2010 (9) TMI 1128 - AT - Income Tax

Summary

Issues Involved:
1. Interpretation of the phrase "liable to tax" in Article 4 of Indo-UAE DTAA.
2. Availability of benefits of Indo-UAE DTAA to the assessee.

Summary:

Issue 1: Interpretation of the phrase "liable to tax" in Article 4 of Indo-UAE DTAA

The revenue contended that the benefit of the Indo-UAE DTAA is not available to the assessee because the assessee was not liable to pay tax in UAE. The Tribunal, however, relied on its previous rulings, particularly in the case of DIT(International Taxation) vs. Green Emirates Shipping & Travel, where it was held that the expression "liable to tax" does not necessarily imply that the person should actually be liable to tax in that contracting State. It is sufficient if the other contracting State has the right to tax such a person, whether or not such a right is exercised. This interpretation was supported by the Hon'ble Supreme Court's judgment in the case of Azadi Bachao Andolan, which emphasized that double taxation avoidance treaties prevent not only "current" but also "potential" double taxation.

Issue 2: Availability of benefits of Indo-UAE DTAA to the assessee

The assessee, a resident of Dubai, UAE, claimed that he is entitled to the benefits under the Indo-UAE DTAA, specifically under Article 13.3, which exempts capital gains from being taxed in India. The Assessing Officer (AO) rejected this claim on the grounds that the assessee was not liable to pay tax in UAE. The Tribunal, however, found that the facts in the assessee's case were identical to those in the case of Ramesh Kumar Goenka, where it was held that the benefit of the DTAA is available even if the income is not taxed in the other contracting State. The Tribunal upheld the CIT(A)'s decision, which followed the precedent set in the case of Green Emirates Shipping & Travel, confirming that the assessee is entitled to the benefits of the Indo-UAE DTAA and thus not liable to pay tax on capital gains in India.

Conclusion:

Respectfully following the order of the Tribunal in the case of Ramesh Kumar Goenka and Green Emirates Shipping & Travel, the Tribunal found no reason to interfere with the order of the CIT(A). All three appeals filed by the revenue were dismissed.