Long Term Capital Gain On Sale Of Shares By Mauritius Company Is Not Liable To Be Taxed In India: ITAT

The Income Tax Appellate Tribunal (ITAT) has ruled that long-term capital gains from the sale of shares in a Mauritius-based company are taxable in India. The case involved shares of Mauritius-based Fame India Ltd., sold by a British Virgin Islands company. The ITAT dismissed the taxpayer's claim that the gains should be taxed in Mauritius under the India-Mauritius Double Tax Avoidance Agreement (DTAA). The Tribunal found that the sale of shares was effectively connected with a permanent establishment in India, thus taxable under Indian law. This decision emphasizes the importance of examining the substance over form and scrutinizing the actual business operations and connections to determine the taxability of such transactions.