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TMI Blog2009 (11) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof. The assessee had entered into an Aviation Service Agreement dated 17-1-2003 with Caltex Al Khalij (LLC), U.A.E. This agreement was entered into for providing various services in the nature of technical services, commercial services, etc., in consideration of which the assessee was to pay US$ 45,000 per annum. The assessee moved an application under section 195(2) of the Income-tax Act, 1961 ( the Act ) before the Assessing Officer seeking permission not remit US$ 45,000 to Caltex Al Khalij (LLC), U.A.E. without any deduction of tax at source. It was submitted by the assessee that in terms Indo-U.A.E. tax treaty, the impugned payment should be considered under Article 7 as business profit did not have any permanent establishment in India which sine qua non for taxability under Article 7, the same cannot be brought to tax. It was also submitted by the assessee that in view of the provisions of section 90 of the Act, the Indo-U.A.E. tax treaty will override the provisions of income-tax paid and the taxability of the impugned amount in the hands of the recipient is to be adjusted on the basis of taxability under Indo-U.A.E. tax treaty. Without prejudice to these lines of argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been elaborated by the Ld. CIT(A). Be that as it may, a Co-ordinate Bench of this Tribunal in Asstt. DIT v. Green Emirate Shipping Travels [2006] 100 ITD 203 (Mum.), has held that the actual payment of tax in one of the Contracting States is not a condition precedent to avail the benefits of the Indo-U.A.E. tax treaty in the other Contracting States. In other words, it is not necessary, contrary to what has been held so by the Assessing Officer, that unless a person is taxed in the U.A.E. that person cannot claim the benefits of Indo-U.A.E. tax treaty in India. We may, in this regard, refer to the following observations made by the Tribunal in Meera Bhatia v. ITO [IT Appeal No. 1876 (Mum.) of 2006, order dated 29-10-2009]. (3) Learned Representatives fairly agree that the issue is covered by the Tribunal s decision dated 30th November, 2005, in the case of ADIT v. Green Emirate Shipping and Travels 100 ITD 203 wherein the Tribunal has held that actual payment of tax in one of the Contracting States is not a condition precedent to avail the benefits of DTAA in the other Contracting States because the tax treaty prevents not only current taxation but also po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of locality related attachments which attract, residence type taxation, that person is to be treated as resident and this status of being a resident of the Contracting State is independent of the activity of tax on that person. Viewed in this perspective, we are of the considered opinion that being liable to tax in the Contracting State by the virtue of an existing legal provision but would also cover the cases where that other Contracting State has the right to tax such persons irrespective of whether or not such a right is exercised by the Contracting State . (4) Learned Departmental Representative, however, dutifully relies upon the orders of the authorities below, and urges us to confirm the same. She highlights the reasoning adopted by the CIT(A), relies upon the rulings of the Hon ble Authority for Advance Rulings followed by the CIT(A), and submits that there is no justification for any interference in the order of the CIT(A). (5) However, we see no reasons to take any other view of the matter than the view so taken by the Co-ordinate Bench in the case of Green Emirates Shipping Travels ( supra ). It may result in double non-taxation but then we cannot be obli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, for Applying Article 4(1) of the Netherlands-Greece tax liability is not sufficient rather a factual subjective indebtedness ( een feitelike subjective onderworpnheld ) is required. The Court, however, refuted this argument it pointed out that the tax treaty did not postulate factual taxation: instead a legal obligation to pay tax on worldwide income was called for, which under Greek law was established. (7) In legal matters like interpretation of international tax treaties and with a view to ensure consistency in judicial interpretation thereof under different tax regimes, it is desirable that the interpretation given by the foreign courts should also be given due respect and consideration unless, of course, there are any contrary decisions form the binding judicial forums or unless there are any other good reasons to ignore such judicial precedents of other tax regimes. The tax treaties are more often than not based on the models developed by the multilateral forums and judicial bodies in the regimes where such models are being used get occasions to express their views on expressions employed in such models. It is only when the views so expressed by judicial bodies glob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orated in UAE and which is managed and controlled wholly in UAE . This amendment in the definition of resident of UAE thus accepts the broad proposition that the taxability in one of the Contracting States is not a sine qua non to avail treaty benefits in the other Contracting State. The fundamental assumption by the Assessing Officer that an individual who is not liable to pay tax under the UAE law cannot claim any relief from the only tax which is payable in India under the agreement and that the provisions of Double Taxation Avoidance Agreements do not apply to any cases where the same income is not liable to be taxed twice by the existing laws of both the Contracting States is thus no longer backed by the tax administration itself. As we notice this position, we are alive to the fact that the protocol to the Indo- UAE tax treaty has come into effect from 1st April, 2008 but that is not really relevant in the present context. What is material is the fundamental approach to the availability of treaty benefits to the residents of Contracting States without making it conditional upon dual taxability of same income. This approach is clearly in conformity with the approach adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to remit the sum without deduction of tax. For further remittance of US$ 631556 and US$ 75350 to foreign party, the assessee again applied to extend the validity of NOC issued earlier at nil rate of TDS. But this time the Assessing Officer did not grant permission not remit money without deduction of tax at source. Relying upon the logic that since SIG was not paying any taxes in U.A.E., it is not eligible for tax treaty benefits, the Assessing Officer held that provisions of Indian Income-tax Act will apply and, accordingly, taxes are required to be deducted at the rate of 20 per cent. In appeal, the ld. CIT(A) upheld the action of the Assessing Officer by observing that ..... No doubt the appellant is eligible for the benefit under Article 4 of the DTAA with UAE. But for claiming treaty benefit, the appellant has to prove that it is a tax resident of UAE . She also noted that in support of assessee s contention ....... no documentary evidence like tax resident certificate has been filed by the appellant . On the basis of these reasons, the ld. CIT(A) upheld the action of the Assessing Officer. The assessee is aggrieved and is in appeal before us. 9. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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