The crisis would have been more severe than 1991 if the stock market hadbeen allowed to tumble, stressed one official. "Those who are gunning forthe FM,s head now, would have done the same with more vigour in that case,"he added.

The role of FM has been questioned in the whole episode, but the reality isthat, he hardly had any other option lef, said another official.

It was the policy decision of the successive governments to forego revenueinterest in favour of foreign investment, and the finance minister cannotchange it, he added.

Any policy change in this regard has to be initiated at the government'slevel and the government has already clarified that there was no question ofreviewing the double tax avoidance treaty with Mauritius, said the official.He pointed out that neither the government can go back on its internationalcommitments nor can it challenge the residency certificate given by acountry.

Interestingly, bulk of the FII investment of $ 12 billion and FDI of over $3 billion has come in India through Mauritius. It is quite clear that thegovernment would want to encourage the stream of FII investment through thisroute.

Inviting foreign investment through different routes is a conscious policydecision and any tinkering would require a complete change in policy, saidthe official.

FIIs coming to India through Mauritius were knowingly availing a tax benefitand any attempt of stopping them from doing so would not only send anegative signal to them but to the whole FII community operating in India, he said and asked "can we afford to do that?"

Moreover, change in the existing DTAA with any country would require theconsent of that country. "Why should Mauritius be willing to do that," saidthe official.

Investors located in other countries finding the India-Mauritius DTAAfavourable invest in India through Mauritius offshore companies.

The main advantage arises from Article 13(4) of the treaty which enablescapital gains arising from sale of shares to be taxed in the country of theresidence of the shareholder, and excludes source taxation.

A Mauritius company selling shares in an Indian company is, therefore, nottaxable in India as it has become a tax haven from 1992 - the same year inwhich Indian stock market was opened for FIIs.

Through a circular issued on March 30, 1994, Indian government had clarifiedthat any resident of Mauritius deriving income from alienation of shares ofIndian companies will be liable to capital gains tax only in Mauritius asper Mauritius Tax Law and will not have any capital gains tax liability inIndia.

According to tthe revenue department officials, the circular issued by theCentral Board of Direct Taxes (CBDT) on April 13, 2000, is just areiteration of the point making it clear that the status of residence inMauritius will be governed by the Mauritius government and theiorcertificate to this effect.