The ITO, (International Taxation), GANDHIDHAM v. M/s Samsara Shipping Pvt Ltd, GANDHIDHAM

ITA 7/RJT/2011 | 2008-2009
Pronouncement Date: 28-11-2017 | Result: Dismissed

Appeal Details

RSA Number 724914 RSA 2011
Assessee PAN AAACS9285Q
Bench Rajkot
Appeal Number ITA 7/RJT/2011
Duration Of Justice 6 year(s) 10 month(s) 15 day(s)
Appellant The ITO, (International Taxation), GANDHIDHAM
Respondent M/s Samsara Shipping Pvt Ltd, GANDHIDHAM
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2017
Appeal Filed By Department
Tags Indo-UAE Tax Treaty
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 28-11-2017
Date Of Final Hearing 25-10-2013
Next Hearing Date 25-10-2013
First Hearing Date 25-10-2013
Assessment Year 2008-2009
Appeal Filed On 13-01-2011
Judgment Text
ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 1 OF 18 IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT [CORAM: PRAMOD KUMAR AM AND RAJPAL YADAV JM] ITA NOS. 7 TO 9/RJT/2011 ASSESSMENT YEAR: 2008-09 INCOME-TAX OFFICER (INTERNATIONAL TAXATION) ...........................APPELLANT GANDHIDHAM VS. MARTRADE GULF LOGISTICS FZCO-UAE ........RE SPONDENT [M/S. SAMSARA SHIPPING PVT. LTD.- AS AGENTS] UNIT NO.102 1 ST FLOOR PLOT NO. 348 WD. NO. 12/B GANDHIDHAM-370 201 [PAN: AAACS 9285 Q] APPEARANCES BY: CS ANJARIA FOR THE APPELLANT KALPESH DOSHI FOR THE RESPONDENT DATES OF HEARING OF THIS APPEAL : NOVEMBER 2 201 7 DATE OF PRONOUNCING THE ORDER : NOVEMBER 28 2017 O R D E R PER PRAMOD KUMAR AM: 1. THESE THREE APPEALS WHICH PERTAIN TO THE SAME A SSESSEE AND INVOLVE A COMMON ISSUE ARE DIRECTED AGAINST THE CONSOLIDATED ORDER DATED 02.11.2010 PASSED BY THE CIT(A) GANDHINAGAR AHMEDABAD AND WERE HEAR D TOGETHER AS A MATTER OF CONVENIENCE. THEREFORE ALL THESE THREE APPEALS ARE DISPOSED OF BY WAY OF THIS COMMON ORDER. 2. GRIEVANCES RAISED BY THE ASSESSING OFFICER WHIC H ARE COMMON IN ALL THE APPEALS ARE AS FOLLOWS: THE LD. CIT(A) ERRED IN LAW AND ON FACTS WHILE GRA NTING DTAA BENEFIT FOR PRINCIPAL OF UAE. THE LD. CIT(A) ERRED IN LAW AND ON FACTS BY IGNORIN G COMPREHENSIVE DTAA AGREEMENT WITH UAE AN ARTIRLE-4(4) RESIDENT ARTICL E-8 SHIPPING AND ARTICLE-29 (LIMITATION OF BENEFITS). ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 2 OF 18 THE LD. CIT(A) ERRED IN LAW AND ON FACTS CONSIDERIN G RESIDENTIAL STATUS OF PRINCIPAL WHILE IGNORED THE NATIONALITY OF DIRECTOR S & SHARE HOLDERS COMPANY ARE OUT OF UAE LIKE WISE AGM OF THE COMPANY ARE ALS O HOLD OUTSIDE UAE. THE LD.CIT(A) ERRED IN LAW AND ON FACTS OF BARD CIR CULAR NO.1/2003 DATED 10.02.2003. THE LD CIT(A) ERRED IN LAW AND FACTS ON DETERMINING EFFECTIVE CONTROL AND MANAGEMENT OF THE PRINCIPAL- M/S MARTRADE GULF LOGI STICS FZCO UAE THE LD CIT(A) ERRED IN LAW AND FACTS ON RELIANCE IS PLACED IN THE CASE OF MOHSINALLY ALIMOHAMMED RAFIK V CIT [1995] 79 TAXMAN 75 (AAR - NEW DELHI) THE STRICT INTERPRETATION OF ARTICLE 4 OF DT A ONLY PERSONS WHO ARE ACTUALLY SUBJECTED TO TAX IN UAE CAN BE TREATED AS RESIDENT OF UAE. THE LD CIT(A) ERRED IN LAW AND FACTS ON TRC ISSUED BY THE MINISTRY OF FINANCE-UAE WITH DIRECTION TO ISSUED IN DUBAI WITH OUT ANY RESPONSIBILITY WHATSOEVER ON THE MINISTRY OF FINANCE'. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. THE GROUNDS OF APPEAL SO TAKEN ARE PRIMARILY ARG UMENTS IN SUPPORT OF ASSESSING OFFICERS BASIC GRIEVANCE THAT THE ASSESS EE COMPANY DID NOT DESERVE THE TREATY PROTECTION UNDER INDO-UAE DOUBLE TAXATION AV OIDANCE AGREEMENT ([(1995) 205 ITR STAT 49; INDO-UAE TAX TREATY IN SHORT) AS (I) THE EFFECTIVE CONTROL AND MANAGEMENT OF THE ASSESSEE WAS SITUATED OUT OF UAE (II) THE ASSESSEE WAS NOT AN ASSESSEE SUBJECTED TO TAX IN UAE THE ASSESSEE CANN OT BE TREATED AS RESIDENT OF UAE AND (III) THE CASE OF THE ASSESSEE WAS HIT BY A RTICLE 29 OF THE INDO-UAE TAX TREATY. 4. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF SCRUTINY OF RETURN FILED UNDER SECTION 172(4) OF TH E ACT THE ASSESSING OFFICER INVITED ATTENTION OF THE ASSESSEE TO THE FACT THAT AS EVID ENT FROM THE LIST OF DIRECTORS OF THE ASSESSEE-COMPANY THE DIRECTORS OF THE ASSESSEE-COM PANY BEING DIFFERENT NATIONALITIES OTHER THAN UAE I.E. INDIAN GERMAN AN D PORTUGUESE NATIONALITIES AND THEREFORE ASSESSEE-COMPANY WAS REQUIRED TO SHOW-CA USE AS TO WHY THE TREATY PROTECTION SHOULD NOT BE DECLINED TO THE ASSESSEE. THE ATTENTION OF THE ASSESSEE WAS ALSO INVITED TO ARTICLE 29 OF THE INDO-UAE TAX TREATY WHEREIN IT IS INTER ALIA PROVIDED THAT AN ENTITY WHICH IS A RESIDENT OF A CO NTRACTING STATE SHALL NOT BE ENTITLED TO THE BENEFITS OF INDO-UAE TAX TREATY IF THE MAIN PURPOSE OR ONE OF THE MAIN PURPOSES OF THE CREATION OF SUCH ENTITY WAS TO OBTA IN THE BENEFITS OF INDO-UAE TAX TREATY WHICH WOULD NOT HAVE BEEN OTHERWISE AVAILABL E. THE ASSESSING OFFICER WAS ALSO REQUIRED THE ASSESSEE TO SHOW-CAUSE AS TO WHY ARTICLE 29 NOT BEING INVOKED IN THE FACTS OF THE PRESENT CASE. IT WAS ALSO POINTED OUT BY THE ASSESSING OFFICER THAT WHEN A RESIDENT OF THE CONTRACTING STATE CAN BE SAI D TO BE RESIDENT OF BOTH THE CONTRACTING STATES UNDER INDO-UAE TAX TREATY UNDER ARTICLE 4(4) THEN IT SHALL BE DEEMED TO BE A RESIDENT OF THE STATE IN WHICH ITS P LACE OF EFFECTIVE MANAGEMENT IS ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 3 OF 18 SITUATED. IT APPEARS THAT ON THE BASIS OF THIS PRO VISION THE ASSESSING OFFICER SOUGHT TO DENY THE STATUS OF THE ASSESSEE-COMPANY BEING TR EATED AS A RESIDENT OF UAE ON THE GROUND THAT THE PLACE OF EFFECTIVE MANAGEMENT I S NOT SITUATED IN UAE. IN RESPONSE TO THESE OBSERVATIONS MADE BY THE ASSESSIN G OFFICER ELABORATE SUBMISSIONS WERE MADE BY THE ASSESSEE BEFORE THE AS SESSING OFFICER IN SUPPORT OF THE PROPOSITION THAT THE ASSESSEE-COMPANY IS MANAGE D AND CONTROLLED WHOLLY FROM UAE THAT EVEN THOUGH THE SHAREHOLDERS AND DIRECTOR S OF THE UAE COMPANY ARE NON- UAE RESIDENTS SINCE THE BUSINESS IS CARRIED ON FRO M THE UAE THAT ASPECT OF THE MATTER IS NOT RELEVANT AND THAT THE PROVISIONS OF A RTICLE 29 DID NOT COME INTO PLAY ON THE FACTS OF THE PRESENT CASE. THE ASSESSING OFFIC ER WAS HOWEVER NOT IMPRESSED BY THESE ARGUMENTS. THE ASSESSING OFFICER WAS OF T HE VIEW THAT THE ASSESSEE- COMPANY IS NOT ENTITLED TO INDO-UAE TAX TREATY BENE FITS FOR THE REASON THAT THE SAID COMPANY HAS GOT JUST REGISTRATION FOR DOING THEIR B USINESS IN UAE AND COMPANY EMPLOYEES ARE CARRYING DAY-TO-DAY AFFAIRS THROUGH T HE DIRECTORS AND SHAREHOLDERS OF COMPANY ARE OTHER NATIONALS. THE ASSESSING OFFICER WAS ALSO OF THE VIEW THAT ARTICLE 29 COME INTO PLAY IN THE PRESENT CASE AS TH E ASSESSEE WOULD NOT HAVE BEEN ENTITLED TO THE TREATY BENEFITS SUCH