In 2023, the Assessment Review Committee (ARC) ruled against Alteo Energy Ltd (Alteo) with respect to a claim for an 80% partial income tax exemption on interest income under the Income Tax Act 1995 (ITA), on the basis that the interest income was not derived from the core income generating activities (CIGA) of Alteo.

As context, under the ITA, interest income would qualify for an 80% income tax exemption, provided the receiving entity meets the conditions prescribed in Regulation 23D (2) of the Income Tax Regulations 1996 (ITR). These conditions are that the company:

• carries out its CIGA in Mauritius;
• employs directly or indirectly an adequate number of suitably qualified persons to conduct its CIGA; and
• incurs a minimum expenditure proportionate to its level of activities.

The ITR further specifies that with regards to interest income, CIGA includes agreeing funding terms, setting the terms and duration of any financing, monitoring and revising any agreements and managing any risks.

In its 2023 ruling, the ARC ruled that for a claim of partial exemption concerning interest income, the interest income must have been derived from the main business activity of Alteo based on its interpretation of the intention of the legislator.

This resulted in an additional limb to the conditions under Regulation 23D (2) of the ITR and limiting the application of partial exemption with respect to interest income only to companies having a financing business as a main business activity.

Alteo appealed against the decision of the ARC with the Supreme Court of Mauritius which delivered its judgment setting aside the decision of the ARC, on 31 January 2025.

Supreme Court finding

The Supreme Court found that the language in Regulation 23D (2) of the ITR is unequivocal and unambiguous to the effect that only a company that satisfies the three conditions enumerated therein will benefit from the partial exemption on interest income.

CIGA should be given its natural meaning (ie any business activities that generate the main income of the company) as well as the extended statutory meaning given to CIGA to claim the partial exemption on interest income.

The Supreme Court further added that the clear words do not provide room for any further conditions to be imposed so that the ARC was wrong in law to read more than what has been expressly provided and hold that the interest income must be derived from CIGA or that CIGA must necessarily include production of interest income.

Our comments

This judgment clarifies the position for eligibility for a partial exemption with respect to interest income, limiting eligibility to the conditions specified in Regulation 23D (2) of the ITR.

It confirms that it is not a requirement for the main business of the company to include production of interest income for the application of the partial exemption.

This judgement sets an important precedent for taxpayers in Mauritius, particularly companies generating incidental interest income.

Written by Javed Niamut, Partner and Nafiisah Jeehoo, Senior Associate, Bowmans Mauritius