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2022 (10) TMI 486 - AT - Income TaxIncome accrued/taxable in India - Tax Resident - Taxability of investment of unexplained income in properties in India - unexplained investment of the assessee made from the undisclosed sources - investment made in India by the assessee, who is non-resident Indian settled in the United Arab Emirates (UAE) - HELD THAT - We find that similar issue arose for consideration before Co-ordinate Bench of the Tribunal in assessee s own case in ITO v/s Rajeev Suresh Ghai 2021 (12) TMI 697 - ITAT MUMBAI assessee before us is a tax resident of the United Arab Emirates and is thus entitled to the benefits of the Indo UAE tax treaty. When the rights to tax the income in question. under the applicable tax treaty provisions, are allocated to the residence jurisdiction, it is wholly immaterial whether or not the source jurisdiction has the right to tax that income, and, in any event, India is not even a source jurisdiction for the income in question as no economic activities have been carried out in India- it is at best the jurisdiction in which earnings are invested. That cannot anyway have any bearing on the taxation of income. In our considered view, therefore, since, under the terms of the Indo UAE tax treaty, the right to tax the amounts in question, even if that be of income nature in the hands of the present assessee, does not belong to India, all these issues being raised by the learned counsel are wholly academic as of now. In the present case the assessee has also filed the Tax Domicile Certificate for the relevant Financial Year issued by the concerned authority in Ministry of Finance, UAE, in support of its claim. The learned D.R. could not show us in any reason to deviate from the aforesaid decision and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following aforesaid judicial precedent in assessee s own case, we find no infirmity in the impugned order passed by the learned CIT(A). As a result, grounds raised by the Revenue are dismissed.
Issues Involved:
1. Delay in filing the appeal. 2. Existence of commercial relation between the assessee and M/s. Ahuja Group. 3. Evidentiary value of the statement recorded under section 132(4) of the IT Act, 1961. 4. Deletion of addition amounting to Rs. 3.65 crores citing Article 22 of India-UAE treaty. 5. Source of cash provided as a loan and its taxability under domestic tax laws. Detailed Analysis: 1. Delay in Filing the Appeal: The appeal was delayed by 14 days. The impugned order was received by the Revenue on 11-02-2022, and the appeal was filed on 26-04-2022. According to section 253(3) of the Act, the appeal should have been filed within 60 days. However, the Hon'ble Supreme Court's order dated 10/01/2022 in M.A. no.21 of 2022 excluded the period from 15/03/2020 to 28/02/2022 for the purpose of limitation. Thus, the appeal was considered timely filed, and the tribunal proceeded to decide on the merits. 2. Existence of Commercial Relation Between the Assessee and M/s. Ahuja Group: The Revenue contended that the learned CIT(A) erred in not appreciating the existence of a commercial relationship between the assessee and M/s. Ahuja Group. However, the tribunal did not find substantial evidence to support this claim and upheld the findings of the learned CIT(A). 3. Evidentiary Value of the Statement Recorded Under Section 132(4) of the IT Act, 1961: The Revenue argued that the learned CIT(A) failed to appreciate the evidentiary value of the statement recorded under section 132(4) of the IT Act. The tribunal noted that the statement alone, without corroborative evidence, was insufficient to substantiate the Revenue's claims. 4. Deletion of Addition Amounting to Rs. 3.65 Crores Citing Article 22 of India-UAE Treaty: The Revenue challenged the deletion of the addition of Rs. 3.65 crores, arguing that Article 22 of the India-UAE treaty pertains to the taxability of income from immovable property. The tribunal referred to the Co-ordinate Bench's decision in the assessee's own case for the assessment year 2010-11, which held that unexplained investment could be taxed in India under section 69 only if it was proved that such investments were made out of income earned in India. The tribunal observed that the assessee, being a tax resident of UAE, was entitled to the benefits of the India-UAE tax treaty, and the right to tax such income vested with UAE, not India. Consequently, the tribunal upheld the deletion of the addition. 5. Source of Cash Provided as a Loan and Its Taxability Under Domestic Tax Laws: The Revenue contended that the cash provided as a loan must have been generated in India, as there was no evidence furnished by the assessee to show it was earned outside India. The tribunal noted that the assessee had filed a Tax Domicile Certificate from the Ministry of Finance, UAE, supporting his claim of being a tax resident of UAE. The tribunal emphasized that the unexplained investments, inherently in the nature of the application of income rather than earning of income, could not be taxed in India under Article 22(1) of the India-UAE tax treaty. The tribunal found no evidence to suggest that the investments were made from income generated in India and upheld the findings of the learned CIT(A). Conclusion: The tribunal dismissed the appeal by the Revenue, affirming the learned CIT(A)'s order and concluding that the addition of Rs. 3.65 crores was not taxable in India under section 69 of the Act, in light of the India-UAE tax treaty provisions. The tribunal found no infirmity in the learned CIT(A)'s order and dismissed the grounds raised by the Revenue.
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