CBDT issued Circular No. 789 dt. 13th April, 2000 (2000) 243 ITR (St) 57, clarifying that Certificate of Residence issued by the Mauritian Authorities will constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for applying the India Mauritius DTAA. Accordingly, Foreign Institutional Investors who are resident in Mauritius would not be taxable\u00a0 inIndia on income from capital gains arising in India on sale of shares as per Article 13(4) of the treaty. Public interest litigation was filed before Delhi High Court by Shivkant Jhah v. UOI and Azadi Bachoo andolan v. UOI (WP No. 2802 of 2000 <\/em><\/strong>challenging the aforesaid Circular.<\/p>\n \u00a0<\/p>\n Whether the provisions of the DTAA\u00a0 override the provisions of the Act. What is\u00a0 the meaning of the term \u2018liable to tax\u2019? Can a non-resident claim benefit of DTAA only if he \u2018pays tax\u2019 in a Contracting State?<\/p>\n \u00a0<\/p>\n Supreme Court observed that section 90 of the Act enables and empowers the Central Government to issue a notification for implementation of the terms of a DTAA. Supreme Court held that a DTAA would operate even if inconsistent with the provisions of the Income Tax Act and would override the provisions of the Act\u00a0 for determining the total income and the tax liability. Supreme Court further held that Circular no. 789 is a circular within the scope of section 90 and shall prevail even if it is inconsistent with the provisions of the Act. Supreme Court rejected\u00a0\u00a0 the argument of the respondents that FIIs cannot be considered to be \u2018residents\u2019\u00a0\u00a0\u00a0\u00a0 of Mauritius under the DTAA because they are\u00a0 not\u00a0 \u2018liable to\u00a0 tax\u2019 in\u00a0 Mauritius\u00a0 on account of tax exemption on sale of shares under the Mauritius Income tax\u00a0 \u00a0Act. Supreme Court held that the term \u2018liable to tax\u2019 is not the same as\u00a0 \u2018pays\u00a0 tax\u2019. Therefore, FIIs incorporated in Mauritius are \u2018liable to tax\u2019 in Mauritius\u00a0 and are also to be treated as resident of Mauritius under the DTAA. Supreme Court held that Circular no 789 clarifying that FIIs, etc. which are resident in Mauritius would not be taxable in India on income from capital gains arising on sale of shares is not ultra vires the provisions of the Act. From the Judgement in<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Shivkant Jhah v.\u00a0 UOI\/Azadi Bachao Andolan v.\u00a0 UOI (2002) 175 CTR 371\/256\u00a0 ITR 563 (Delhi)(HC) <\/em><\/strong>(CA Nos. 8161& 8162 of 2003 and 8163 & 8164 of 2003 dt.<\/p>\n 7 -10-2003)<\/p>\n \u00a0<\/p>\n Editorial: <\/em><\/strong>With respect to tax planning, Supreme Court in Azadi Bachao Andolan Andolan observed that the decision of McDowell and Co. Ltd. v.\u00a0 CTO (1985) 154 ITR 148 (SC) <\/em><\/strong>could not be read as laying down the ratio that every attempt\u00a0\u00a0\u00a0\u00a0\u00a0 at tax planning is illegitimate and must be ignored or that every transaction or arrangement which is perfectly permissible under law which has the effect of reducing the tax burden of the assessee must be looked upon with disfavour. In Vodafone International Holdings BV v. UOI (2003) 341 ITR 1 (SC) <\/em><\/strong>held that there is no conflict between McDowell and Co. Ltd. v. CTO (1985) 154 ITR 148 (SC) and Azadi Bachao Andolan<\/em><\/strong><\/p>\n \u00a0<\/em><\/strong><\/p>\n \u201cThe test of friendship is assistance in adversity, and that too, unconditionalassistance.<\/em><\/p>\n Co-operation which needs consideration is as a commercial contract and not friendship. Conditional co-operation is like adulterated cement which does not bind ” -Mahatana Gandhi\u00a0<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" S. 90 : Double taxation relief \u2013 India \u2013 Mauritius DTAA \u2013 Circular No. 789 ( 2000) 243 ITR (St) 57 , not ultra vires the provisions of the Income-tax Act [S.2(17, 5(2) , 6(3) , 119 , Art .3, 4, 13(4) ]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-13395","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3u3","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13395","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=13395"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13395\/revisions"}],"predecessor-version":[{"id":13396,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13395\/revisions\/13396"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=13395"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=13395"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=13395"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Issue<\/h3>\n
Held<\/h3>\n