Mauritian entities have found it difficult to benefit from the capital gains tax exemption under the India- Mauritius double taxation avoidance agreement (DTAA) upon exit from Indian investments with the tax department questioning the said benefits. Recently, the Authority for Advance Ruling (AAR), declined to give a ruling on taxability of a Mauritian resident in India, on the grounds that the transaction was prima facie designed for avoidance of tax.[1]
The Base Erosion and Profit Shift (“BEPS”) programme, initiated by OECD, had recommended a host of action plans, which could be implemented by making changes to the international tax treaties. . However, there are more than 3000 bilateral tax treaties entered into by contracting countries and it would have taken years to amend them. To solve this problem, over 100 jurisdictions negotiated and concluded a multi-lateral instrument (“MLI”) in November 2016. Countries that agreed to change their tax treaties were required to sign and notify the OECD Secretariat. India was amongst the first few signatories to the MLI in 2017 and ratified it on June 25, 2019. Thus, its network of bilateral tax treaties would be impacted by the provisions of the MLI where its treaty partner is also a signatory. It is, therefore, necessary now to read the applicable tax treaty with MLI, based on the treaty partner’s position and reservations on the provisions of the MLI.
Continue Reading Have You Checked the Applicability of Multi-Lateral Instrument Impacting Your Treaty Benefit Claim?
Recently, the National Company Law Tribunal (NCLT) rejected Ajanta Pharma Limited’s (Ajanta Pharma) scheme of amalgamation and arrangement (Scheme) between the company and its shareholder Gabs Investments Private Limited (Gabs Investments) on the grounds of General Anti Avoidance Rules (GAAR).
Continue Reading NCLT Smell Tests GAAR! Rejects Ajanta Pharma’s Scheme of Merger on Grounds of Tax Avoidance