India: Interest on “external commercial borrowing” exempt under Mauritius treaty (High Court decision)
Loan was deemed approved by the government for purposes of treaty.
The Rajasthan High Court held that interest paid by an Indian company to a Mauritius tax resident on an “external commercial borrowing” (ECB), for which the Indian company had obtained a loan registration number from the Reserve Bank of India in accordance with the ECB guidelines, was exempt under the India-Mauritius income tax treaty.
The court found that under guidance from the tax authority, the granting of a loan registration number meant that the loan was deemed approved for the purposes of a concessional tax rate under the Income-tax Act, 1961, and such deemed approval was sufficient to meet the government approval requirement for exemption under the treaty.
The case is: Shree Cement Limited v. DCIT, International Tax
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