Taxmen wary of protocol to amend India-Mauritius DTAA; raise concern over enhanced litigation, confusion on new clauses

A section of the Income Tax administration is wary of the new changes in India-Mauritius Double Tax Avoidance Treaty. While the goal of the new protocol is to block tax evasion, it leaves room for interpretation in favour of the original intent of the treaty which was for promoting investment. Another fear is that the protocol is likely to lead to enhanced litigation.

According to sources in the Income Tax Department, a key concern is about the framing of the proposed Article 27B. The purpose of the amendment was to deny a benefit if an entity had entered into an arrangement or transaction solely for this purpose. However, this amendment leaves the room open for interpretation. If an entity enters into a transaction or arrangement in line with the original object and purpose of the convention, which is to further investment, the benefit can be given. This means going back to the original treaty and subverting the entire meaning of the recent amendment,

To shed light on this issue, Shishir Sinha from Business line writes on “Taxmen wary of protocol to amend India-Mauritius DTAA; raise concern over enhanced litigation, confusion on new clauses” with expert comments from our Partner Rahul Charkha.

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