9911796707
TMI Blog2010 (4) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... and in law, learned CIT(A) erred in : (i) holding that the assessee a resident of UAE, is entitled to the benefits of DTAA between India and UAE. (ii) Holding that the assessee is not liable to pay any tax on the short term capital gains earned in India. 2) the appellant prays that the order of learned CIT(A) on the above grounds be set aside and that of the Assessing Officer restored. 3. The Assessee is an individual. He is a resident of UAE. During the previous year he earned short term capital gain of RS.5,04,89,379/-. He claimed that die short term capital gain cannot be brought to tax in India in view of Article 13(3) of the Indo-UAE DTAA. Since the Assessee was a Resident of UAE, it is only UAE which has a right to tax capital in and not India. Article 13 of the agreement for avoidance of double taxation between India and the UAE (hereinafter referred to as the India-UAE Treaty provides an exemption from capital gains tax in India to residents of UAE. It reads as under :- Article 13 : Capital gains: 1) Gains derived by a resident of a contracting state from the alienation of immovable property referred to in paragraph 2 of Article 6 and situated in the other Contracting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee was a shipping line based in United Arab Emirates. In the relevant previous year, the assessee had a taxable income of Rs. 28,35,628 from shipping operations. The assessee's claim was that in terms of article 8 of the Indo-UAE Double Taxation Avoidance Agreement , the assessee's income was liable to tax only in the country of domicile i.e., UAE, but this contention was rejected by the Assessing Officer on the ground that the assessee Is not paying taxes in UAE'. The Assessing Officer relied upon the decision of the AAR in the case of Cyril Eugene Pereria, In re [1999] 239 ITR 6501 in support of the proposition that the provisions of the DTAA do not apply to any case which the 'same income is not liable to be taxed twice by the existing laws of both the Contracting States'. 5. The Tribunal firstly disagreed with the view expressed by the AAR in the case of Cyril Eugene Pereria (Supra) on the ground that the said decision was held to be not laying down the correct law by the Hon'ble Supreme Court in the case of Union of India v. Azadi Bachao Andolan [2003] 263 ITR 7061, at page 742. The tribunal held that: - 6. Undoubtedly, in Cyril Eugene Pereria's case (supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s said that the treaty prevents not only 'current' but also merely 'potential' double taxation". Further, according to Vogel, "only in exceptional cases, and only when expressly agreed to by the parties, is exemption in one of the Contracting States dependent upon whether the income or capital is taxable in the other Contracting State, or upon whether it is actually taxed there." It is, therefore, not possible for us to accept the contentions so strenuously urged by the respondents that the avoidance of double taxation can arise only when tax is actually paid in one of the Contracting States." 6. The Tribunal also held that the decision of the Authority for Advance Ruling in the case of Abdul Razak A. Menon, In re [2005] 276 ITR 306 was also not good law. 7. The Tribunal dealt with the argument of the Learned Departmental Representative that as non-corporate entities are not taxable entities under the UAE Tax Treaty such non-corporate entities, even though based in UAE, cannot be treated as "resident' for the purposes of the India-UAE DTAA as follows: "Our attention is also invited to the learned Assessing Officer's observations to the effect that "the provisions of the DTAA do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UAE. The question then arises whether an existing liability to pay taxes in UAE is a sine qua non to avail the benefit of India-UAE tax treaty in India. On this issue also, we find guidance from the judgment of Hon'ble Supreme Court in the case of Azadi Bachao Andolan (supra). Referring to the Klaus Vogel's Commentary on Double Taxation Conventions, Their Lordships, inter alia, observed as follows : "In other words, Contracting States mutually bind themselves not to levy taxes or to tax only to a limited extent in cases when the treaty reserves taxation for the other Contracting State either entirely or in part. Contracting States are said to waive 'tax claims' or more illustratively to divide 'tax sources', 'taxable objects', amongst themselves. Double taxation avoidance treaties were in vogue even from the time of the League of Nations. The experts appointed in the early 1920s by the League of Nations describe this method of classification of items and their assignments to the Contracting States. While the English lawyers called it 'classification and assignment rule', the German jurists called it 'the distributive rule' (Vertei-lungsnorm). To the extent that an exemption is agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely following it i.e., 'by reason of domicile, residence, place of management, place of incorporation or any other criterion of similar nature'. That would mean that merely a person living in a Contracting State should not be sufficient, that person should also have fiscal domicile in that country. These tests of fiscal domicile which are given by way of examples following the expression 'liable to tax by reason of i.e., domicile, residence, place of management, place of incorporation etc. are no more than examples of locality related attachments that attract residence type taxation. Therefore, as long as a person has such 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 actual levy of tax on that person. Viewed in this perspective, we are of the considered opinion that being 'liable to tax' in the Contracting State does not necessarily imply that the person should actually be liable to tax in that Contracting State "by the virtue of an existing legal provision but would also cover the cases where that other Contracting State has the rig ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
