The question raised in Assistant Director of Income Tax (International Taxation) Vs. Asia Today Limited was that whether a re-domiciliation of a company can led to denial of treaty entitlements of jurisdiction in which the company is re-domiciled. The Assessee was registered with name “Signpost International Company” on 15th November 1991 in British Virgin Islands as an ‘international business company but the name of the company was changed to ‘Asia Today Limited’ on 24th May 1992. The Assessee was re-domiciled in Mauritius on 29th June 1998 when Registrar of Companies issued a ‘certificate of incorporation by continuation’ in Mauritius. Post the issuance of certificate, the Company was discontinued in British Virgin Islands. Further, the revenue authorities of Mauritius issued Tax Residency Certificate (TRC) to the Assessee in June 1999. Now, it was against this tax residence certificate and by the act of re-domiciliation that the Assessee claimed its entitlement to India- Mauritius tax treaty, which was denied by the Indian tax authorities. Against this, the Assessee approached the Tribunal which held in favour of the Assessee, thus giving the benefit of India – Mauritius tax treaty. While holding this in favour, the Tribunal observed that the act of re-domiciliation which is also referred to as ‘continuation’ is a process where the entity does not cease to exist but continues to be in existence but its domicile changes from the place of origination to the new country and continues to be governed by the regulations of such new place. Such an option is provided under the domestic laws of the originating country and target country i.e. country where the new domicile shall exist. The reasons for change of domiciliation can be attributed to business, legal, rules and regulations then prevailing in the current domicile (i.e. place of incorporation) of the company may no longer fit the company’s purpose etc. So, for such reasons or other reasons re-domiciliation may be an option which if exercised should not result in the tax treaty denial. Although, it may be open to the tax authority in India to ensure that domiciliation in such new country is practically existing, but in the presence of valid tax residency certificate, it is not open to the tax authorities to challenge such treaty claim.
