NEW DELHI: The income tax department on Friday said amendments to the India-Mauritius double tax avoidance treaty (DTAA) have not been ratified and notified under the Indian law.
“As and when the protocol comes into force, queries, if any, will be addressed, wherever necessary,” CBDT said in a social media post. Earlier this month, India and Mauritius had signed a protocol to amend the treaty raising concerns over how it would affect new and old investments routed to the country. The amendments have included a principal purpose test (PPT) to claim treaty benefits.
“This would mean that taxpayer’s resident in Mauritius can no longer simply rely on a Tax Residency Certificate issued by Mauritius Revenue authority to claim treaty benefits. CBDT Circular 789 had clarified that TRC by Mauritian authorities will constitute sufficient evidence of residence to claim benefits of tax treaty… With PPT test now introduced in the India-Mauritius tax treaty, tax authorities in India are likely to look beyond TRC and will have the ability to deny the benefit of India-Mauritius tax treaty if it is reasonable to conclude, that obtaining the treaty benefits was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly such tax benefit,” said Lokesh Shah, Partner, IndusLaw.