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Booster for the stock market

New Delhi, Oct. 7: Business between Mauritius and India will surge on the back of today’s Supreme Court’s judgement and this in turn will have a positive rub-on effect on the stock markets, the Mauritian Financial Services Commission, Indian analysts and brokers feel.

Baboo R. Gujadhar, chairman of Mauritius Financial Services Commission, said the Supreme Court judgement will bring back the necessary confidence to the market. “The judgement sends out the message that you need not be worried. It is business as usual,” Gujadhar, who is also the managing director of the Bank of Mauritius, told The Telegraph.

“The tax treaty provides for capital gains taxation and so the judgement would make foreign institutional investors happy, which would help to improve the sentiment of the market,” said Amitabh Singh, partner, Ernst & Young.

The Supreme Court today upheld a government notification exempting Mauritius-registered companies doing business in India from paying corporate tax.

In 2000, the government had said if the Mauritius government gives a residency certificate to a firm doing business in India, then the company will not be taxed by the income tax authorities here due to the Double Taxation Avoidance Treaty between India and Mauritius.

Singh said the judgement would encourage firms looking at Mauritius as an investment platform for tapping the secondary and primary market. “The FIIs’ had scaled down investments due to tax disadvantages but now they would be bullish because very few countries provide tax benefit treaty,” he said.

Gujadhar added: “The government’s decision had created an uncertainity which had arrested the flow of business between the two countries. The judgement will help remove it.”

Saumitra Chaudhuri, economic adviser of Icra, said the order reinforces that law is not subject to interpretation.

“If there is a double taxation treaty, one should honour it. However, an amendment in the treaty is needed to plug the loopholes as some bogus firms might misuse this facility,” he said.

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