23 April 2019 | Technical
The protocol also allowed for a transitional period whereby shares disposed or transferred between 1 April 2017 and 31 March 2019 suffered tax at 50% of the Indian tax rate on capital gains. Whilst the transitional period has ended, it is also important to note that shares acquired prior to 1 April 2017 will still be exempt from capital gains tax.
However, treaty benefits are not always a given.
The Authority for Advance Rulings issued 2 different rulings on the application of the capital gains tax exemption under the treaty (AAR No. 1128 of 2011 and AAR No 1129 of 2011) in 2018. The distinguishing factors between the 2 cases is that in the case where the exemption was applied, the Mauritian entity disposing of the shares acted as an independent company by taking its own decisions.
It also documented its purchase of shares properly and was deemed to be more than a nominee company.