Alteo Energy Ltd and another v Director-General, Mauritius Revenue Authority (Mauritius)

A statutory condition requiring a company to carry out its core income generating activities in Mauritius links the location of activity to the income eligible for exemption. “Income” means the relevant exempt income, not the company’s total income.

“Core” qualifies the activities needed to generate that income. It does not require those activities to be core business activities or central to the company’s main operations. The inquiry concerns the substance of the relevant activities, informed by adequate suitably qualified personnel and proportionate expenditure. Where interest income is incidental, the broader operations may be considered.

Alteo, a Mauritius-incorporated electricity producer, received a small amount of interest from loans. The Mauritius Revenue Authority assessed tax on the whole of that interest income. The Assessment Review Committee upheld the assessment.

The Supreme Court of Mauritius allowed Alteo’s appeal, interpreting the relevant “income” as all income generated by the company, and remitted the matter to the Committee. The Mauritius Revenue Authority appealed to the Privy Council. The central issue was whether Alteo satisfied the first condition in regulation 23D(2)(a) of the Income Tax Regulations 1996.

1. Disposition. The appeal was dismissed. The Board reached the same result as the Supreme Court, but for different reasons.
2. Relevant income. Section 7(2) of the Income Tax Act 1995, item 7 of Sub-part B of Part II of the Second Schedule, and regulation 23D(2) establish the conditions for the partial exemption of specified interest income. In regulation 23D(2)(a), “income” refers to income capable of benefiting from the relevant exemption, namely interest income, rather than all income generated by the company. This follows from the function of the regulation, the substantial activity requirement, and the use of substantially similar wording for other exemptions, including items 42 and 44.
3. Meaning of “core”. The word “core” qualifies the income generating activities. It requires the company to carry out in Mauritius the core activities required to generate the relevant income. It does not require money lending or similar activities to be core business activities, or central to the company’s principal operations. The list in regulation 23D(2)(b) cannot alter that plain meaning.
4. Application. The broader view of the relevant activities was preferable. It better reflected the substance of the company’s activities and the use of employees and expenditure as proxies for those activities. In Alteo’s case, interest was incidental to its electricity business, and all its activities were carried out in Mauritius. It employed an adequate number of suitably qualified persons and incurred expenditure proportionate to its activities. The statutory condition was therefore satisfied.

• Privy Council: Dismissed the Mauritius Revenue Authority’s appeal, affirming the result reached below on different reasoning.
• Supreme Court of Mauritius: Allowed Alteo’s appeal and remitted the matter to the Assessment Review Committee after construing “income” as all income generated by the company.
• Assessment Review Committee: Upheld the tax assessment.