2021 (12) TMI 717 - HC - Income Tax

Residential status of assessee - grant of certificate of residence has been rejected by the authorities - benefit under the India-US double taxation avoidance agreement - dismissing the claim of the petitioner with respect to the grant of TRC Tax Residency Certificate - petitioner is a USA national, who has been appointed in India as a Dean-cum-Professor in O.P. Jindal Global University w.e.f. 01.01.2020 and owing to the Covid-19 pandemic, he departed from India on 21.03.2020 - HELD THAT - Section 90 of the 1961 Act is an enabling provision for the Central Government to enter into an agreement with the Government of any country outside India for granting relief to the assessee in respect of various issues including for avoidance of double taxation of income. However, the relief of double taxation of income under the Treaty is subject to the condition of the assessee providing a certificate of his being a resident in any country outside India or specified territory outside India as enumerated under Section 90(4) of the 1961 Act. In order to claim benefit from double taxation as provided under Article 22 of the Treaty, the petitioner is required to submit a certificate of him being a resident in country out side India i.e. USA in the present case from the Government of USA. The claim of the petitioner is totally misfound. The objective of the Treaty is to avoid double taxation and not to avoid taxation. In order to claim benefit in India, the petitioner has to provide TRC from the Government of USA which admittedly he does not possess. Case of the petitioner in our view is hit by Section 90(4) of the 1961 Act which contemplates that a non-resident assessee claiming benefit under the double taxation avoidance agreement is not entitled for such benefit unless the said assessee obtains TRC from the country of which he is resident. In the absence of TRC as contemplated under Section 90(4) of the 1961 Act and having his source of income based in India, the petitioner cannot claim exemption under Article 22 of the Treaty. WP dismissed.

Summary

Issues:
1. Rejection of claim for grant of certificate of residence under the India-US Double Taxation Avoidance Treaty.
2. Interpretation of Article 22 of the Treaty regarding exemption from tax for professors and research scholars visiting a contracting State.
3. Requirement of Tax Residency Certificate (TRC) for claiming relief under the Double Tax Avoidance Agreement.
4. Application of Section 90 of the Income Tax Act, 1961 in granting relief for double taxation.
5. Obligation of non-resident assessee to obtain TRC from their country of residence for claiming benefits under the Treaty.

Analysis:
The petitioner, a USA national appointed as a Dean-cum-Professor in India, sought a writ of certiorari to quash the order rejecting his claim for a certificate of residence under the India-US Double Taxation Avoidance Treaty. The authorities rejected the claim citing the petitioner's non-resident status and lack of Tax Residency Certificate (TRC). The petitioner argued that Article 22 of the Treaty exempts him from tax for two years, fulfilling conditions with his nationality proof, appointment letter, and Form-16. The respondent defended the rejection, stating the petitioner's short stay in India does not meet TRC requirements under Section 90 of the Income Tax Act, 1961.

The court noted the existence of the India-US Double Tax Avoidance Agreement under Section 90 of the Income Tax Act, enabling relief for double taxation subject to TRC for non-resident claimants. The court emphasized the necessity of TRC from the petitioner's country of residence, the USA, to claim benefits under Article 22 of the Treaty. As the petitioner failed to provide TRC and his income source was in India, he could not avail exemption under the Treaty. Consequently, the court dismissed the writ petition, finding no merit in the petitioner's case.

Therefore, the judgment highlights the importance of complying with TRC requirements for claiming benefits under Double Tax Avoidance Agreements, emphasizing the need for non-resident assessees to obtain TRC from their country of residence to avoid double taxation.