AS INDO-UAE TA X TREATY BUT FOR REGISTRATION OF ASSESSEE-COMPANY IN UAE. THE ASSESSING OFFICER FU RTHER HELD THAT SINCE THE TAX RESIDENCY CERTIFICATE ISSUED BY THE MINISTRY OF FIN ANCE OF UAE CLEARLY MENTIONS THAT ISSUED IN DUBAI ON SUNDAY THE 14.12.2008 WITHOUT ANY RESPONSIBILITY WHATSOEVER ON THE MINISTRY OF FINANCE HE CONCLUDED THAT SAID COMPANY WAS MERELY REGISTER ED IN UAE TO GET DOUBLE TAXATION BENEFIT AND ITS PLACE OF EFFECTIVE CONTROL AND MANAGEMENT WAS SITUATED OUTSIDE UAE. THE ASSESSING OFFICER WAS OF THE VIEW THAT MERELY BECAUSE SOME EMPLOYEES OF THE COMPANY ARE WO RKING IN UAE DOES NOT MEAN THAT IT THEY ARE UAE RESIDENTS SINCE THE PLACE OF EFFECTIVE MANAGEMENT IS OUTSIDE UAE. IT WAS ALSO NOTED THAT THE COMPANY WA S NOT LIABLE TO TAX IN UAE AND FOR THIS REASON ALSO THE PROTECTION OF INDO-UAE TAX TREATY WAS NOT AVAILABLE. AGGRIEVED BY THE STANDS SO TAKEN THE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) REVERSES TH E ACTION OF THE ASSESSING OFFICER ON THE BASIS OF HIS CATEGORICAL FINDINGS THAT THE P LACE OF EFFECTIVE MANAGEMENT OF THE ASSESSEE-COMPANY WAS UAE AND THAT IN VIEW OF THE RESIDENCY CERTIFICATE INCORPORATION CERTIFICATE TRADING LICENSE AND OTHE R DOCUMENTS IT IS CLEAR IN PRINCIPLE THAT THE ASSESSEE WAS A RESIDENT OF DUBAI AND ACCOR DINGLY ELIGIBLE FOR TREATY PROTECTION. WHILE HOLDING SO THE CIT(A) INTER ALIA OBSERVED AS FOLLOWS: 2.5 THE MATTER HAS BEEN HAS BEEN CONSIDERED .KEEP ING IN VIEW THE ARGUMENTS OF BOTH SIDES. THE ADDITIONAL EVIDENCE IS ACCEPTED BECAUSE THE ASSESSEE WORKING AS AGENT WAS PREVENTED BECAUSE OF REASONABLE REASON THAT INFORMATION WAS REQUIRED TO BE COLLECTED FROM PRINC IPALS AT UAE WHICH COULD NOT BE COLLECTED FULLY IN THE LIMITED TIME GIVEN DU RING ASSESSMENT PROCEEDINGS. THE ISSUE AT HAND IS ABOUT THE APPLICABILITY OF LOB CLAUSE EFFECTIVE CONTROL AND MANAGEMENT OF THE COMPANY AND ABOUT GRANTING OF DTAA BENEFITS UNDER INDIA - UAE TAX TREATY. IN MY CONSIDERED OPINION TH E COMPANY MARTRADE IS ELIGIBLE FOR DTAA BENEFITS UNDER INDIA UAE TREATY A S: I HOLD THAT THE ASSESSING OFFICER IS NOT CORRECT IN HIS LOGIC TO SAY THAT DTAA (INDIA-U.A.E) CLAIMED BY MARTRADE GULF LOGISTI C FZCO IN PROVISIONAL & FINAL RETURN ARE TO BE WITHDRAWN BASED ON COMPANY'S AGM IS HELD OUTSIDE ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 4 OF 18 UAE DIRECTORS OF THE COMPANY ARE NOT UAE RESIDENT (CITIZENS) SHAREHOLDERS OF THE COMPANY ARE NOT RESIDENT OF UAE AND MARTRAD E HAS ONLY REGISTERED OFFICE IN UAE WITH SOME SENIOR EMPLOYEES AND THEREF ORE ITS EFFECTIVE CONTROL AND MANAGEMENT ARE OUT OF UAE. DETAILED OBSERVATION S ARE AS UNDER: THE BOARD MEETINGS AND IMPORTANT DECISION ARE TAKEN AT DUBAI SENIOR STAFF INCLUDING MD IS RESIDENT OF DUBAI AND HAVING PERMANENT RESIDENTIAL STATUS. PLACE OF HOLDING OF AGM AND RESID ENTIAL STATUS OF SHARE HOLDERS ARE NOT RELEVANT FACTOR FOR DETERMINING RESIDENTI AL STATUS OF THE COMPANY. THE PLACE OF HOLDING AGM IS GOVERNED BY LA W OF THE COUNTRY WHERE THE COMPANY IS INCORPORATED. FURTHER SHAREHOLDERS D O NOT HAVE SAY OR DIRECT INTERFERENCE IN THE MANAGEMENT OF COMPANY THEREFORE IN MY VIEW THE ASSESSING OFFICER'S STAND IN THIS REGARD IS NOT COR RECT TO SAY THAT EFFECTIVE CONTROL AND MANAGEMENT IS NOT SITUATED IN UAE JUST BECAUSE SHAREHOLDERS ARE NOT RESIDENT OF UAE OR JUST BECAUSE AGM WAS NOT HEL D IN UAE. ALSO ASSESSING OFFICER SEEMS TO BE WRONGLY CONSIDERING N ATIONALITY OF DIRECTOR AS FACTOR TO DECIDE THE RESIDENTIAL STATUS OF THE COMP ANY. APPELLANT HAS BEEN ABLE TO PROVE THAT MD OF THE COMPANY IS RESIDING AT UAE AND HAS PERMANENT RESIDENTIAL VISA OF UAE. FURTHER AS PER DTAA ARTICLE 4 RESIDENTIAL STATUS OF THE COMPANY IS TO BE DETERMINED AS: ARTICLE 4 - RESIDENT 1. FOR THE PURPOSES OF THIS AGREEMENT THE TERM 'RESIDENT OF A CONTRACTING STATE' MEANS: (B] IN THE CASE OF THE UNITED ARAB EMIRATES: ......... A COMPANY WHICH IS INCORPORATED IN THE UAE AND WHICH IS MANAGED AND CONTROLLED WHOLLY IN UAE. BASED ON INDIAN EMBASSY CERTIFIED DOCUMENTS SUBMITT ED SUCH AS INCORPORATION CERTIFICATE TRADING LICENSE VALID T AX RESIDENCY CERTIFICATE MEMORANDUM AND ARTICLES OF ASSOCIATION ETC SUBMITTE D THE COMPANY IS INCORPORATED IN UAE AND BASED ON DETAILS OF BOARD M EETING HELD AND OTHER DETAILS SUCH AS MD'S RESIDENTIAL STATUS SUBMITTED S HOWED THAT THE COMPANY IS CONTROLLED AND MANAGED FROM UAE. FURTHER AS REGARDS ASSESSING OFFICER'S STAND ON ISS UE OF TAX RESIDENCY CERTIFICATE ON SUNDAY WITH GENERAL DISCLAIMER I HA VE ALSO CONSIDERED THE VIEWS BOTH SIDES IN MY OPINION AS FACT REMAINS THAT IN UAE FRIDAY IS THE WEEKLY OFF AND SUNDAY IS A WORKING DAY. FURTHER THE DISCLAIMER CLAUSE SEEMS TO BE GENERAL A ND RESTRICTING UAE GOVERNMENT LIABILITY AND HAS NOTHING EXCEPTIONAL FO R THIS COMPANY AS THESE WORDINGS ARE COMMONLY FOUND IN ALL TRC ISSUED AT UA E. IN ANY CASE THESE WORDINGS CANNOT BE BASIS FOR DENIAL OF DTAA BENEFIT S. ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 5 OF 18 MARTRADE HAS NOT ONLY REGISTERED OFFICE IN UAE AND PRESENCE OF SENIOR EMPLOYEES BUT ALSO ITS EFFECTIVE CONTROL AND MANAGE MENT IS IN UAE IN MY CONSIDERED VIEW BASED ON FACTS. THE NUMBER OF SENIO R RESIDENT EMPLOYEES AND SUBSTANTIATED AND INCREASING EXPENDITURE ON STA FF REINFORCE MY VIEW. AS PER EXPLANATION UNDER SECTION 115VC OF INCOME TAX A CT 1961 DEFINING THE PLACE OF EFFECTIVE MANAGEMENT OF SHIP OPERATING COM PANY WHERE IT IS SPECIFICALLY STATED THAT IN A CASE WHERE THE BOARD OF DIRECTORS ROUTINELY APPROVE THE COMMERCIAL AND STRATEGIC DECISIONS MADE BY THE EXECUTIVE DIRECTORS OR OFFICERS OF THE COMPANY THE EFFECTIVE MANAGEMENT LIES IN THE PLACE WHERE SUCH EXECUTIVE DIRECTORS OR OFFICERS OF THE COMPANY PERFORM THEIR FUNCTIONS SINCE ALL THE BOARD MEETINGS HAVE BEEN R EGULARLY CONDUCTED IN UAE AFFIRMS THE FACTS THAT CONTROL AND MANAGEMENT LIES IN UAE. THE FINANCIAL STATEMENTS AND OTHER EVIDENCE LIKE OP ERATING PRESENCE AND NOT MERELY INVESTMENT PRESENCE (BANK OPERATIONS ) COPY OF PASSPORT OF EMPLOYEES PROVES THAT COMPANY HAS FULL FLEDGE OPERA TIONS IN UAE AND NOT JUST REGISTERED OFFICE. EVIDENCES PRODUCED AUTOMATI CALLY REJECT THE APPLICABILITY OF LIMITATION OF BENEFIT CLAUSE AND MAKE M/S. MARTR ADE A RESIDENT UNDER INDIA-UAE TAX TREATY IN TERMS OF ARTICLE 4. 2.6 OTHERWISE THE ASSESSING OFFICER HAS NOTHING ABO UT APPLICABILITY OF DTAA BETWEEN INDIA AND UAE IN THE CASE OF THE ASSESSEE. THE APPELLANT HAS FILED RESIDENCY CERTIFICATE INCORPORATION CERTIFICATE T RADING LICENSE AND OTHER DOCUMENTS TO PROVE THAT IT IS RESIDENT OF DUBAI. IT HAS ALSO SUPPORT OF DECISIONS REFERRED IN SUBMISSION. 