The revenue department has tightened its grip on foreign companies routing their investments through Mauritius to take advantage of the Double Tax Avoidance Agreement between India and the island country.
The department, while clearing a proposal by Mauritius-based Ganesha Ltd for investing in a 50:50 joint venture in India in the textiles sector, has added a rider that the department will be at liberty to examine whether the company is availing of the benefits of the Double Tax Avoidance Agreement after it has started business.
The move comes in the wake of questions being raised in Parliament on the legality of channeling foreign direct investment (FDI) through this route. While a joint parliamentary committee had recommended that such investments be scrutinised, a public interest litigation on this issue is pending in the Supreme Court.
Accordingly, the revenue department has said: