2009 (11) TMI 660 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to benefits of Indo-U.A.E. tax treaty.
2. Verification of residential status of the recipient in the U.A.E.
3. Rectification petitions u/s 154 of the Act.

Summary:

1. Entitlement to benefits of Indo-U.A.E. tax treaty:
The assessee, a Public Sector Undertaking, challenged the order of CIT(A) denying benefits of the Indo-U.A.E. tax treaty. The assessee had entered into an Aviation Service Agreement with Caltex Al Khalij (LLC), U.A.E., and sought permission u/s 195(2) of the Income-tax Act, 1961, to remit payment without tax deduction at source. The Assessing Officer denied the treaty benefits on the grounds that Caltex Al Khalij was not paying taxes in the U.A.E. The CIT(A) upheld this view, stating that the assessee failed to provide a tax resident certificate. However, the Tribunal referenced the decision in Green Emirate Shipping & Travels, which held that actual payment of tax in one Contracting State is not a condition precedent to avail treaty benefits in the other Contracting State. The Tribunal concluded that the recipient's tax residency status in the U.A.E. was sufficient for treaty benefits, irrespective of actual tax payment.

2. Verification of residential status of the recipient in the U.A.E.:
The Tribunal noted that the CIT(A) did not have the benefit of examining the evidence regarding the recipient's residential status in the U.A.E. The matter was remitted to the Assessing Officer for de novo adjudication to verify the residential status of the recipient in the U.A.E., with the assessee agreeing to file requisite evidence.

3. Rectification petitions u/s 154 of the Act:
The assessee's appeals in ITA Nos. 5761/Mum./2004 and 5762/Mum./2004, concerning rectification petitions u/s 154 of the Act, became infructuous as the main issues were remitted to the Assessing Officer. Consequently, these appeals were dismissed as not pressed.

Conclusion:
The appeals in ITA Nos. 5273 and 5274/Mum./2004 were allowed for statistical purposes, and the matters were remitted to the Assessing Officer for verification of the recipient's residential status in the U.A.E. The appeals in ITA Nos. 5761 and 5762/Mum./2004 were dismissed as infructuous.