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TMI Blog2016 (7) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No. 3877/Mum/2012, is directed against the order dated 28-03-2012 passed by learned Commissioner of Income Tax (Appeals)- 8, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2007-08, the appellate proceedings before the CIT(A) arising from the assessment order dated 30-12-2009 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income Tax Act,1961(Hereinafter called the Act ). 2. The grounds raised by the assessee in the memo of appeal filed with the Tribunal read as under:- On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in coming to the conclusion that, despite the AADT between Sri Lanka and India, the capital gain arising on the sale of immovable property, situated at No. 15/3, Guildford Crescent, Colombo 07, Sri Lanka , was taxable in India. 3. The brief facts of the case are that the case of the assessee was selected for scrutiny by Revenue under CASS. It was observed by the AO from the CASS details that the assessee has purchased units of Mutual Funds amounting to ₹ 2,44,17,000/- . The assessee was asked to submit the source of the said investment by the AO to whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Act,1961 (43 of 1961) , the Central Government hereby notifies that where an agreement entered into by the Central Government with the Government of any country outside India for granting relief of tax or as the case may be, avoidance of double taxation, provides that any income of the resident of India may be taxed in the other country, such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income Tax Act,1961 (43 of 1961) , and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement. Thus, the AO held that in view of the above notification dated 28-08-2008 issued by Central Government , the assessee should have included the income from capital gains in her total income chargeable to tax in India and accordingly claimed the relief thereof. Since no tax has been paid in Sri Lanka no relief can be granted to the assessee in India and accordingly capital gains arising thereof from sale of immovable property in Sri-Lanka is fully taxable in India. The assessee made an application u/s 144A of the Act to the Additional Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that State in respect of income from sources or capital situated therein. 2. Where by reason of the provisions of paragraph 1 of this article, an individual is a resident of both Contracting States , then his status shall be determined as follows: (a) he shall be deemed to be a resident of the state in which he has a permanent home available to him. If he has a permanent home available to him in both States , he shall be deemed to be a resident of the State with which his personal and economic relations are closer ( centre of vital interests); (b) if the State in which he has his centre of vital interest cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode; (c) If he has an habitual abode in both States or in neither of them , he shall be deemed to be a resident of the State of which he is national; (d) If he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement. 3. Where by reason of the provisions of paragraph1 of this Article a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich decision has been upheld by the Hon'ble Supreme Court in UOI v. Azadi Bachao Andolan, 263 ITR 706(SC). Thus, it was submitted whether the assessee is considered as resident of India or that of Sri-Lanka under DTAA , the capital gains on the sale of the immovable property located in Sri-Lanka by the assessee shall be taxed only in Sri-Lanka and not in India. It was also contended that even if there is zero taxation in one country to DTAA, still the provisions of DTAA will be applicable and to contend that the relief will be available only when tax has been paid in both the countries which are party to DTAA is not correct and such view was over-ruled by Hon'ble Supreme Court in the case of UOI v. Azadi Bachao Andolan, 263 ITR 706(SC) whereby Hon'ble Supreme Court at page 744 held as under: It is, therefore, not possible for us to accept the contentions so strenuously urged on behalf of the Respondents that avoidance of double taxation can arise only when tax is actually paid in one of the Contracting States. It was also submitted that in the decision of the Federal Court of Australia in Commissioner of Taxation v. Lamesa Holdings, (1997) 785 FCA, the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty located in Sri-Lanka is taxable in Sri-Lanka. The said DTAA is placed in paper book filed with the Tribunal. The learned counsel submitted that the assessee is Sri-Lankan national holding Sri-Lankan passport, which is placed in paper book filed with the Tribunal. She was born in Sri-Lanka , studied in Sri-Lanka and her parents are also residing in Sri-Lanka. She married to an Indian national Mr Gurpreet Seekond and is living with him after his marriage in India . The learned counsel submitted that the assessee is resident of Sri-Lanka as per Article 4 of DTAA. It was submitted that it is to be ascertained based on facts and circumstances of the case where the domicile of the assessee is situated whether at place of marriage i.e. India or at Sri-Lanka. It was submitted that in case of divorce taking place, will the domicile change again. The learned counsel submitted that the assessee is resident of Sri-Lanka and hence income from Sri-Lanka is taxable in Sri- Lanka and not in India. The learned counsel referred to commentary on Article 4 model convention -OECD which is placed in the file to contend that the assessee is not resident of India but resident of Sri-Lanka. The attenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year which immovable property so sold during relevant previous year was situated in Sri- Lanka. It was an admitted and undisputed position before the authorities below that as per provisions of Section 6 of the Act , the assessee is resident in India during the relevant previous year as it was stated that the assessee duly stayed for more than prescribed period u/s. 6 of the Act in India during the relevant previous year to come within the definition of being resident in India for the purposes of the Act. The contentions of the assessee vide written submissions no IT/S-33/212 dated 15-10-2009 submitted before the AO is reproduced hereunder, which are placed in paper book page 63 filed before the Tribunal: 5. Mrs Seekond is a Sri Lankan national though she is residing in India on the basis of her marriage to an Indian national, Shri Gurpreet Seekond. Also because she is residing in India for more than requisite period under Section 6 of the Act, which determines residence of an individual , she is resident of India for the purposes of the Income-tax Act,1961( the Act ) The same contentions were repeated by the assessee during appellate proceedings before the learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is not a resident in India during relevant previous year under the provisions of the Act , and now the assessee cannot be allowed to change its admitted position in the absence of cogent material and evidences brought on record to prove that the earlier admissions was not correct and the assessee duly complied with the conditions of Section 6 of the Act to be categorized as 'non- resident' during the relevant previous year as per provisions of the Act. No such cogent material or evidences have been brought on record by the assessee to prove her contention that she is not resident in India under the provisions of the Act during the relevant previous year. Thus, we hold that she is resident in India during the relevant previous year under the provisions of the Act keeping in view the provisions of Section 6 of the Act. Now coming to the residential status of the assessee as per provisions of Article 4 of the DTAA, it clearly stipulates that for the purposes of DTAA, the term resident of a Contracting State means any person who , under the law of that State , is liable to tax therein by reason of his domicile, residence, place of management or any other criteria o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter marriage despite the fact she might not be owning an house in India as the condition as stipulated in Article 4 is regarding availability of permanent home in the state of residence and it no-where stipulates that the assessee should own an house in the State of residence. The availability of permanent home as is referred to in Article 4 has nothing to do with ownership of an home in the State of Residence but refers to a place of abode or dwelling in the State of Residence which is arranged and established by the assessee to have the dwelling and abode available to her at all times continuously being permanent home in India of the husband who is Indian national, and not occasionally for the purpose of a stay, which owing to the reasons for it, is necessarily of short duration (travel for pleasure, business travel , educational travel , attending a course at a school , etc) which in the instant case the permanent home is in India in the case of the assessee as she is staying now in India after her marriage with her husband who is an Indian national. The word 'house' has been defined in Blacks Law dictionary 7th edition, page 743 as 'a home, dwelling or residence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of parents of a married women in that State will not make her habitual abode of that State unless it is demonstrated with cogent evidences that in-fact the assessee was living in both India and Sri-Lanka permanently, regularly and consistently to bring within meaning of 'habitual abode' as contained in Article 4(2)(c) of DTAA of both the States. Under these circumstances, the onus was on the assessee to have demonstrated with cogent evidences and material that her habitual abode is in Sri Lanka and she has retained centre of vital interest in Sri Lanka, which in our considered view, the assessee failed to demonstrate in the instant case rather the facts as set out above speaks opposite. As per facts emerging from records , she has an habitual abode in India and not at Sri-Lanka post her marriage with Mr. Gurpreet Seekond who is an Indian national and she moved to India to stay with him after her marriage and in- fact sold her only immovable property in Sri Lanka for equivalent Indian ₹ 3.93 crores during relevant previous year and made investment in Mutual Funds to the tune of ₹ 2.44 crores in India and bought property in Goa in India for ₹ 78.44 lacs. