NISHITH.TV
  • Mumbai
  • Silicon Valley
  • Bengaluru
  • Singapore
  • Mumbai BKC
  • New Delhi
  • Munich
  • New York

Locations

  • Mumbai
  • Silicon Valley
  • Bengaluru
  • Singapore
  • Mumbai BKC
  • New Delhi
  • Munich
  • New York
  • Content
  • Home
  • ABOUT US
  • NDA in the Media
  • Areas of Service
  • Research and Articles
  • Opportunities
  • Contact
  • NDACloud
  • Client Access
  • Member Access
  • Events and Calender
  • How we perform
  • Knowledge anywhere, anytime
  • See our recent deals
  • Up to date legal developments
  • Case studies in M&A

Research and Articles

HTMLPDF

  • Research at NDA
  • Research Papers
  • Research Articles
  • Policy Papers
  • NDA Think Tanks
  • NDA Hotline
  • New Ali Gunjan
  • Japan Desk ジャパンデスク

NDA-Hotline


  • Capital Markets Hotline
  • Companies Act Series
  • Climate Change Related Legal Issues
  • Competition Law Hotline
  • Corpsec Hotline
  • Court Corner
  • Cross Examination
  • Deal Destination
  • Debt Funding in India Series
  • Dispute Resolution Hotline
  • Education Sector Hotline
  • FEMA Hotline
  • Financial Service Update
  • Food & Beverages Hotline
  • Funds Hotline
  • Gaming Law Wrap
  • GIFT City Express
  • Green Hotline
  • HR Law Hotline
  • iCe Hotline
  • Insolvency and Bankruptcy Hotline
  • International Trade Hotlines
  • Investment Funds: Monthly Digest
  • IP Hotline
  • IP Lab
  • Legal Update
  • Lit Corner
  • M&A Disputes Series
  • M&A Hotline
  • M&A Interactive
  • Media Hotline
  • New Publication
  • Other Hotline
  • Pharma & Healthcare Update
  • Private Client Wrap
  • Private Debt Hotline
  • Private Equity Corner
  • Real Estate Update
  • Realty Check
  • Regulatory Digest
  • Regulatory Hotline
  • Renewable Corner
  • SEZ Hotline
  • Social Sector Hotline
  • Tax Hotline
  • Technology & Tax Series
  • Technology Law Analysis
  • Telecom Hotline
  • The Startups Series
  • White Collar and Investigations Practice
  • Yes, Governance Matters.
  • Japan Desk ジャパンデスク

Tax Hotline

March 27, 2001

Capital gains earned by Private Equity Funds to be taxed as Business Profits

The Indian Authority for Advance Rulings (AAR), in a recent ruling, has held that gains on sale of shares, earned by a Mauritius based private equity fund (the Fund) will be regarded as business profits. According to the AAR, private equity funds are carrying on a systematic business of buying and selling shares and hence gains arising on sale of shares should be taxed as Business Profits as per Article 7 of the India-Mauritius Tax Treaty and not under Article 13 on Capital Gains.

The AAR in this landmark judgement has considered all the aspects of a private equity fund structure and ruled that neither the Investment Adviser in India, nor the custodian can constitute a Permanent Establishment (PE) of the Fund in India. Hence, in absence of a PE, the entire business profits of the Fund will be taxable only in Mauritius and not be taxable in India.

The AAR has once again accepted the ‘resident’ status of a Mauritius based Fund on the basis of the tax residency certificate issued by the Mauritius Offshore Business Activity Authority. The AAR has distinguished the present case from its earlier ruling in the case of Cyril Pereira wherein the UAE resident was denied the treaty benefits on the ground that he was not liable to tax in UAE. In case of Mauritius, the AAR has held that the Mauritius Income Tax Act does provide for a basic charge to capital gains and business profits, even though currently, all the taxes may not be levied.

At this stage, when the writ petition questioning the tax residency of Mauritius based companies is pending in the Delhi High Court, this ruling would prove to be positive step towards re-establishing Mauritius route for investments into India.

Advance rulings are private and binding only on the applicant and tax authorities, in respect of the applicant. However, they do have some persuasive value.

Mission and Vision


Distinctly Different

What's New


How To Prioritise People: A Governance Approach To Minimise Layoffs At Startups
Yes, Governance Matters.: October 03,2023
Navigating Governance Challenges: Strengthening Non-Profit Organizations in India
Yes, Governance Matters. : September 30,2023

Events


Webinars

Impact of The New Indian Data Law on Multinational Companies Operating in India
August 22,2023 - August 22,2023

This event is over. For event material please click here


Seminar

Compliance, Governance, and Leadership
October 06,2023 - October 06,2023

Round Table

Investing In Net Zero
July 22,2022 - July 22,2022

This event is over. For event material please click here

News Roundup


News Articles

Reciprocity requirement for enforcement: A roadblock in ease of doing business?
August 24,2023

Quotes

English, Welsh lawyers have no intention of taking court work away from Indian lawyers: UK Law Society President
September 23,2023

Newsletters


Yes, Governance Matters.

How To Prioritise People: A Governance Approach To Minimise Layoffs At Startups
October 03,2023

Yes, Governance Matters.

Navigating Governance Challenges: Strengthening Non-Profit Organizations in India
September 30,2023

Social Sector Hotline

A step towards fostering transperancy under FCRA
September 29,2023

  • Disclaimer
  • Content
  • Feedback
  • Walkthrough
  • Subscribe
Nishith Desai Associates@2016 All rights reserved.