The tax department has recently reopened assessments of several global fund houses (including notable PE firms) and retrospectively denied treaty benefits under the Mauritius and Singapore Treaties on the basis that these entities had indulged in fiscal evasion by means of treaty shopping, as their place of effective management was not, in fact, in Mauritius or Singapore. Though grandfathered under GAAR, department has invoked judicial GAAR and denied tax treaty benefits, slapped substantial tax demands along with interest for prior assessment years, and levied penalties for under-reporting of income, in accordance with the provisions of the Income-tax Act.   Revenue has also disallowed carry forward of losses from the grandfathered years. This issue is also centre stage in several ongoing assessments as well as deal negotiations since pre 2017 investments are yet to be fully harvested. 

There is also the angle of indirect share transfers and possible treaty exemptions for such transactions even for post 2017 acquisitions.  Add to this the complexity of converting shares from preference to equity, mergers and demergers.

We invite you to join us for an interaction as we carefully evaluate defence strategies for the proceedings, analyze different fact patterns, delve into case laws where the Revenue has been successful, and revisit what ‘substance’ and purpose mean in the evolving sphere of global tax jurisprudence.