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TMI Blog2021 (5) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in support of the existence of an office, and dedicated employees, in UAE and the business being carried on from there- as also the financial statements showing the business being carried on from the UAE on a regular and commercial basis, unless the revenue authorities bring on record some material to dispute this position, one cannot proceed to conclude, as the Assessing Officer did, that the business activities of the assessee lacked bonafides. The authorities below were thus clearly in error in holding that the LOB clause was applicable on the facts of this case. We are of the considered opinion that the assessee company is a resident of the UAE, in terms of requirements of article 4(1)(b) of the Indo-UAE tax treaty, that the limitation of benefits provisions of article 29 of the Indo-UAE tax treaty cannot be pressed into service in this case, and that the assessee is eligible for treaty protection, in respect of its income earned in India, under the Indo UAE tax treaty. It is not even in dispute, and rightly so, that under the provisions of article 8(1) of the Indo UAE tax treaty, which provides that profits derived by an enterprise of a Contracting State from the opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief was thus sought under section 90 read with the Indo UAE tax treaty. 4. This claim of the assessee, however, did not find favour with the Assessing Officer. The Assessing Officer did take note of the fact that the assessee had taken vessels on the time charter, for transportation of good by ship in the international traffic, as also the assessee s filing of the commercial licence issued by the Department of Economic Development, Government of Dubai, and tax residency certificate. He, however, noted that as much as 80% of the profits of the assessee entity were to go to one Dimosthenis Lalagiannis, a Greek national. The Assessing Officer was of the view that since this person was a Greek national, it could be safely concluded that the business was not managed or controlled wholly from the UAE. It was also noted that the assessee entity is a partnership firm and not a company. As regards the tax residency certificate, and no objection certificates issued by the Indian income tax authorities in the past, the Assessing Officer was of the view that nothing turns on these certificates as these certificates are obtained on the basis of misrepresentation of facts. It was also noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess in India only from March, 2015. It is noted from the order/report of the AO that: a. There is no taxation in the UAE except for assessees engaged in oil extraction or banking. Therefore, there is no double taxation of the Appellant's shipping income. This provides an opportunity to do treaty shopping. b. The Appellant is managed and controlled by one Mr. Dimosthnis Lalgiannis, a Greek national. The view of the AO is that this indicates that the Appellant is not managed card, controlled, from UAE. Before the DRP also except for filing a copy of residency card, no details have been filed by the assessee to show that Mr. Dimosthnis Lalgiannis was in UAE for over 183 days since he is the sole effective manager and controller of the assessee. c. The AO has pointed out that the assessee has not provided several crucial documents including the minutes of Board's Resolutions; the assessee now claims that several documents are not available and the UAE Law does not mandate keeping Board of Directors Resolutions. This argument of the assessee precludes any inquiry into the manner of management and control over the assessee. d. The AO has also me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der to the remand report but documents filed by the assessee related to Financial Year 2017-18 and later. Hence this claim of the assessee is also not proved. g. Section 90 has been amended by Finance Act, 2012 to the effect that TRC would be a necessary but not sufficient condition for availing the benefit of Double Taxation Avoidance Agreements entered into by India. Even earlier it was only the 'FRC under India-Mauritius DTAA which had enjoyed overriding power. h. The TRC produced by the Appellant needs to be ignored. It is clear that the TRC in conditional. The essence has to demonstrate that the company is controlled wholly from UAE. There is no evidence that Mr. Dimosthenis Lalagiannis has operated the company wholly and exclusively from UAE. The AO has correctly relied on Article 29 Limitation of Benefits of the India - UAE Treaty. The Assessing Officer has also relied upon the decision of the Supreme Court in the case of Vodafone International Holdings BV v. U01 (341 ITR I). The DRP is in argument with the AO. i. The mere fact that the assessee had obtained a favourable order for tax deduction earlier is no reason enough to hold that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd submissions, and, therefore, the status as a company is now beyond any dispute or controversy. The main objection taken by the authorities below, as the extracts reproduced above would also show, is that the company is managed by a Greek national, namely Dimosthenis Lalagiannis, that there is nothing to show that he was resident in UAE for more than 183 days, and that it is thus reasonable to infer that the company was not managed or controlled from the UAE. The assessee company had fourteen expatriate employees who were issued work permits by the UAE Government for working in the assessee company. These details and copies of work permits are placed before us at pages 19 to 40 of the second paper-book. Clearly, thus, the company was being run from UAE itself. It is also important to note that, as per evidence on record on pages 1-18 of the second paper-book, Dimosthenis Lalagiannis was in UAE for 300 days during the relevant previous year. The copies of the passport and relevant pages with clear entry and exit stamps of the immigration authorities are on record, and no doubts are raised about the genuineness of these copies. As for this gentleman being a non-UAE national, nothin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to maintain statutorily anyway, cannot be put against the assessee. The assessee cannot be asked to prove a negative, as is the settled position in law in the light of Hon ble Supreme Court s judgment in the case of K P Varghese Vs ITO [(1981) 131 ITR 587 (SC)] wherein Their Lordships have, inter alia, observed that to throw the burden of showing that there is no understatement of the consideration on the assessee would be to cast an almost impossible burden upon him to establish a negative, namely, that he did not receive any consideration beyond that declared by him . Therefore, the assessee company cannot be asked to prove that the assessee company was not managed from outside UAE . In our considered view, on the facts of the present case, the inferences drawn by the authorities below are unsustainable in law, as there is reasonable material on record to substantiate the stand of the assessee that the assessee company was incorporated in UAE, and was managed and controlled wholly in the UAE. 9. Let us now revert to article 29 of Indo UAE tax treaty, which states that An entity which is a resident of a Contracting State shall not be entitled to the benefits of this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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