HSBC Bank Scores Tax Exemption Win in Mauritius

The Bombay High Court has ruled that HSBC Bank, operating a legitimate banking business in Mauritius, is exempt from tax under the Double Taxation Avoidance Agreement. The court stated that interest income derived by a bank with a bona fide banking business in another contracting state, such as India, is not subject to tax.

HSBC Bank, a company registered and tax-resident in Mauritius, holds a Foreign Institutional Investor license from SEBI. The Assessing Officer disputed HSBC Bank’s claim for exemption on interest income from securities but accepted the exemption on income from external commercial borrowings.

The case went to the Dispute Resolution Panel and then the Income Tax Appellate Tribunal, which ruled in favour of HSBC Bank. The High Court clarified that under the DTAA, the assessee does not need to have a banking business license in India to qualify for exemption.

It is sufficient for the assessee to be a resident of Mauritius and have a legitimate banking business there. The court emphasised that since the Assessing Officer confirmed HSBC Bank’s legitimate banking business in Mauritius, the bank is entitled to tax exemption in India.

Source: Legal60