Saturday, September 2 2006 12:06 Hrs (IST) - World Time -

New Delhi: The Government yesterday (Sept 1, 2006) said it is in discussion with Mauritius to review the double taxation avoidance treaty to plug its misuse.

"Mauritius has agreed for discussion, including the review of the treaty," Central Board of Direct Taxes spokesperson A K Sinha told reporters today.

He said similar treaties with other countries, including the one being negotiated with Singapore, cannot be compared with Mauritius.

There were reports that some officials want the treaty to have same provisions as proposed with Singapore.

The treaty gives capital gains exemption for investment routed via Mauritius. According to a Supreme Court ruling in 2003, the Tax Residency Certificate of Mauritius was enough to claim exemption.

India-Singapore Double Tax Avoidance Treaty has a similar provision, but tax exemption is only for bonafide businesses.

He refused to give any further details, stating that the treaty is still being discussed by the two countries.

Recently, Mauritius Finance Minister Ramakrishna Sithanen on an official visit to India said he was willing to co-operate with India to prevent misuse of the treaty.

He, however, had said Mauritius should not be singled out for action on the treaty.

Mauritius Finance Minister said many bona fide investors use DTAT and that their interests should not be harmed.

He had said his country will check the misuse of the DTAT but is reluctant to insert provisions that will put off investors.

"We are willing to cooperate with the government to check the misuse. But there are bona fide investors and damage should not be caused to Mauritius," he had added.