CBDT ready to address queries on Mauritius DTAA update

New Delhi: India's apex direct taxes body Friday said it will address all "queries" related to the amended Double Taxation Avoidance Agreement with Mauritius while terming concerns around it "premature" as the protocol is yet to be notified.

"Some concerns have been raised on the India Mauritius DTAA amended recently. In this context, it is clarified that the concerns /queries are premature at the moment since the Protocol is yet to be ratified and notified u/s 90 of the Income-tax Act, 1961," the Central Board of Direct Taxes (CBDT) posted on 'X'. "As and when the Protocol comes into force, queries, if any, will be addressed, wherever necessary," it added.

The clarification follows concerns by tax experts over the agreement opening past investments to scrutiny from tax authorities at the time of exit following the protocol, which was inked on March 7. A key concern expressed by experts is about reopening of past cases in view of the amended provision.


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"The key concern among foreign investors is the retrospective applicability of the protocol as provided in Article 3(2). The finance ministry may need to clarify the cases or situations where the PPT test (Principal Purpose Test) would not apply, e.g. the closed assessments should not be reopened," said Punit Shah, partner, Dhruva Advisors.

Article 3(2) states, "The provisions of this Protocol shall have effect from the date of entry into force of the Protocol, without regard to the date on which the taxes are levied or the taxable years to which the taxes relate".

The latest amendment makes it clear that relief under the treaty cannot be for the indirect benefit of residents of another country. In almost all cases, shareholders or investors in Mauritian entities making investments in India are from other countries.

These investments will be tested on 'Principal Purpose' as per the amendment.