2.7 THEREFORE CONSIDERING ALL THE FACTS AND CIRCUMSTANCES I HOLD THAT THE PROFITS ARISING OUT OF OPERATIONS OF SHIP IN QUESTION IN INTERNATIONAL WATER BY THE APPELLANT IS NOT SUBJEC T TO TAXATION IN INDIA DUE TO APPLICABILITY OF ARTICLE 8 READ WITH ARTICLE 4 OF I NDO-UAE DTAA. 5. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APP EAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 7. WE FIND THAT SO FAR AS THE ENTITLEMENT TO TREAT Y PROTECTION BY AN ENTITY BASED ON UAE IS CONCERNED THE ISSUE IS SETTLED BY A SERI ES OF ORDERS OF THIS TRIBUNAL STARTING WITH ADIT VS. GREEN EMIRATE SHIPPING AND T RAVELS (2006) 100 ITD 203 (MUM) WHEREIN SPEAKING THROUGH ONE OF US I.E. ACC OUNTANT MEMBER THIS VERY COMBINATION OF MEMBERS CONSTITUTING MUMBAI C BENC H OBSERVED AS FOLLOWS:- 4. THE IMPUGNED ORDER PASSED BY THE CIT(A) TAKES A RATHER SUPERFICIAL VIEW OF THE MATTER AND HAS CONVENIENTLY DUCKED THE CORE ISSUE REALLY REQUIRED TO BE ADJUDICATED UPON. IT HAS SIMPLY BRUSHED ASIDE THE R EAL OBJECTION RAISED BY THE AO WHICH WAS THAT IN ORDER TO AVAIL BENEFITS OF THE INDIA-UAE DTAA A PERSON NEED NOT ONLY BE RESIDENT OF ONE OF THE CONTRACTING STATE BUT SHOULD ALSO BE 'LIABLE TO TAX THEREIN. THEN THERE IS NEXT QUESTI ON ABOUT THE CONNOTATIONS OF ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 6 OF 18 THE EXPRESSION 'LIABLE TO TAX. DOES IT MEAN LIABIL ITY AT PRESENT OR DOES IT ALSO COVER A POTENTIAL FUTURE LIABILITY? A RESIDENCY CER TIFICATE BY ITSELF DOES NOT DECIDE THE MATTER ONE WAY OR THE OTHER BECAUSE WHAT ACCORDING TO THE AO IS IMPORTANT IS WHETHER THE ASSESSEE WAS LIABLE TO TAX IN UAE OR NOT. THEREFORE WHETHER THE ASSESSEE WAS RESIDENT IN UAE OR NOT WOU LD NOT HAVE REALLY MATTERED FROM THE POINT OF VIEW OF THE AO. FOR THIS REASON WE ARE UNABLE TO APPROVE THE REASONING AND STAND OF THE CIT(A). HAVI NG HELD SO THE NEXT QUESTION THAT WE ARE REQUIRED TO ADDRESS OURSELVES TO IS WHETHER OR NOT THE AO WAS JUSTIFIED IN RAISING THE OBJECTION THAT HE D ID. IS IT REALLY THE LIABILITY TO PAY TAX IN UAE WHICH IS SINE QUA NON TO AVAIL THE B ENEFITS OF THE INDIA-UAE DTAA OR A FISCAL DOMICILE OR RESIDENCY IN UAE PER S E WILL BE SUFFICIENT FOR AN ASSESSEE TO CLAIM THE BENEFITS OF THE INDIA-UAE DTA A ? IS IT TAXATION LIABILITY AT PRESENT WHICH IS MATERIAL FOR THIS PURPOSE OR IS IT EVEN PROSPECT OF FUTURE TAX LIABILITY WHICH IS SOUGHT TO BE PREVENTED BY THE SA ID DTAA ? 5. AS FOR THE AOS RELIANCE ON RULING GIVEN BY THE AUTHORITY FOR ADVANCE RULING IN CYRIL EUGENE PEREIRIAS CASE (SUPRA) WE DEEM IT NECESSARY TO REPRODUCE THE FOLLOWING EXTRACTS FROM THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. AZADI BACHAO ANDOLAN (20 03) 184 CTR (SC) 450 : (2003) 263 ITR 706 (SC) AT P. 742 WHEREIN THEIR LO RDSHIPS OF HONBLE SUPREME COURT HAD AN OCCASION TO DEAL WITH THE SAID AAR RULING : 'THE RESPONDENTS PLACED GREAT RELIANCE ON THE DECIS ION BY THE AUTHORITY FOR ADVANCE RULINGS CONSTITUTED UNDER S. 245-O OF THE I T ACT 1961 IN CYRIL EUGENE PEREIRAS CASE (1999) 154 CTR (AAR) 281 : (1 999) 239 ITR 650 (AAR). SEC. 245S OF THE ACT PROVIDES THAT THE ADVAN CE RULING PRONOUNCED BY THE AUTHORITY UNDER S. 245R SHALL BE BINDING ONLY : '(A) ON THE APPLICANT WHO HAD SOUGHT IT; (B) IN RESPECT TO THE TRANSACTION IN RELATION TO WH ICH THE RULING HAD BEEN SOUGHT; AND (C) ON THE CIT AND THE IT AUTHORITIES SUBORDINATE TO HIM IN RESPECT TO THE APPLICANT AND THE SAID TRANSACTION. IT IS THEREFORE OBVIOUS THAT APART FROM WHATEVER ITS PERSUASIVE VALUE IT WOULD BE OF NO HELP TO US. HAVING PERUSED THE ORDER OF TH E ADVANCE RULING AUTHORITY WE ARE NOT PERSUADED.' (EMPHASIS ITALIC ISED IN PRINT SUPPLIED BY US NOW). THE JUDGMENTS OF HONBLE SUPREME COURT ARE BINDING ON US UNDER ART. 141 OF THE CONSTITUTION OF INDIA; THE RULINGS OF AUTHORITY FOR ADVANCE RULINGS WHATEVER BE THEIR PERSUASIVE VALUE ARE NOT. THE WO RDS OF HONBLE SUPREME COURT ARE CLEAR CATEGORICAL AND UNAMBIGUOUS. ONCE HONBLE SUPREME COURT DECLINES TO BE PERSUADED BY THE RULING GIVEN BY THE AUTHORITY FOR ADVANCE RULINGS IN CYRIL EUGENE PEREIRAS CASE (SUPRA) IT CANNOT BE OPEN TO US TO FOLLOW THE SAID RULING. IN THE CASE OF ASSTT. COLLE CTOR OF CENTRAL EXCISE VS. DUNLOP INDIA LTD. (1985) 154 ITR 172 (SC) AT P. 180 HONBLE SUPREME COURT HAS INTER ALIA OBSERVED AS FOLLOWS : ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 7 OF 18 'WE DESIRE TO ADD AND AS WAS SAID IN THE CASSELL & CO. LTD. VS. BROOME (1972) AC 1027 (HL) WE HOPE IT WILL NEVER BE NECES SARY TO SAY SO AGAIN THAT 'IN THE HIERARCHICAL SYSTEM OF COURTS WHICH EXISTS IN OUR COUNTRY 'IT IS NECESSARY FOR EACH LOWER TIER .. 'TO ACCEPT LOYALL Y THE DECISIONS OF THE HIGHER TIERS 'IT IS INEVITABLE IN A HIERARCHICAL SYSTEM OF COURTS THAT THERE ARE DECISIONS OF THE SUPREME TRIBUNAL WHICH DO NOT ATTRACT UNANIM OUS APPROVAL OF ALL THE MEMBERS OF THE JUDICIARY.. BUT JUDICIAL SYSTEM WORK S ONLY IF SOMEONE IS ALLOWED TO HAVE THE LAST WORD AND THAT LAST WORD O NCE SPOKEN IS LOYALLY ACCEPTED. (SEE OBSERVATIONS OF LORD HALLSHAM AND L ORD DIPLOCK IN BROOME VS. CASSELL ). THE WISDOM OF THE COURT BELOW HAS TO YIELD TO THE HIGHER WISDOM OF THE COURT ABOVE.' WE RESPECTFULLY FOLLOW THE HIGHER WISDOM OF THE COU RTS ABOVE AND DECLINE TO APPROVE AOS RELIANCE UPON THE RULING GIVEN BY THE AUTHORITY FOR ADVANCE RULINGS IN CYRIL EUGENE PEREIRAS CASE (SUPRA). 6. UNDOUBTEDLY IN CYRIL EUGENE PEREIRAS CASE (SUP RA) HONBLE AUTHORITY FOR ADVANCE RULINGS DEVIATING FROM THE STAND TAKEN BY IT IN THE EARLIER RULINGS INCLUDING RULING IN MOHSINALLY ALIMOHAMMED RAFIK I N RE (1995) 126 CTR (AAR) 311 : (1995) 213 ITR 317 (AAR) CONCLUDED THA T 'AN INDIVIDUAL WHO IS NOT LIABLE TO PAY TAX UNDER THE UAE LAW CANNOT CLAI M ANY RELIEF FROM THE ONLY TAX ON INCOME WHICH IS PAYABLE IN INDIA UNDER THE A GREEMENT' AND THAT 'THE PROVISIONS OF THE DOUBLE TAXATION AVOIDANCE AGREEME NT DO NOT APPLY TO ANY CASE WHERE THE SAME INCOME IS NOT LIABLE TO BE TAXE D TWICE BY THE EXISTING LAWS ON BOTH THE CONTRACTING STATES'. HOWEVER IN A ZADI BACHAO ANDOLANS CASE (SUPRA) THEIR LORDSHIPS OF HONBLE SUPREME CO URT AFTER REFERRING TO THE SAID RULING AND AFTER ELABORATE DISCUSSIONS ON THE VARIOUS ASPECTS OF THIS ISSUE CONCLUDED THAT 'IT IS ... NOT POSSIBLE FOR U S TO ACCEPT THE CONTENTIONS SO STRENUOUSLY URGED BY THE RESPONDENTS THAT THE AVOID ANCE OF DOUBLE TAXATION CAN ARISE ONLY WHEN TAX IS ACTUALLY PAID IN ONE OF THE CONTRACTING STATES'. THE REASONING GIVEN BY THEIR LORDSHIPS INCLUDED THE FOL LOWING : 'ACCORDING TO KLAUS VOGEL 'DOUBLE TAXATION CONVENT ION ESTABLISHES AN INDEPENDENT MECHANISM TO AVOID DOUBLE TAXATION THRO UGH