SC stays Delhi HC ruling on benefits for foreign investors with TRCs

livemint.com:

NEW DELHI : The Supreme Court has put on hold a Delhi High Court ruling that had allowed foreign investors to benefit from zero or reduced tax rates in India based solely on possessing a tax residency certificate. Foreign investors can avail these certificates, known as TRCs, based on treaties between India and tax haven countries such as Singapore and Mauritius. This Supreme Court’s decision on Friday was in response to a petition by tax authorities challenging the Delhi High Court’s decision in a case involving Blackstone Capital Partners, a Singapore-based company facing a tax notice of about ₹108 crore.

However, the Supreme Court restrained the tax department from acting against the company based on the tax notices, and deferred the case until March. The Delhi High Court had ruled in favour of Blackstone Singapore in January 2023. The court had stated that a tax residency certificate was enough evidence for treaty eligibility, residential status, and legal ownership.

It rejected the tax authorities’ claim that Blackstone Singapore was not the beneficial owner of capital gains income, supporting Blackstone’s exemption from capital gains tax on the sale of shares acquired before 1 April, 2017 in an Indian company. As per India’s domestic tax law, benefits under a Double Taxation Avoidance Agreement are available only to a non-resident with a valid tax residency certificate issued by their country of residence. India has such agreements with more than 80 countries, including Singapore, and plans to sign more such treaties.