Mauritius Route Upheld, Yet Again: Aar Analyzes Control & Management And Commercial Substance Of Structure

• Mauritius company is not chargeable to Indian capital gains tax under India – Mauritius tax treaty, on sale of shares of an Indian company.
• Sale of shares pursuant to an Option Agreement upon fulfilment of certain milestones in the Option Agreement shows sufficient commercial rationale.
• The nature of decisions in taken in the Board meetings of the Mauritius company in Mauritius sufficiently demonstrates that the control and management of the Mauritius company's affairs could not be considered to be situated wholly in India.

Recently, the Authority for Advance Ruling ("AAR") in the case of In re, Mahindra BT Investment Company (Mauritius) Limited upheld capital gains relief under the India-Mauritius tax treaty ("Mauritius Treaty") on transfer of an Indian company's shares by a Mauritius company to a US company under an Option Agreement. The AAR observed that based on the decisions taken by its Board of directors, the constitution of the Board, and the fact