Treaty Benefits Allowed for Capital Gains Where Shareholder Not Merely a Name Lender

This case note reviews the ruling issued by the Authority for Advance Rulings to AB Holdings, which stated that, because AB Holdings had made investments from its own funds through proper banking channels and had taken key investment decisions in its board of directors’ meetings, its management and control was in Mauritius; therefore, it was not a puppet of its United States holding company, and shares that it held in an Indian company were held by it in reality, and not in name only. Consequently, the gain derived on an intra-group transfer of the shares escaped tax in India under article 13(4) of the India-Mauritius Income Tax Treaty.