RESTRICTION OF TAX CLAIMS IN AREAS WHERE OVERLAPPING TAX CLAIMS ARE EX PECTED OR AT LEAST THEORETICALLY POSSIBLE. IN OTHER WORDS CONTRACTING STATES MUTUALLY BIND THEMSELVES NOT TO LEVY TAXES OR TO TAX ONLY TO A LI MITED EXTENT IN CASES WHEN THE TREATY RESERVES TAXATION FOR THE OTHER CONTRACT ING STATE EITHER ENTIRELY OR IN PART CONTRACTING STATES ARE SAID TO 'WAIVE TAX CL AIMS OR MORE ILLUSTRATIVELY TO DIVIDE 'TAX SOURCES 'TAXABLE OBJECTS AMONGST TH EMSELVES. DOUBLE TAXATION AVOIDANCE TREATIES WERE IN VOGUE EVEN FROM THE TIME OF THE LEAGUE OF NATIONS. THE EXPERTS APPOINTED IN THE EARLY 1920S B Y THE LEAGUE OF NATIONS DESCRIBE THIS METHOD OF CLASSIFICATION OF ITEMS AND THEIR ASSIGNMENTS TO THE CONTRACTING STATES. WHILE THE ENGLISH LAWYERS CALLE D IT 'CLASSIFICATION AND ASSIGNMENT RULES THE GERMAN JURISTS CALLED IT 'TH E DISTRIBUTIVE RULES (VERTEILUNGSNORMI). TO THE EXTENT THAT AN EXEMPTION IS AGREED TO ITS EFFECT IS IN PRINCIPLE INDEPENDENT OF BOTH WHETHER THE OTHER CONTRACTING STATE IMPOSES ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 8 OF 18 A TAX IN THE SITUATION TO WHICH THE EXEMPTION APPLI ES AND IRRESPECTIVE OF WHETHER THE STATE ACTUALLY LEVIES THE TAX. COMMENTI NG PARTICULARLY ON THE GERMAN DOUBLE TAXATION CONVENTION WITH THE UNITED S TATES VOGEL COMMENTS: 'THUS IT IS SAID THAT THE TREATY PREVENT S NOT ONLY 'CURRENT BUT ALSO MERELY 'POTENTIAL DOUBLE TAXATION'. FURTHER ACCOR DING TO VOGEL 'ONLY IN EXCEPTIONAL CASES AND ONLY WHEN EXPRESSLY AGREED T O BY THE PARTIES IS EXEMPTION IN ONE OF THE CONTRACTING STATES DEPENDEN T UPON WHETHER THE INCOME OR CAPITAL IS TAXABLE IN THE OTHER CONTRACTI NG 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 DOUB LE TAXATION CAN ARISE ONLY WHEN TAX IS ACTUALLY PAID IN ONE OF THE CONTRACTING STATES. CLEARLY THEREFORE THERE IS NO MEETING GROUND BETW EEN THE RULING GIVEN BY THE AUTHORITY FOR ADVANCE RULINGS IN CYRIL EUGENE PEREI RAS CASE (SUPRA) AND THE JUDGMENT DELIVERED BY THE HONBLE SUPREME COURT IN AZADI BACHAO ANDOLANS CASE (SUPRA). THE CHOICE HOWEVER POSES NO DIFFICU LTY IN THE LIGHT OF THE ELEMENTARY LEGAL POSITION THAT THE JUDGMENTS OF HON BLE SUPREME COURT HAVE BINDING FORCE ON ALL OF US. MUCH AS WE RESPECT THE HONBLE AUTHORITY FOR ADVANCE RULINGS WE REGRET OUR INABILITY TO FOLLOW THE RULING WHICH IN OUR HUMBLE UNDERSTANDING HAS BEEN CLEARLY DISAPPROVED BY THE HONBLE SUPREME COURT. IT IS NOT EVEN OPEN TO US EVEN IN A CASE IN WHICH OUR UNDERSTANDING OF THE ISSUE ON MERITS CONCURS WITH THAT OF THE HONBL E AUTHORITY FOR ADVANCE RULINGS IN CYRIL EUGENE PEREIRAS CASE TO FOLLOW T HAT SCHOOL OF THOUGHT. 7. LEARNED DEPARTMENTAL REPRESENTATIVE HAS INVITED OUR ATTENTION TO THE RULING GIVEN BY THE AUTHORITY FOR ADVANCE RULINGS IN THE C ASE OF ABDUL RAZAK A. MEMAN IN RE (2005) 195 CTR (AAR) 534 : (2005) 276 ITR 306 (AAR) WHICH SUPPORTS THE CASE OF THE REVENUE AND IS SAID TO BE ON EXACTLY THE SAME MATERIAL FACTS. WE ARE HOWEVER UNABLE TO ACCEPT T HIS PLEA AND WE DECLINE TO TREAT THIS AS A SORT OF TO USE THE PHRASEOLOGY EMP LOYED IN LEGAL PARLANCE A COVERED MATTER. AS HONBLE SUPREME COURT HAS DULY T AKEN (NOTE) OF IN AZADI BACHAO ANDOLANS CASE (SUPRA) A RULING GIVEN BY TH E AUTHORITY FOR ADVANCE RULINGS IS NOT EVEN BINDING ON THE CIT AND AUTHORI TIES SUBORDINATE THERETO IN ANY CASE EXCEPT IN THE CASE OF THAT VERY ASSESSEE I N WHICH SUCH A RULING IS GIVEN AND EVEN IN SUCH A CASE IT IS BINDING IN RESP ECT OF TRANSACTION IN RESPECT OF WHICH THE RULING IS GIVEN. WHATEVER BE THE RESPE CT AND DEFERENCE JUDICIAL AUTHORITIES INDEED HAVE FOR THE RULINGS GIVEN BY TH E AUTHORITY THE AUTHORITY FOR ADVANCE RULINGS NOT BEING A PART OF THE JUDICIAL H IERARCHY CANNOT LAY DOWN A BINDING PRECEDENT FOR ANYONETHE REVENUE THE ASSES SEES OR THE APPELLATE AUTHORITIES. BY NO STRETCH OF LOGIC THEREFORE A R ULING GIVEN BY THE HONBLE AUTHORITY OF ADVANCE RULINGS HAS ANY PRECEDENCE VA LUE IN GENERAL. THEREFORE LEARNED DEPARTMENTAL REPRESENTATIVES RE LIANCE ON THE RULING GIVEN IN ABDUL RAZAK A. MEMANS CASE (SUPRA) BY ITSELF IS NOT SUFFICIENT TO DECIDE THE MATTER ONE WAY OR THE OTHER. LEARNED DEPARTMENT AL REPRESENTATIVES CONTENTION IS THAT AS NON-CORPORATE ENTITIES ARE NO T TAXABLE ENTITIES UNDER THE UAE TAX DECREE 1969 SUCH NON-CORPORATE ENTITIES E VEN THOUGH BASED IN ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 9 OF 18 UAE CANNOT BE TREATED AS 'RESIDENT FOR THE PURPOS ES OF THE INDIA-UAE DTAA. OUR ATTENTION IS ALSO INVITED TO THE LEARNED AOS O BSERVATIONS TO THE EFFECT THAT 'THE PROVISIONS OF THE DTAA DO NOT APPLY TO ANY CAS E WHICH THE SAME INCOME IS NOT LIABLE TO BE TAXED TWICE BY THE EXISTING LAW S OF BOTH THE CONTRACTING STATES' AND THAT 'SINCE THE ASSESSEE HAS FAILED TO PROVE THAT IT IS PAYING TAXES IN UAE THE DIT RELIEF SOUGHT BY THE ASSESSEE IS RE JECTED'; BUT IT IS THE VERY PROPOSITION UNDERLYING THESE OBSERVATIONS WHICH WAS REJECTED BY THE HONBLE SUPREME COURT HOLDING THAT 'IT IS... NOT POSSIBLE F OR 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'. AS WE HAVE NOTED EARLIER ALSO THE REVENUE IS ON RECORD TO HAVE OPPOSED THE VERY ARGUMENT THAT THE REVENUE HAS TAKEN IN THE PRESENT CASE AS EVIDENT FROM THE HONBLE SUPREME COURTS F OLLOWING OBSERVATION : 'THE APPELLANTS (I.E. UNION OF INDIA) CONTENDED TH AT ACCEPTANCE OF THE RESPONDENTS SUBMISSION THAT DOUBLE TAXATION AVOIDA NCE IS NOT PERMISSIBLE UNLESS THE TAX IS PAID IN BOTH THE COUNTRIES IS CON TRARY TO THE INTENDMENT OF S. 90. IT IS URGED THAT CL. (B) OF SUB-S. (1) OF S. 90 APPLIES TO A SITUATION WHERE INCOME-TAX HAS BEEN PAID IN BOTH THE COUNTRIES BUT CL. (B) DEALS WITH THE SITUATION OF AVOIDANCE OF DOUBLE TAXATION OF INCOME INASMUCH AS PARLIAMENT HAS DISTINGUISHED BETWEEN THE TWO SITUATIONS IT IS NOT OPEN TO A COURT OF LAW TO INTERPRET CL. (B) OF S. 90 SUB-S. (1) AS IF IT WERE THE SAME AS SITUATIONS CONTEMPLATED UNDER CL. (A).' THE VERY CONTENTION WHICH HAS BEEN RAISED BY THE RE VENUE IN THIS CASE WAS SUCCESSFULLY CHALLENGED BY THE UNION OF INDIA BEFOR E THE HONBLE SUPREME COURT. IT CANNOT BE OPEN TO US TO TAKE ANY OTHER VI EW OF THE MATTER THAN THE VIEW SO TAKEN BY THE HONBLE SUPREME COURT. 