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought the same to tax under the provisions of the Act as the provisions of DTAA will prevail being beneficial to the assessee over the provisions of the Act, even though the word 'may be taxed' is used in Article 13(1) of DTAA between India and Sri-Lanka as the same is to be read in a manner that it takes away the power of the other Contracting State to tax the same income , of which power to tax is vested by virtue of DTAA in the Contracting State in which the immovable property is situated. The afore-said view's has been consistently held by the courts in the cases cited by the assessee which are detailed in preceding para's of this order which are not repeated. However, it will be pertinent to note at this stage that these cases are prior to the issue of notification no. 91 of 2008 dated 28.08.2008 by Central Government which is reproduced hereunder : In exercise of the powers conferred by sub-section(3) of section 90 of the Income Tax Act,1961 (43 of 1961) , the Central Government hereby notifies that where an agreement entered into by the Central Government with the Government of any country outside India for granting relief of tax or as the case may be, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used such a term came into force. The said notification no 91 of 2008 , dated 28.08.2008 as could be observed from the plain language used is merely procedural in nature and no additional liability is sought to be fastened on the tax-payer by issuance of the said notification. It is well established proposition of law that the tax-payer does not have vested right in the procedures and the same can be brought in retrospectively. Thus, by bringing the notification no. 91 of 2008, dated 28.08.2008, no prejudice is caused to the assessee nor the assesses' capital gain income arising from the sale of immovable property situated in Sri-Lanka is sought to be brought to tax in India by the Central Government. The said notification merely stipulates the manner and procedure of granting the relief from tax to avoid double taxation without expanding scope of taxability of income from capital gains arising on sale of immovable property situated in Sri-Lanka nor is the same inconsistent with the provisions of the Act or the DTAA between India and Sri-Lanka and in our considered view, the said notification is merely clarificatory in nature and cannot be treated as prospective in nature and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per provisions of the relevant Sri Lanka Inland Revenue Act, No. 28 of 1979 (or the applicable relevant income-tax statute of Sri Lanka bringing to income-tax capital gains arising on sale of immovable property situated in Sri Lanka) as applicable in Sri Lanka as being subjected to 'zero' or 'nil' rate of taxation in Sri Lanka as per prevailing rates of Income-tax as applicable in Sri Lanka to the relevant year as is contended by the assessee, then the same cannot be brought to tax in India under the provisions of the Act merely on the grounds that the said income is subjected to 'Nil' or 'zero' rate of income-tax in Sri Lanka as per applicable statute. This direction of our's is subject to verification by the learned AO for which necessary material and evidences in support of her contentions shall be brought on record by the assessee before the AO as no such material is placed before the Tribunal to support contentions by the learned counsel for the assessee, before any relief can be granted to the assessee. Needless to say proper and adequate opportunity of being heard shall be granted by the AO to the assessee in accordance with the princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came into force. Therefore, the legislative intent of sub-section (3) to section 90 and section 90A that whenever any term is assigned a meaning through a notification issued under Section 90(3) or section 90A(3), it shall have the effect of clarifying the term from the date of coming in force of the agreement in which such term is used, needs to be clarified. It is proposed to amend Section 90 of the Act to provide that any meaning assigned through notification to a term used in an agreement but not defined in the Act or agreement, shall be effective from the date of coming into force of the agreement. It is also proposed to make similar amendment in Section 90A of the Act. The amendment in section 90 will take effect retrospectively from 1st October, 2009 and the amendment in section 90A shall take effect retrospectively from 1st June, 2006 The Memorandum states that the notification under section 90(3) of the Act merely gives a legal framework for clarifying the intent and objective as understood during the course of negotiations of the treaty and thus in our considered view the same shall be applicable to the DTAA from the date of the entering of the DTAA ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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