Financial Daily from THE HINDU group of publications
Wednesday, Oct 08, 2003
Financial Daily from THE HINDU group of publications Wednesday, Oct 08, 2003 |
|
|
|
|
|
Home Page
-
Foreign Institutional Investors Industry & Economy - Taxation SC verdict `double-edged sword', say experts Our Bureau
New Delhi , Oct. 7 EXPERTS see the Supreme Court's verdict upholding the validity of the Finance Ministry's April 13, 2000, circular relating to the Indo-Mauritius Double Taxation Avoidance Convention (DTAC) as a double-edged sword. On the one hand, it is a shot in the arm for `genuine' foreign investors, both direct as well as portfolio, which route their investments through Mauritius. The bulk of FDI inflows to India in recent years have been accounted for by companies registered in Mauritius. The apex court's verdict will help "dispel the uncertainties regarding the residence status of Mauritian-registered companies under the Treaty", according to the Minister for Economic Development, Financial Services and Corporate Affairs of the Republic of Mauritius, Mr Susheel K.C. Khusiram. But on the flip side, the verdict will also put a spanner in the works of investors who indulge in treaty-shopping through `post-office' front companies registered in Mauritius. The Central Board of Direct Taxes' (CBDT) circular of April 13, 2000, makes it clear that the tax residency certificate issued by the Mauritius authorities would constitute sufficient evidence for accepting the status of residence as well as beneficial ownership. "The requirement for investors to produce an authentic residence proof from the Mauritian authorities would deter unscrupulous companies to set up post-box entities in Mauritius and claim tax benefits under the DTAC," said an industry source. According to Mr Khushiram, "Mauritius has taken necessary measures in recent years to enhance the soundness and integrity of its financial services sector through stricter supervision, a tougher anti-money laundering regime and closer international cooperation by its regulatory bodies". A subsequent CBDT circular, dated February 10, 2003 has tightened the screws further on front-companies. If an entity is resident of both India and Mauritius, its residential status for availing DTAC benefits would be determined on the basis of its place of `effective management' as envisaged under Article 4(3) of the treaty. The entity would not be entitled to the benefits under the DTAA where an Assessing Officer (AO) is satisfied that an entity is a resident of both India and Mauritius, and determines that the entity's effective management is in India (although the entity may be incorporated in Mauritius).
Article E-Mail :: Comment :: Syndication
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | Home |
Copyright © 2003, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|