| Abstract: |
Intellectual Property (IP) assets enjoy a unique advantage in tax planning.
Owing to their intangible nature and the lack of a physical attribution, IP
assets can be methodologically parked to transfer income between tax
jurisdictions. In 2016, the Delhi High Court was presented with a dispute
where IP assets registered in India were transferred between an Australian and
English company through their subsidiary holdings in Mauritius. The question
before the Court was which tax jurisdiction, India, Australia or Mauritius,
would be entitled to tax the capital gains arising from the transaction. The
Court held that if a foreign corporation owns an IP asset, regardless of its
registration and use in India, it would be taxed by the jurisdiction of the
owner’s residence. Coming to its conclusion, the Indian Court found a
legislative vacuum in the Indian Income Tax Act, 1961, and relied on the
doctrine of Mobilia Sequuntur Personam to fill the lacunae. The present study
examines the relevance of the doctrine in line with precedential guidelines
and the international treaty framework. The paper reveals that, either
inadvertently or by design, the Indo-Mauritian DTAA creates an instance of
double tax exemption of Mauritian-owned, Indian-registered IP assets. |