8. ALTHOUGH THE AOS OBJECTION TO APPLICABILITY OF INDIA-UAE TAX TREATY WAS ONLY ON THE GROUND THAT THE PROVISIONS OF DTAAS DO NOT C OME INTO PLAY UNLESS IT IS ESTABLISHED THAT THE ASSESSEE IS PAYING TAX IN BOTH THE COUNTRIES IN RESPECT OF THE SAME INCOME IN THE GROUNDS OF APPEAL BEFORE US IT IS ALSO CONTENDED THAT THE ASSESSEE-COMPANY FAILED TO PRODUCE ANY EVIDENCE TO THE EFFECT THAT IT WAS 'LIABLE TO PAY TAXES IN UAE. THE QUESTION THEN ARI SES 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 GU IDANCE FROM THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF AZADI BACHAO A NDOLAN (SUPRA). REFERRING TO THE KLAUS VOGELS COMMENTARY ON DOUBLE TAXATION CONVENTIONS. THEIR LORDSHIPS INTER ALIA OBSERVED AS FOLLOWS : 'IN OTHER WORDS CONTRACTING STATES MUTUALLY BIND T HEMSELVES NOT TO LEVY TAXES OR TO TAX ONLY TO A LIMITED EXTENT IN CASES WHEN TH E TREATY RESERVES TAXATION FOR THE OTHER CONTRACTING STATE EITHER ENTIRELY OR IN P ART. CONTRACTING STATES ARE SAID TO WAIVE 'TAX CLAIMS OR MORE ILLUSTRATIVELY T O DIVIDE 'TAX SOURCES 'TAXABLE OBJECTS AMONGST THEMSELVES'. DOUBLE TAXATION AVOI DANCE 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 T HIS METHOD OF ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 10 OF 18 CLASSIFICATION OF ITEMS AND THEIR ASSIGNMENTS TO TH E CONTRACTING STATES. WHILE THE ENGLISH LAWYERS CALLED IT 'CLASSIFICATION AND A SSIGNMENT RULE THE GERMAN JURISTS CALLED IT 'THE DISTRIBUTIVE RULE (VERTEILU NGSNORMI). TO THE EXTENT THAT AN EXEMPTION IS AGREED TO ITS EFFECT IS IN PRINCIPLE INDEPENDENT OF BOTH WHETHER THE CONTRACTING STATE IMPOSES A TAX IN THE SITUATI ON TO WHICH THE EXEMPTION APPLIES AND IRRESPECTIVE OF WHETHER THE STATE ACTU ALLY LEVIES THE TAX. COMMENTING PARTICULARLY ON THE GERMAN DOUBLE TAXATI ON CONVENTION WITH THE UNITED STATES VOGEL COMMENTS: 'THUS IT IS SAID TH AT THE TREATY PREVENTS NOT ONLY 'CURRENT BUT ALSO MERELY 'POTENTIAL DOUBLE T AXATION'. IT IS THUS CLEAR THAT A TAX TREATY NOT ONLY PREVENT S CURRENT BUT ALSO POTENTIAL DOUBLE TAXATION. THEREFORE IRRESPECTIVE OF WHETHER OR NOT THE UAE ACTUALLY LEVIES TAXES ON NON-CORPORATE ENTITIES ONCE THE RI GHT TO TAX UAE RESIDENTS IN SPECIFIED CIRCUMSTANCES VESTS ONLY WITH THE GOVERNM ENT OF UAE THAT RIGHT WHETHER EXERCISED OR NOT CONTINUES TO REMAIN EXCLU SIVE RIGHT OF THE GOVERNMENT OF UAE. AS NOTED ABOVE THE EXEMPTION AG REED TO UNDER THE 'ASSIGNMENT OR 'DISTRIBUTIVE RULE IS INDEPENDENT OF 'WHETHER THE CONTRACTING STATE IMPOSES A TAX IN THE SITUATION TO WHICH EXEMP TION IMPLIES. IN THE CASE OF JOHN N. GLADDEN VS. HER MAJESTY THE QUEEN 85 TAX CA SES 5188 WHICH WAS QUOTED WITH APPROVAL BY THE HONBLE SUPREME COURT I N AZADI BACHAO ANDOLANS CASE (SUPRA) FEDERAL COURT OF CANADA HAS OBSERVED THAT THE NON- RESIDENT CAN BENEFIT FROM THE EXEMPTION (UNDER THE TREATY) REGARDLESS OF WHETHER OR NOT HE IS TAXABLE ON THAT CAPITAL GAIN I N HIS OWN COUNTRY. IF CANADA OR THE US WERE TO ABOLISH THE CAPITAL GAINS TAX COM PLETELY WHILE THE OTHER COUNTRY DID NOT A RESIDENT OF THE COUNTRY WHICH HA S ABOLISHED THE CAPITAL GAINS WOULD STILL BE EXEMPT FROM CAPITAL GAINS IN T HAT OTHER COUNTRY'. IT IS THUS CLEAR THAT TAXABILITY IN ONE COUNTRY IS NOT SINE QU A NON FOR AVAILING RELIEF UNDER THE TREATY FROM TAXABILITY IN THE OTHER COUNTRY. AL L THAT IS NECESSARY FOR THIS PURPOSE IS THAT THE PERSON SHOULD BE 'LIABLE TO TAX IN THE CONTRACTING STATE BY REASON OF DOMICILE RESIDENCE PLACE OF MANAGEMENT PLACE OF INCORPORATION OR ANY OTHER CRITERION OF SIMILAR NATURE WHICH ESSENT IALLY REFERS TO THE FISCAL DOMICILE OF SUCH A PERSON. IN OTHER WORDS IF FISCA L DOMICILE OF A PERSON IS IN A CONTRACTING STATE IRRESPECTIVE OF WHETHER OR NOT T HAT PERSON IS ACTUALLY LIABLE TO PAY TAX IN THAT COUNTRY HE IS TO BE TREATED AS RESIDENT OF THAT CONTRACTING STATE. THE EXPRESSION 'LIABLE TO TAX IS NOT TO REA D IN ISOLATION BUT IN CONJUNCTION WITH THE WORDS IMMEDIATELY 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 LIVIN G IN A CONTRACTING STATE SHOULD NOT BE SUFFICIENT THAT PERSON SHOULD ALSO H AVE FISCAL DOMICILE IN THAT COUNTRY. THESE TESTS OF FISCAL DOMICILE WHICH ARE G IVEN BY WAY OF EXAMPLES FOLLOWING THE EXPRESSION 'LIABLE TO TAX BY REASON O F I.E. DOMICILE RESIDENCE PLACE OF MANAGEMENT PLACE OF INCORPORATION ETC. ARE NO MORE THAN EXAMPLES OF LOCALITY-RELATED ATTACHMENTS THAT ATTRA CT RESIDENCE TYPE TAXATION. THEREFORE AS LONG AS A PERSON HAS SUCH LOCALITY-RE LATED ATTACHMENTS WHICH ATTRACT RESIDENCE TYPE TAXATION THAT 'PERSON IS T O BE TREATED AS RESIDENT AND THIS STATUS OF BEING A 'RESIDENT OF THE CONTRACTIN G STATE IS INDEPENDENT OF THE ACTUAL LEVY OF TAX ON THAT PERSON. VIEWED IN THIS P ERSPECTIVE WE ARE OF THE CONSIDERED OPINION THAT BEING 'LIABLE TO TAX IN TH E CONTRACTING STATE DOES NOT ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 11 OF 18 NECESSARILY IMPLY THAT THE PERSON SHOULD ACTUALLY B E LIABLE TO TAX IN THAT CONTRACTING STATE BY VIRTUE OF AN EXISTING LEGAL PR OVISION BUT WOULD ALSO COVER THE CASES WHERE THAT OTHER CONTRACTING STATE HAS TH E RIGHT TO TAX SUCH PERSONS IRRESPECTIVE OF WHETHER OR NOT SUCH A RIGHT IS EXER CISED BY THE CONTRACTING STATE. IN OUR HUMBLE UNDERSTANDING THIS IS THE LEG AL POSITION EMERGING OUT OF HONBLE SUPREME COURTS JUDGMENT IN AZADI BACHAO AND OLANS CASE (SUPRA). THE PLEA TAKEN BY THE REVENUE THAT THE ASSESSEE WAS NOT 'LIABLE TO TAX WHICH WAS ANYWAY NOT TAKEN BY THE AO OR BEFORE THE CIT(A) IS ALSO NOT SUSTAINABLE IN LAW EITHER. 9. FOR THE REASONS SET OUT ABOVE AND EVEN THOUGH W E DO NOT APPROVE THE REASONING ADOPTED BY THE CIT(A) WE APPROVE THE CON CLUSION ARRIVED AT BY THE CIT(A). HIS HAVING ARRIVED AT RIGHT CONCLUSION MAY HAVE BEEN FORTUITOUS BUT WHAT IS MATERIAL IS THAT HE REACHED THE RIGHT CONCL USION. WE APPROVE HIS CONCLUSION AND DECLINE TO INTERFERE IN THE MATTER. 8. IN VIEW OF THE LEGAL POSITION SO SET OUT WITH W HICH WE ARE IN CONSIDERED AGREEMENT ALL THAT IS NECESSARY FOR THE PURPOSE OF BEING TREATED AS RESIDENT OF A CONTRACTING STATES UNDER INDO-UAE TAX TREATY IS THA T THE PERSON SHOULD BE LIABLE TO TAX IN THAT CONTRACTING STATE BY THE REASON OF DOMI CILE RESIDENCE PLACE OF MANAGEMENT PLACE OF INCORPORATION ETC. CLEARLY THE ASSESSEE COMPANY W AS INCORPORATED IN UAE AND THEREFORE THE ASSESSEE CO MPANY HAD THIS LOCALITY RELATED ATTACHMENT WHICH LED TO RESIDENCE TYPE TAXATION. IT IS NOT AT ALL NECESSARY TO BE TREATED AS LIABLE TO BE TAXED IN UAE FOR THE PUR POSES OF THIS TREATY THAT THE ASSESSEE SHOULD ACTUALLY PAY TAX IN UAE. TO THIS EXTENT GRIEVANCE OF THE ASSESSING OFFICER CLEARLY ILL CONCEIVED. IT IS ALSO IMPORTAN T TO NOTE THE TRITE RULE WITH RESPECT TO RESIDENTIAL STATUS OF THE ASSESSEE COMPANY COMES IN TO PLAY WHEN THE ASSESSEE IS RESIDENT OF BOTH THE CONTRACTING STATES I.E. INDIA AND UAE IN THIS CASE. IT IS NOT EVEN THE CASE OF THE ASSESSING OFFICER THAT THE ASS ESSEE COULD BE TREATED AS A RESIDENT OF INDIA. THEREFORE THE TIE BREAKER RULE SET OUT IN RULE 4(4) TO WHICH SO MUCH OF EMPHASIS IS PLACED BY THE ASSESSING OFFICER IS WHOLLY