9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (12) TMI 697 - AT - Income TaxIncome accrued/taxable in India - Tax Resident - Taxability of investment of unexplained income in specific residential properties in India - taxability of income arising from immovable property - scope of Indo UAE tax treaty - assessee is an Indian national fiscally domiciled in, and tax resident of, the United Arab Emirates for over three decades - whether unexplained investments, even if that be so, can be taxed in India upon investment in India, even when he is not carrying out any income generating activities in India ? - whether CIT(A) erred in considering the interest income to be taxable under article 22 of India-UAE DTAA not under article 11 of the treaty? - HELD THAT - The plea that the India- UAE treaty provides for taxability of income arising from immovable property, this plea is contextually irrelevant inasmuch as what we are dealing with right now is not an income from the immovable property, but an income said to have been invested in an immovable property. The plea is thus devoid of any legally sustainable merits. As for article 23(1), which refers to taxation of capital represented by immovable property, the said article refers to taxation of capital but does not provide, as learned Departmental Representative seem to suggest, for taxation by virtue of investment in the immovable property. The assessee before us is certainly an Indian national, but he is admittedly resident in the UAE so far as his residential status, under the Indo UAE tax treaty is concerned, is of the UAE tax resident. The residuary taxation rights, in terms of the treaty provisions, belong to the residence jurisdiction, but even if that was not to be so, the residence rights can at best go to the source jurisdiction, which in turn refers to a jurisdiction in which the income is earned, rather than a jurisdiction in which the income is invested. By no stretch of logic, therefore, such an income could be taxed in India, which is neither residence nor source jurisdiction; it is at best investment jurisdiction. However, the scheme of tax treaties limits the rights of taxation either to residence or to source jurisdiction. As for the alleged interest income, there is no finding whatsoever to suggest that there was indeed any interest income inasmuch as even the Assessing Officer is tentative when he states that the related entry probably refers to interest receipt. The taxability of interest is, even by the standards of the revenue authorities, also thus far from established. There is no evidence whatsoever, or even a serious allegation, that there is an interest income. The 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, and do not call for our adjudication. Having said that, however, in due deference to the legitimate rights of the assessee, we make it clear that, if so necessary in future, the assessee will be at liberty to raise these issues. We approve the well-reasoned conclusions arrived at by the learned CIT(A) and decline to interfere in the matter.
Issues Involved:
1. Existence of commercial relation between the assessee and M/s Ahuja Group. 2. Evidentiary value of the statement of Shri Jagdish Bhagwandas recorded under section 132(4) of the IT Act, 1961. 3. Taxability of interest income under article 22 versus article 11 of the India-UAE DTAA. 4. Taxability of unexplained investment under article 22 of the India-UAE DTAA. Detailed Analysis: 1. Existence of Commercial Relation between the Assessee and M/s Ahuja Group: The Assessing Officer challenged the correctness of the CIT(A)'s order, arguing that the CIT(A) erred in not appreciating the existence of a commercial relationship between the assessee and M/s Ahuja Group. The tribunal noted that the assessee, an Indian national and tax resident of the UAE, had allegedly paid unaccounted monies to Ahuja Builders. However, the tribunal found no substantial evidence to establish a commercial relationship that would affect the taxability of the unexplained investments in India. 2. Evidentiary Value of the Statement of Shri Jagdish Bhagwandas: The Assessing Officer contended that the CIT(A) failed to appreciate the evidentiary value of the statement of Shri Jagdish Bhagwandas recorded under section 132(4) of the IT Act, 1961. The tribunal observed that the statement alone, without corroborative evidence, was insufficient to substantiate the claim of unexplained investments by the assessee. The tribunal emphasized the need for concrete evidence to support such claims. 3. Taxability of Interest Income under Article 22 versus Article 11 of the India-UAE DTAA: The CIT(A) considered the interest income of ?4,47,150 to be taxable under article 22 of the India-UAE DTAA, not under article 11 as argued by the Assessing Officer. The tribunal upheld this view, stating that the interest income, if any, was not conclusively established as the Assessing Officer himself was tentative, stating the related entry "probably" referred to interest receipt. Hence, the tribunal found no grounds to tax this amount under article 11. 4. Taxability of Unexplained Investment under Article 22 of the India-UAE DTAA: The tribunal focused on whether the unexplained investments could be taxed in India under article 22 of the India-UAE DTAA. It noted that the income in question was not specifically taxed under any treaty heads and thus fell under the residuary head of 'other income' in article 22. According to article 22(1), such income is taxable only in the resident state, which is the UAE in this case. The tribunal concluded that since the assessee did not undertake any economic activities in India, the unexplained investments, being an application of income rather than earning of income, could not be taxed in India. The tribunal dismissed the revenue's argument that the treaty allows for the taxation of income arising from immovable property, clarifying that the issue at hand was not income from immovable property but income invested in immovable property. Conclusion: The tribunal upheld the CIT(A)'s decision, emphasizing that under the Indo-UAE tax treaty, the right to tax the amounts in question belongs to the UAE, not India. The tribunal dismissed the appeal, affirming that the unexplained investments and the alleged interest income could not be taxed in India as per the treaty provisions. The tribunal also allowed the assessee to raise related issues in the future if necessary.
|
