On 30 June 2026, the Judicial Committee of the Privy Council (JCPC) delivered its judgment in *Alteo Energy Ltd. et al. v. Director-General, Mauritius Revenue Authority*. The decision resolves a contested question about the scope of the interest income exemption under Item 7 of Sub-part B of Part II of the Second Schedule to the Mauritius Income Tax Act. The ruling confirms that the exemption is not confined to companies whose principal business is financing or money lending.
Background
Alteo Energy Ltd. is engaged in the production of electricity from bagasse and coal. For the year ended 30 June 2019, its electricity sales totalled Rs 817,200,269, while its total interest income amounted to Rs 2,151,623. That interest income was incidental to its main trading activity and was not derived from surplus funds.
Because the exemption applied from January 2019, Alteo time-apportioned its interest income. The eligible amount was Rs 1,075,811, of which 80% (Rs 860,649) was treated as exempt under Item 7.
On 29 June 2020, the Mauritius Revenue Authority (MRA) assessed Alteo on the basis that incidental interest income did not qualify, because it did not relate to the company's core business operations. The MRA's Objections, Appeals, Dispute Resolutions Department upheld that view on 26 July 2021, taking the position that the exemption must be derived from the core activities of the company.
The route through the domestic tribunals
Alteo lodged representations with the Assessment Review Committee (ARC) on 19 August 2021. The ARC dismissed Alteo's case, finding that Alteo had "utterly misunderstood the Purport of Item 7" and that the core income-generating activities (CIGA) of the company had to include activities related to producing the interest income. The ARC treated the activities specified in Regulation 23D of the Income Tax Regulations 1996 as mandatory.
The Supreme Court of Mauritius reversed the ARC on 31 January 2025. It found no ambiguity in the categories of company eligible for the exemption: it applied to any company not on the excluded list (such as insurance companies), with no restriction based on the nature of the company's business. The Supreme Court also analysed Regulation 23D(2)(a), concluding that the verb "includes" carried both its ordinary meaning and an enlarged statutory meaning, and that CIGA encompassed the totality of the company's activities.
The MRA appealed to the JCPC.
The JCPC's reasoning
The JCPC began with the legislative context, referring to the OECD's 1998 report *Harmful Tax Competition: An Emerging Global Issue* and to paragraph 72 of the OECD/G20 BEPS Action 5 final report, *Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance*. Those instruments require a link between income qualifying for a preferential regime and the core activities necessary to earn that income.
On the central question, the JCPC disagreed with the MRA that Item 7 requires the activities generating the interest income to be the core business activities of the company. The JCPC noted that Item 7 is unqualified: it does not restrict the exemption to companies engaged in money lending, the provision of debt finance or investment in debt instruments.
The JCPC also parted from the Supreme Court's analysis. It held that the Supreme Court had incorrectly read the term "income" in Regulation 23D(2) as referring to Alteo's income as a whole. The JCPC gave three reasons. First, Regulation 23D(2) concerns exempt interest under Item 7 and should focus on activities generating exemptible interest income; other income is irrelevant. Second, focusing on activities that produce the interest income ensures the exemption complies with the substantial activity requirement. Third, the phrase "core income-generating activities" appears across multiple exemption provisions and its meaning tracks the specific category of exempt income in question, not the company's income generally.
Facing a choice between a "broader view" (considering the company's whole operations) and a "narrower view" (focusing only on activities directly connected to earning the interest), the JCPC favoured the broader view. In Alteo's case, all its activities were carried out in Mauritius, so the result was the same under either approach. The JCPC observed that, where interest income is incidental to a company's trading income, the number of employees and expenses attributable to making the loans are "of doubtful relevance." It made more sense to ask whether the activities generating all the company's revenue are located in Mauritius. The conditions in Regulation 23D(2)(a) regarding employees and proportionate expenses were genuinely satisfied: Alteo employed suitably qualified persons and incurred the relevant expenses.
Finally, the JCPC acknowledged that Regulation 23D lists activities such as agreeing funding terms and setting the terms and duration of financing. It accepted that those items may have been drafted with financing businesses in mind, but held that they could not be read as requiring equivalent activities to form part of every claimant company's core business.
Implications
The judgment establishes clearly that a company need not be principally engaged in financing to claim the Item 7 interest exemption. Where interest income is incidental to a company's main trading activity, the CIGA analysis should examine the substance of the company's overall operations in Mauritius and whether those operations satisfy the employee and expense conditions, rather than demanding a dedicated financing function.
The MRA's current published position, including in TR 249, treats the activities listed in Regulation 23D(2)(b) as mandatory. In light of this ruling, that position will need to be reconsidered. Businesses that previously did not claim the exemption on the assumption that their interest income was too peripheral to their core business may wish to review their position for open years.
The JCPC's approach also has implications for foreign-source interest income. Where activities are carried out by non-resident service providers and the interest is foreign-sourced, the decision-making and executory aspects of the arrangements may themselves constitute CIGA, even if those activities are not explicitly listed in Regulation 23D(2). That question remains to be worked through in practice.