IRRELEVANT IN THE PRESENT CONTEXT. WE HAVE ALSO NOTED THAT THE LEARN ED CIT(A) HAS GIVEN VERY REASONED AND ELABORATE FINDINGS THAT THE PLACE OF E FFECTIVE MANAGEMENT OF THE ASSESSEE COMPANY WAS FROM UAE. WE FIND NO REASONS TO DISTURB THESE FINDINGS OF THE LEARNED CIT(A) NOR ANY SPECIFIC DEFECT THEREIN HAS BEEN POINTED OUT BY THE REVENUE AUTHORITIES. FINALLY SO FAR AS ARTICLE 29 OF THE INDO-UAE TAX TREATY IS CONCERNED WE MAY REFER TO THE OBSERVATIONS MADE BY US IN THE CASE OF ITO VS. MUR SHIPPING DMC CO. IN ITA NO. 405/RJT/2013 WHICH AR E AS FOLLOWS: 6. WE FIND THAT AS LEARNED DEPARTMENTAL REPRESENT ATIVE RIGHTLY CONTENDS AND SO FAR AS THE JUDGMENT DATED 4 TH JULY 2012 PASSED BY HONBLE JURISDICTIONAL HIGH COURT IN TAX APPEAL NO. 12 OF 2012 IS CONCERNED THE ISSUE BEFORE THEIR LORDSHIPS WAS WIT H RESPECT TO THE EVIDENCES IN SUPPORT OF PLACE OF EFFECTIVE MANAGEM ENT UNDER THE ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 12 OF 18 INDIA NETHERLANDS DOUBLE TAXATION AVOIDANCE AGREEME NT. THE CONCLUSIONS ARRIVED IN THIS CONTEXT IN OUR CONSIDE RED VIEW WOULD NOT BE DECISIVE ON THE ISSUE AS TO WHETHER OR NOT THE C IT(A) RIGHTLY REVERSED THE ACTION OF THE ASSESSING OFFICER IN DEN YING THE TREATY PROTECTION. THE MATTER HOWEVER DOES NOT END THER E. EVEN IF THE ISSUE BEFORE US IS NOT COVERED BY THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT THE MATTER IS TO BE ADJUDICATED ON MERITS AN YWAY. ON MERITS LEARNED DEPARTMENTAL REPRESENTATIVES THRUST OF ARG UMENTS IS ONE TWO ISSUES- FIRST THAT THERE IS NO EVIDENCE TO SUGGEST THAT THE ASSESSEE ACTUALLY PAID ANY TAXES IN UAE; AND SECOND THAT I T WAS A FIT CASE TO INVOKE ARTICLE 29 OF THE INDO UAE TAX TREATY AS THE ASSESSEE COULD NOT REBUT THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER. 7. IT IS IN THIS BACKDROP THAT WE NEED TO TAKE A LO OK AT ARTICLE 29 OF INDIA UAE TAX TREATY WHICH HAS BEEN INVOKED BY THE ASSESSING OFFICER TO DECLINE TREATY BENEFITS TO THE ASSESSEE. THIS AR TICLE PROVIDES AS FOLLOWS: 'AN ENTITY WHICH IS A RESIDENT OF A CONTRACTING STA TE SHALL NOT BE ENTITLED TO THE BENEFITS OF THIS AGREEMENT IF THE M AIN PURPOSE OR ONE OF THE MAIN PURPOSES OF THE CREATION OF SUCH EN TITY WAS TO OBTAIN THE BENEFITS OF THIS AGREEMENT THAT WOULD NO T BE OTHERWISE AVAILABLE. THE CASES OF LEGAL ENTITIES NOT HAVING B ONAFIDE BUSINESS ACTIVITIES SHALL BE COVERED BY THIS ARTICLE.' 8. THE ABOVE ARTICLE WAS INTRODUCED IN THE INDO UAE TAX TREATY BY THE VIRTUE OF A PROTOCOL DATED 26 TH MARCH 2007 [NOTIFICATION NO. 282 OF 2007; 213 CTR (STATUTE) 64]. IT MAY BE RECALLED THA T UNDER THE ORIGINAL TREATY PROVISIONS RESIDENT OF A CONTRACTING STATE WAS DEFINED AS ANY PERSON WHO UNDER THE LAWS OF THAT STATE IS LIABLE TO TAX THEREIN BY REASON OF HIS DOMICILE RESIDENCE PLACE OF MANAGEM ENT PLACE OF INCORPORATION OR ANY OTHER CRITERION OF A SIMILAR N ATURE AND THERE WAS CONSIDERABLE CONTROVERSY ON WHETHER UNDER THIS PRO VISION THE ACTUAL TAXABILITY OF INCOME IN THE UAE WAS A CONDITION PRE CEDENT FOR AVAILING THE TREATY BENEFITS IN INDIA. THIS ISSUE WAS PARTIC ULARLY RELEVANT AS NOT ALL THE RESIDENTS WHETHER INDIVIDUAL OR CORPORATE WERE NECESSARILY TAXABLE ENTITIES UNDER THE UAE LAW. THE UAE AS A T AX JURISDICTION HAD RIGHT TO TAX THESE RESIDENTS BUT THE RIGHTS WERE N OT EXERCISED BY INTRODUCING LAW TO TAX THEM. WHILE DEALING WITH THE ISSUE AS TO WHETHER OR NOT IN SUCH A SITUATION THE UAE TAX RESIDENTS WILL BE ELIGIBLE FOR TREATY PROTECTION IN RESPECT OF THEIR INCOME SOURCE D IN INDIA A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ADIT VS GREEN EMIRATE TRAVELS [(2006) 100 ITD 203 (BOM)] OBSERVED THAT . .... AS LONG AS A PERSON HAS SUCH LOCALITY-RELATED ATTACHME NTS WHICH ATTRACT RESIDENCE TYPE TAXATION THAT 'PERSON IS T O BE TREATED AS RESIDENT AND THIS STATUS OF BEING A 'RESIDENT OF T HE CONTRACTING STATE IS INDEPENDENT OF THE ACTUAL LEVY OF TAX ON T HAT PERSON AND CONCLUDED THAT VIEWED IN THIS PERSPECTIVE WE ARE OF THE ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 13 OF 18 CONSIDERED OPINION THAT BEING 'LIABLE TO TAX IN TH E CONTRACTING STATE DOES NOT NECESSARILY IMPLY THAT THE PERSON SH OULD ACTUALLY BE LIABLE TO TAX IN THAT CONTRACTING STATE BY VIRTU E OF AN EXISTING LEGAL PROVISION BUT WOULD ALSO COVER THE CASES WHER E THAT OTHER CONTRACTING STATE HAS THE RIGHT TO TAX SUCH PERSONS IRRESPECTIVE OF WHETHER OR NOT SUCH A RIGHT IS EXERCISED BY THE CON TRACTING STATE . HOWEVER UNCOMFORTABLE WITH THE FACT THAT THE JUDIC IAL BODIES WERE CALLED UPON TO ADJUDICATE ON SUCH A FUNDAMENTAL ASP ECT AS THE ELIGIBILITY FOR TREATY BENEFITS AND WITH THE WHOLL Y AVOIDABLE AMBIGUITY PREVAILING ON THIS ISSUE DUE TO INERTIA OF THE TAX ADMINISTRATION THE COORDINATE BENCH FURTHER OBSERVED AS FOLLOWS: 10. BEFORE PARTING WITH THE MATTER WE MAY ADD THAT INSTEAD OF ALLOWING SUCH MATTERS AS IS THE DISPUTE BEFORE US TO BE SUBJECTED TO CONFUSING SIGNALS RESULTING IN UNCERTAINTY AND P ROLONGED LITIGATION IT IS CERTAINLY MORE DESIRABLE FOR THE GOVERNMENT TO TAKE A CLEAR-CUT STAND ON THE ISSUE OR LET THE MATTER BE RESOLVED AT THE LEVEL OF GOVERNMENTS OF THE CONTRACTING STATES. THA T PERHAPS IS A BETTER SOLUTION FOR QUICKLY RESOLVING DISPUTES ON S UCH A FUNDAMENTAL ASPECT OF A TAX TREATY AS TO WHO WILL B E ELIGIBLE FOR THE BENEFITS OF THAT TAX TREATY. WE HOPE THAT THE GOVER NMENT WILL RESOLVE THIS MATTER ONCE FOR ALL AND WOULD NOT ALLO W THIS UNCERTAINTY TO LAST FOR LONG. WE LEAVE IT AT THAT. 9. IT IS HEARTENING TO NOTE THAT WITHIN LESS THAN O NE AND A HALF YEAR FROM THE ABOVE OBSERVATIONS HAVING BEEN MADE BY THE TRIBUNAL THE TAX ADMINISTRATION DID INDEED RESOLVE THE ISSUE. VIDE P ROTOCOL DATED 26 TH MARCH 2007 (SUPRA) THE DEFINITION OF EXPRESSION R ESIDENT WAS REVISED AS FOLLOWS: 1. FOR THE PURPOSES OF THIS AGREEMENT THE TERM 'RES IDENT OF A CONTRACTING STATE' MEANS: (A) IN THE CASE OF INDIA: ANY PERSON WHO UNDER THE LAWS OF INDIA IS LIABLE TO TAX THEREIN BY REASON OF HIS DOMICILE RE SIDENCE PLACE OF MANAGEMENT OR ANY OTHER CRITERION OF A SIMILAR NATU RE. THIS TERM HOWEVER DOES NOT INCLUDE ANY PERSON WHO IS LIABLE TO TAX IN INDIA IN RESPECT ONLY OF INCOME FROM SOURCES IN INDIA; AN D (B) IN THE CASE OF THE UNITED ARAB EMIRATES: AN IND IVIDUAL WHO IS PRESENT IN THE UAE FOR A PERIOD OR PERIODS TOTALING IN THE AGGREGATE AT LEAST 183 DAYS IN THE CALENDAR YEAR CO NCERNED AND A COMPANY WHICH IS INCORPORATED IN THE UAE AND WHICH IS MANAGED AND CONTROLLED WHOLLY IN UAE. 10. THE REQUIREMENT OF ACTUAL LIABILITY TO TAX FOR THE RESIDENTS IN UAE WAS THUS CONSCIOUSLY REMOVED FROM THE DEFINITION OF RESIDENT OF A CONTRACTING STATE. AS NOTED BY HONBLE DELHI HIGH COURT IN THE CASE OF ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 14 OF 18 EMIRATES SHIPPING LINE FZE VS ADIT [(2012) 349 ITR 493 @519 (DEL)] IN THE CONTEXT OF THIS AMENDED DEFINITION OF RE SIDENT OF A CONTRACTING STATE SO FAR AS A UAE TAX RESIDENT IS CONCERNED UNDER THE AMENDED ARTICLE THE REQUIREMENT OF LIABILITY T O TAX HAS BEEN DONE AWAY WITH . IT CANNOT THEREFORE BE ANY LONGER OPEN TO THE ASSESSING OFFICER TO DECLINE THE TREATY PROTECTION TO A UAE TAX RESIDENT IN RESPECT OF INDIA SOURCED INCOME ON THE GROUND THAT THE UAE TAX RESIDENT HAS NOT ACTUALLY BEEN TAXED IN RESPECT OF HIS INCOME IN UAE. TO THAT EXTENT LEARNED DEPARTMENTAL REPRESENTATIVE IS COMPLETELY IN ERROR AND WE REJECT HIS STAND ON THIS ISSUE. 