Buy-back of shares will not lead to capital gains tax impost on Armstrong Mauritius, says a ruling of the Authority for Advance Rulings (AAR). Armstrong Mauritius, a company incorporated in Mauritius, had approached AAR to seek a determination on the tax implications of a buy-back programme to be undertaken by Armstrong India. Armstrong India is a subsidiary of Armstrong Mauritius, which is wholly-owned by Armstrong UK. Armstrong Mauritius owns 99.97 percent stake in Armstrong India and the balance 0.03 per cent in the Indian unit is directly held by Armstrong UK, which is wholly-owned by Armstrong US. The capital gains arising from the proposed buy-back will be exempt from tax under Article 13 of the India-Mauritius tax treaty, the AAR has ruled. For this ruling, the AAR followed the decision of the Supreme Court in the Azadi Bachao Andolan case. This development follows a series of recent favourable rulings by AAR granting benefit of capital gains exemption under the India-Mauritius tax treaty. Interestingly, AAR had, in a recent case, questioned a buy-back scheme as a tool of tax avoidance and re-characterised the income arising to the shareholder as dividend income.