TRC is the valid document for determining treaty benefits: ITAT M/s Sarva Capital LLC (ITA No.2073/Del/2023)

Facts of the Case:

1. M/s Sarva Capital LLC, a non-resident corporate entity incorporated under the laws of Mauritius, is engaged in investment activities in India across various sectors, including education, agriculture, healthcare, microfinance institutions, and financial services.

2. Sarva Capital LLC sold equity shares of two Indian companies, Sewa Gruh Rin Ltd. and Veritas Finance Pvt. Ltd., during the assessment year in question.

3. In the original return of income filed, Sarva Capital LLC claimed that the capital gains arising from the sale of shares should be exempt from taxation in India under Article 13(4) of the India-Mauritius Double Taxation Avoidance Agreement (DTAA), as it was a resident of Mauritius.

4. The issue before ITAT was whether, Sarva Capital LLC was entitled to exemption as per Article 13(4) of the DTAA or subject to taxation as per article 13(3A).

ITAT Delhi held as below:

1. Once a valid Tax Residency Certificate (TRC) has been issued by the competent authority of another country, it serves as conclusive evidence of tax residency and eligibility for treaty benefits.

2. For shares acquired before April 1, 2017, the the capital gains fall under Article 13(4) of the DTAA and were exempt from taxation in India.

3. Sarva Capital LLC’s appeal is allowed and that the capital gains derived from the sale of shares were not taxable under Article 13(4) of the India-Mauritius DTAA.