to the benefit of the DTAA between India and Mauritius as it had submitted the tax residency certificates issued by the Mauritius Tax Authorities and thus being a Mauritius resident deriving income by way of gains from transfer of shares of Indian companies, it was liable to capital gains tax only in Mauritius and not in India as per paragraph 4 of Article 13 of the DTAA between India and Mauritius. It also noted that the AO had accepted the claim of the assessee in the assessment order as well as the remand report and there was no material to controvert the same.  (AY. 2017-18)