Economic Times of India announced that the Income Tax Department of India had launched investigations on several Mauritius’ based multinational companies that have invested in India after they sold their stakes in Mauritius between 2013 and 2016.
The article titled “Several MNCs under IT scanner for deals done in Mauritius Cos” read the following:
“The tax department has reopened assessments of many MNCs over investments made in India and returns sent back to holding companies after a sale, people with direct knowledge of the matter said.
The tax department has only reopened assessments in cases where investments were routed through Mauritius. However, like in the case of fund houses and PEs, investments via Singapore and Cyprus too could come under the lens. While the tax department has merely reopened the case and sought documents from the MNCs and funds, the fear is that the taxman could trigger judicial GAAR.”
The General Anti Avoidance Rule (GAAR) between India and Mauritius was adopted to help regulators screen and monitor potential abuses of companies and investors under the India-Mauritius Tax Treaty.
India brought in GAAR regulation in April 2017, which is referred to as legislative GAAR by tax experts. However, the tax department doesn’t really need to specifically trigger GAAR per se. Judicial GAAR refers to principles that are not codified in legislation but are a result of judicial precedents.
