Subdivision in Grand-Baie: The Privy Council Rules in Favor of the MRA

The Judicial Committee of the Privy Council has ruled in favor of the Mauritius Revenue Authority (MRA) in a dispute with Claude Didier de Senneville and seven other associates of the Société du Vieux Moulin. The decision, made on December 1, 2025, pertains to how to calculate the tax owed on the sale of subdivided land in Grand-Baie.

At the heart of the disagreement was determining whether the profits from these sales were part of a business activity and, crucially, what cost basis should be used to calculate taxable income. The MRA argued that the land, acquired in 1988 for Rs 1,607,000, had initially been purchased as part of a real estate selling activity. On the other hand, the taxpayers claimed that it was initially bought to build their homes, and only the capital gains generated after 1999, when the subdivision began, should be taxed.

The Privy Council upheld the conclusion of the Assessment Review Committee (ARC) in this case, which stated that the associates' explanations "lacked credibility." The ARC found that they had acquired the land "with the intention, from the outset, to subdivide it for profit."

As a result, the profits fall under the scope of section 10(3)(c) of the Income Tax Act 1995, which addresses the sale of property acquired as part of a business of buying and reselling land. The Privy Council dismissed the defendants' argument trying to apply the De Maroussem case, noting that it "cannot apply when the property was acquired as part of a business."

Consequently, the historical cost from 1988 must be used, rather than the market value from 1999. The Privy Council thus orders the reinstatement of tax assessments for the years 2004/05 to 2006/07.