Assessee company was investment company based in Mauritius and invested in India in number of companies. The capital gains of sale of equity shares of Indian companies were claimed as non-taxable by taking recourse to Article 13(4) of India-Mauritius Treaty. The AO treated the company as shell company and alleging that there was no real economic activity, and TRC was not sufficient and that the company was managed from USA parent and no treaty benefit could be given.

It was observed by ITAT that the assessee company submitted all documentary evidences to claim treaty benefit as per Article 13(4) and as per section 90 read with rule 21AB. Form No.10F and category-1 Global business license issued by the Financial Services Authorities Mauritius was submitted. It was held that the income-tax authorities sitting in India cannot question the correctness of the TRC issued by the Mauritius Tax Authority. Once, the concerned authorities in Mauritius have issued the TRC and the Cat-1 Global business license, it has to be assumed that all facts and evidences were verified by them and only after being satisfied that the relevant conditions have been fulfilled, the certificates have been issued. The AO could not establish on record that the assessee is a shell/conduit company through proper evidence. It was held that the assessee remains entitled to treaty benefits. Further, since the shares were acquired before the amendment to the tax treaty was made, the LTCG can be claimed as exempt. (AY. 2020-21)