The Department of Revenue, part of the Finance Ministry of India,has objected to a proposal by Japan-based Orix Corporation to invest in an Indian trust. The IL&FS Orix Trust, which bought 2% stake in Multi Commodity Exchange, was to issue units to Mauritius-based Orix
Mauritius Trade Winds Investment Company.
The proposal is facing objections as the department of revenue belives that the proposal is
taking advantage of the India-Mauritius Double Taxation Avoidance Agreement, reports Economic Times.
The department has dubbed the investment as round-tripping – capital belonging to a country, which leaves the country & then is reinvested in the form of FDI.
The Foreign Investment Promotion Board (FIPB), the nodal body for clearing foreign investment into India, has deferred the proposal. IL&FS Orix Trust still has to register as a venture capital fund with market regulator SEBI and does not have any foreign equity participation. The investment in MCX was done by Infrastructure Leasing & Financial Services (IL&FS).
ORIX, Japan’s largest leasing and diversified financial services conglomerate, has a presence in 24 countries. Orix is an investor in IL&FS and also has a joint venture with infrastructure lender named Orix Auto Infrastructure Services that provides vehicle leasing and
construction equipment financing services.