Morgan Stanley Mauritius Co. Ltd. v. DCIT(IT) (2021) 191 ITD 88 / 212 TTJ 1/ 203 DTR 10(Mum.)(Trib.)

S. 9(1)(iv) : Income deemed to accrue or arise in India-Dividend by Indian company-Person making payment to assessee could be treated as SCB-UK or SCB-India but none of them were an Indian resident for purpose of India-Mauritius tax treaty, dividend income could not be brought to tax in India-Domestic depository which was admittedly a branch of foreign company would not be treated as an Indian resident-DTAA-India-Mauritius. [S. 9(1)(i), Art. 10, 22]

Assessee-company was incorporated in Mauritius.  Assessee was an investor in Indian Depository Receipts (IDRs) by Indian branch of SCB bank (SCB-India), with underlying assets in form of shares in a UK based company (SCB-UK) held by depository’s custodian i.e. BNY-US. IDRs so issued in respect of shares of SCB-UK were listed in India. Assessing Officer held that IDR dividends received by assessee-company for underlying shares would be taxed in hands of assessee under Income-tax Act. Tribunal held that SCB-India was only an Indian branch office i.e. permanent establishment of SCB-UK. Person making payment to assessee could be treated as SCB-UK or SCB-India but none of them were an Indian resident for purpose of India-Mauritius tax treaty, dividend income could not be brought to tax in India.  Tribunal also held that merely because depository of Indian Depository Receipt (IDR) must only be an Indian company in accordance with law, it would not mean a domestic depository which was admittedly a branch of foreign company would be treated as an Indian resident.  (AY. 2015-16)