Read the detailed analysis of Sarva Capital LLC Vs ACIT (ITAT Delhi) regarding the validity of Tax Residency Certificate (TRC) for determining treaty benefits under the India-Mauritius Double Taxation Avoidance Agreement (DTAA).
Even though the department had the authority to dispute the residential status of the assessee merely on the strength of the Tax Residency Certificate (TRC), it was incumbent upon the department to make a proper inquiry and to establish the fact that the party claiming benefit and the strength of the TRC was a shell or conduit company.
ITAT Delhi held that as shares were acquired prior to 01.04.2017, gain derived from sale of such equity shares is exempt under Article 13(4) of India-Mauritius DTAA.
ITAT Delhi held that that the departmental authorities cannot question the validity of Tax Residency Certificate. Once the assessee holds a valid TRC, it proves the residential status of the assessee as resident of Mauritius, hence, it will be eligible to treaty benefits.