11. THE AMENDMENT OF TREATY DEFINITION FOR RESIDEN T IN A CONTRACTING STATE HOWEVER DID COME WITH A BUILT IN CHECK TO ENSURE THAT THIS PROVISION IS NOT ABUSED BY INCORPORATING SPECIAL PU RPOSE VEHICLES IN UAE ONLY TO SEEK UNDUE BENEFITS IN INDIA. AS A PLAI N READING OF THE ARTICLE 29 SHOWS THIS ARTICLE SEEKS TO DECLINE THE TREATY BENEFITS IN A CASE IN WHICH MAIN PURPOSE OR ONE OF THE MAIN PURP OSES OF THE CREATION OF AN ENTITY IS TO OBTAIN BENEFITS OF THA T BENEFITS OF THIS AGREEMENT WHICH WOULD OTHERWISE NOT BE AVAILABLE. I N OTHER WORDS ONLY WHEN CREATION OF AN ENTITY IS PART OF MANOEUVRING WHOLLY OR MAINLY TO OBTAIN THE BENEFITS OF THE INDIA UAE TAX TREATY WHI CH WOULD NOT BE OTHERWISE AVAILABLE THE BENEFITS OF INDIA UAE TAX TREATY ARE TO BE DECLINED UNDER ARTICLE 29. EVEN THIS LIMITATION OF BENEFIT CLAUSE IS SUBJECT TO THE RIDER THAT THE CASES OF LEGAL ENTITI ES NOT HAVING BONAFIDE BUSINESS ACTIVITIES SHALL BE COVERED BY THIS ARTICL E. IN OTHER WORDS AS LONG AS SUCH ENTITIES HAVE BONAFIDE BUSINESS ACTIVI TIES THE PROVISIONS OF ARTICLE 29 CANNOT BE PRESSED INTO SERVICE AT ALL BY A TAX JURISDICTION. HOWEVER FOR THE REASONS WE WILL SET OUT IN A SHORT WHILE IT IS NOT REALLY NECESSARY TO GO INTO THAT ASPECT OF THE MATTER AT A LL. WE HAVE NOTED THAT THE ASSESSING OFFICER HAS GIVEN TWO REASONS FO R INVOKING ARTICLE 29- FIRST THAT THE VESSEL IS OWNED BY AN ENTITY BA SED IN MARSHALL ISLANDS WHICH HAS NO TAX TREATY WITH INDIA; AND SECOND T HAT THE ASSESSEE COMPANY IS OWNED BY SHAREHOLDERS IN SWITZERLAND A ND SINCE THE INCOME FROM OPERATIONS OF SHIPS OF THE SWITZERLAND BASED ENTITIES IN INTERNATIONAL TRAFFIC IS NOT COVERED BY ARTICLE 8 O F INDIA SWITZERLAND DTAA IF BOTH THE SWISS SHAREHOLDERS WHICH WHOLLY OWN CAPITAL OF THE ASSESSEE COMPANY WERE TO CARRY ON BUSINESS DIRECTL Y THE TREATY PROTECTION WOULD NOT HAVE BEEN AVAILABLE 12. NONE OF THESE REASONS IN OUR CONSIDERED VIEW ARE SUSTAINABLE IN LAW. 13. WE FIND THAT THOUGH THE MERCHANT VESSEL IN QUES TION IS INDEED OWNED BY A MARSHALL ISLANDS BASED ENTITY IT IS AN UNDISPUTED POSITION THAT THE VESSEL IS GIVEN TO THE ASSESSEE UNDER A LO NG TERM TIME CHARTER ARRANGEMENT AND THAT UNDER ARTICLE 8 OWNERSHIP O F THE VESSEL IS NOT A SINE QUA NON FOR AVAILING TREATY PROTECTION OF SHIP PING INCOME. ARTICLE 8(1) PROVIDES THAT PROFITS DERIVED BY AN ENTERPRISE OF A CONTRACTING ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 15 OF 18 STATE FROM THE OPERATION BY THAT ENTERPRISE OF SHIP S IN INTERNATIONAL TRAFFIC SHALL BE TAXABLE ONLY IN THAT STATE AND ESSENTIALLY PROFITS FROM OPERATION OF SHIPS IN INTE RNATIONAL TRAFFIC WILL ALSO COVER THE SITUATIONS IN WHICH THE PROFITS ARE EARNED FROM OPERATING THE SHIPS IRRESPECTIVE OF WHETHER OR NOT SUCH SHIPS ARE OWNED BY THE ENTERPRISE CLAIMING THE TREATY PROTECTION. ARTICLE 29 CAN BE PRESSED INTO SERVICE ONLY WHEN MAIN PURPOSE OR ONE OF THE MAIN PURPOSES OF THE CREATION OF AN ENTITY WAS TO OBTAIN BENEFITS OF TH AT BENEFITS OF THIS AGREEMENT WHICH WOULD OTHERWISE NOT BE AVAILABLE BU T THEN SINCE NOTHING REALLY TURNS ON THE SITUS OF OWNERSHIP OF T HE SHIPS SO FAR AS TREATY BENEFITS ON THE FACTS OF THIS CASE ARE CON CERNED THE FACT OF THE SHIPS BEING OWNED BY AN ENTITY IN MARSHALL ISLANDS IS WHOLLY IRRELEVANT FOR INVOKING ARTICLE 29. 14. COMING TO THE SECOND GROUND ON WHICH THE ASSESS ING OFFICER HAD INVOKED ARTICLE 29 IT HAS BEEN STATED THAT THE INC OME FROM OPERATIONS OF SHIPS OF THE SWITZERLAND BASED ENTITIES IN INTER NATIONAL TRAFFIC IS NOT COVERED BY ARTICLE 8 OF INDIA SWITZERLAND DTAA [(19 95) 214 ITR (STATUTE) 223; INDO SWISS TAX TREATY IN SHORT] AN D THEREFORE IF BOTH THE SWISS SHAREHOLDERS WHICH WHOLLY OWN CAPITAL OF THE ASSESSEE COMPANY WERE TO CARRY ON BUSINESS DIRECTLY THE TR EATY PROTECTION WOULD NOT HAVE BEEN AVAILABLE. 15. THIS LINE OF REASONING IS CLEARLY FALLACIOUS IN ASMUCH AS THE ASSESSMENT YEAR BEFORE US IS POST THE AMENDMENT VID E PROTOCOL DATED 16 TH FEBRUARY 2000 [NOTIFICATION NO. 35 OF 2001 DATED 7 TH FEBRUARY 2001; 165 CTR (STATUTE) 47] WHICH GIVES RESIDUARY T AXATION RIGHTS TO THE RESIDENCE JURISDICTION. WHILE IT IS INDEED CORR ECT THAT ARTICLE 8 OF INDO SWISS TAX TREATY DOES NOT COVER INCOME FROM OP ERATION OF SHIPS IN INTERNATIONAL TRAFFIC AND RESTRICTS ITSELF TO INCOM E OPERATION OF AIRCRAFT IN INTERNATIONAL TRAFFIC ARTICLE 22(1) INSERTED WITH EFFECT FROM 1 ST APRIL 2001 PROVIDES THAT ITEMS OF INCOME OF A RESIDENT OF A CONTRACTING STATE WHEREVER ARISING NOT DEALT WITH IN THE FORE GOING ARTICLES OF THIS AGREEMENT SHALL BE TAXABLE ONLY IN THAT STATE . THERE IS NO DISPUTE AND AS A MATTER OF FACT IT HAS BEEN THE CA SE OF THE ASSESSING OFFICER THAT INCOME OF OPERATION OF SHIPS IN INTER NATIONAL TRAFFIC IS NOT SPECIFICALLY DEALT WITH IN THE INDO SWISS DTAA. WHI LE ON THIS ASPECT OF THE MATTER A USEFUL REFERENCE MAY ALSO BE MADE TO THE DECISION OF THIS TRIBUNAL IN THE CASE OF ADIT VS MEDITERRANEAN SHIPPING CO SA [(2013) 56 SOT 278 (MUM)] . IN EFFECT THEREFORE WHETHER A SWISS TAX RESIDENT EARNS INDIA SOURCED INCOME FROM OPERATIONS OF SHIPS IN INTERNATIONAL TRAFFIC IN INDIA OR WHETHER A UAE TAX RESIDENT EARNS INDIAN SOURCED INCOME FROM OPERATIONS OF SHIPS IN INTERNAT IONAL TRAFFIC THE INCOME IS NOT TAXABLE IN INDIA- IN THE FORMER CASE BECAUSE OF THE PROVISIONS OF ARTICLE 22(1) OF INDO SWISS TAX TREAT Y AND IN THE LATER CASE OF BECAUSE OF THE PROVISIONS OF SECTION 8 OF INDIA UAE TAX TREATY. ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 16 OF 18 16. AS A COROLLARY TO THIS LEGAL POSITION THE CON DITION PRECEDENT FOR INVOKING ARTICLE 29 OF INDO UAE TAX TREATY I.E. M AIN PURPOSE OR ONE OF THE MAIN PURPOSES OF THE CREATION OF THE ASSESSEE E NTITY BEING TO OBTAIN BENEFIT OR BENEFITS OF INDO UAE TAX TREATY WHICH WOULD OTHERWISE NOT BE AVAILABLE IS NOT FULFILLED. WHEN TREATY PRO TECTION IN RESPECT OF INCOME OF SUCH A NATURE WAS ANYWAY AVAILABLE THOUG H UNDER A DIFFERENT KIND OF PROVISION OF THE INDO SWISS TAX T REATY THE ASSESSEE ENTITY CANNOT BE SAID TO HAVE BEEN CREATED FOR THE PURPOSE OF AVAILING INDO UAE TAX TREATY BENEFITS. THE ACTION OF THE ASS ESSING OFFICER IN INVOKING THE PROVISIONS OF ARTICLE 29 IS VITIATED I N LAW ON THIS COUNT AS WELL. 17. IN VIEW OF THE REASONS SET OUT ABOVE THE ASSES SING OFFICER WAS CLEARLY IN ERROR IN INVOKING THE PROVISIONS OF ARTI CLE 29 ON THE FACTS OF THIS CASE. THE CONDITIONS PRECEDENT FOR INVOKING TH IS PROVISION I.E. CREATION OF THE ASSESSEE ENTITY WHOLLY OR MAINLY T O OBTAIN THE BENEFITS OF THE INDIA UAE TAX TREATY WHICH WOULD NOT BE OTHERWISE AVAILABLE COULD NOT HAVE BEEN FULFILLED ON THE FACTS OF THIS CASE AS THE ASSESSEE WAS ANYWAY LIABLE FOR TREATY PROTECTION OF ITS INDI A SOURCED INCOME FROM OPERATIONS OF SHIPS IN INTERNATIONAL TRAFFIC WHETHE R THE BUSINESS WAS CARRIED OUT FROM SWITZERLAND OR FROM UAE AND IRRESP ECTIVE OF THE FACT WHETHER OWNER OF THE VESSEL WAS IN MARSHALL ISLANDS OR ANYWHERE ELSE. 18. COMING TO THE QUESTION AS TO WHETHER THE ASSESS EE QUALIFIED TO BE A RESIDENT OF UAE UNDER ARTICLE 4(1) ALL THAT I S REQUIRED IS THAT THE COMPANY IS INCORPORATED IN THE UAE AND WHICH IS MANAGED AND CONTROLLED WHOLLY IN UAE. WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE IS INCORPORATED IN THE UAE. AS REGARDS THE STAND OF THE ASSESSING OFFICER THAT THE DIRECTORS OF THE ASSESSE E COMPANY ARE NOT UAE NATIONALS THIS IS WHOLLY IRRELEVANT AS THE DIR ECTORS ARE RESIDENTS OF THE UAE AND NATIONALITY OF THE DIRECTORS DEHORS TH EIR PLACE OF RESIDENCE AND BUSINESS ACTIVITY IS NOT DECISIVE OF THE FACT AS TO WHETHER OR NOT THE COMPANY IS MANAGED AND CONTROLLE D IN THE UAE. WE ALSO FIND THAT THE DIRECTORS OF THE ASSESSEE CO MPANY ARE RESIDENTS OF UAE AND THE BOARD AS ALSO SHAREHOLDERS MEETING S HAVE TAKEN PLACE IN THE UAE. COPIES OF THE MINUTES OF THESE ME ETINGS HAVE ALSO BEEN PLACED BEFORE US AND NO DEFECTS HAVE BEEN POI NTED OUT IN THE SAME. WE HAVE ALSO NOTED AS EVIDENT FROM THE ANNU AL ACCOUNTS AND THE LIST OF EMPLOYEES FILED BEFORE US THAT THE ASS ESSEE COMPANY IS NOT MERELY A PAPER COMPANY AND HAS ACTUALLY CARRIED OUT MATERIAL BUSINESS OPERATIONS FROM THE UAE. AS REGARDS THE ISSUE RAIS ED BY THE ASSESSING OFFICER ON THE WORDING OF THE TAX RESIDEN CY CERTIFICATE ISSUED BY THE MINISTRY OF FINANCE AND THE DISCLAIMER GIVE N THEREON WE FIND IT WHOLLY DEVOID OF ANY LEGALLY SUSTAINABLE MERITS SO FAR AS ELIGIBILITY FOR TREATY BENEFITS ARE CONCERNED. SUCH HEDGING IN THE OFFICIAL CERTIFICATIONS BY THE STATUTORY AUTHORITIES IS TOO COMMON A SITUA TION AND A PART OF THE STANDARD OPERATING PRACTICES TO BE REASON ENOUGH T O DRAW AN ADVERSE INFERENCE. IN ANY CASE NOTHING TURNS ON THIS CERTI FICATE PER SE AND IN A ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 17 OF 18 SITUATION LIKE THE ONE THAT WE ARE SEIZED OF I.E. WHEN ALL THE CORROBORATIVE FACTS IN SUPPORT OF THE CERTIFICATI ON ARE ON RECORD THERE IS NO REASON TO REJECT THE TREATY ENTITLEMENTS ON T HE BASIS OF WHAT THE ASSESSING OFFICER PERCEIVES AS SHORTCOMINGS IN THE TAX RESIDENCY CERTIFICATE. AN ISSUE IS THEN RAISED BY THE ASSESSI NG OFFICER ABOUT THE LIMITED THREE YEAR PERIOD OF COMMERCIAL LICENCE ISS UED BY THE GOVERNMENT OF UAE BUT IT IS DIFFICULT TO EVEN UNDER STAND MUCH LESS APPROVE THIS OBJECTION. WHETHER THE ASSESSEE IS GI VEN A PERPETUAL LICENCE TO CARRY ON BUSINESS IN THE UAE OR WHETHER THE LICENCE IS RENEWED EVERY YEAR DOES NOT IN OUR CONSIDERED VIE W AFFECT THE FACT THAT THE ASSESSEE WAS CARRYING ON BUSINESS IN THE R ELEVANT PREVIOUS YEAR. THE APPROACH OF THE ASSESSING OFFICER IS TOO PEDANTIC AND IS ANYWAY SWAYED BY THE CONSIDERATIONS WHICH ARE NOT R EALLY RELEVANT IN THE PRESENT CONTEXT. 19. GIVEN THESE FACTS IN OUR CONSIDERED VIEW THE APPREHENSIONS RAISED BY THE ASSESSING OFFICER ARE DEVOID OF ANY L EGALLY SUSTAINABLE BASIS AND ARE NOT SUPPORTED BY ANY COGENT MATERIAL. THE LOB CLAUSE AS SET OUT IN ARTICLE 29 OF THE INDIA UAE TREATY AS SEE HAVE SEEN EARLIER IN THIS ORDER COULD NOT HAVE BEEN INVOKED ON THE FACTS OF THIS CASE EITHER. IN SUCH A SITUATION ONCE THERE IS REA SONABLE EVIDENCE TO SUGGEST THAT THE AFFAIRS OF THE COMPANY ARE CONDUCT ED FROM UAE AS IS THE CASE BEFORE US AND THERE IS NO MATERIAL TO CON TROVERT THE SAME OR TO ESTABLISH THAT THE COMPANY IS CONTROLLED OR MANA GED FROM OUTSIDE UAE LEARNED CIT(A) WAS INDEED QUITE JUSTIFIED IN R EVERSING THE ACTION OF THE ASSESSING OFFICER AND IN GRANTING THE BENEFI TS OF INDIA UAE TAX TREATY. 20. IN VIEW OF THE DETAILED REASONS SET OUT ABOVE AS ALSO BEARING IN MIND ENTIRETY OF THE CASE WE APPROVE THE CONCLUSIO NS ARRIVED AT BY THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE MATT ER. 9. AS EVIDENT FROM THE ABOVE OBSERVATIONS IN ORDER TO INVOKE ARTICLE 29 WHAT IS TO BE ESTABLISHED IS THAT IF THE ASSESSEE COMPANY W AS NOT TO BE FORMED IN THE UAE THE ASSESSEE WOULD NOT HAVE BEEN ENTITLED FOR SUCH BENEFITS. WE HAVE NOTED THAT THE ENTIRE SHARE CAPITAL OF THE ASSESSEE COMPANY IS HELD BY GERMAN ENTITIES BY THE NAME OF MARTRADE SHIPPING + TRANSPORT GMBH AND C.R. CONSULTING & HOLDING GMBH BUT THEN IN THE INDO-GERMAN DTAA ALSO SIMILA R TREATY PROTECTION WITH REGARD TO TAXABILITY OF SHIPPING PROFITS ONLY IN THE STATE OF RESIDENTS ARE AVAILABLE. THEREFORE WHETHER THE COMPANY WAS TO BE FORMED IN UAE OR IN G ERMANY IT WOULD NOT HAVE ANY MATERIAL DIFFERENCE SO FAR AS NON-TAXABILITY OF SAI D INCOME IN INDIA IS CONCERNED. AS COROLLARY TO THIS LEGAL POSITION MERELY BECAUSE TH E COMPANY IS SET UP IN UAE AND NOT IN THE COUNTRY TO WHICH THE CAPITAL BELONGS THE AS SESSEE DOES NOT GET ANY BENEFITS OF THE INDO-UAE AGREEMENT WHICH WOULD HAVE BEEN OTHERW ISE AVAILABLE. THE REQUIREMENT NECESSARY FOR INVOKING ARTICLE 29 IS TH US NOT FULFILLED IN THE PRESENT CASE. IN VIEW OF THE MATTER AND RESPECTFULLY FOLLOWING TH E CO-ORDINATE BENCH DECISION IN THE ITA NOS. 7 TO 9/RJT/2011 ITO VS. MARTRADE GULF LOGISTICS FZCO-UAE ASSESSMENT YEAR: 2008-09 PAGE 18 OF 18 CASE OF MUR SHIPPING DMC CO. (SUPRA) WE REJECT THE GRIEVANCES OF THE ASSESSING OFFICER ON THIS COUNT ALSO. AS REGARDS THE WORDIN GS OF THE TAX RESIDENCY CERTIFICATE BASED ON WHICH THE ASSESSING OFFICER H AS CONCLUDED THAT THE COMPANY WAS FORMED ONLY FOR THE PURPOSE OF AVAILING INDO-UA E TAX TREATY BENEFITS WE MAY MENTION THAT NEITHER THE INFERENCE OF THE ASSESSING OFFICER IS BASED ON ANY LEGALLY SUSTAINABLE MATERIAL OR EVEN COMMON SENSE NOR THIS TAX RESIDENCY CERTIFICATE IS RELEVANT IN ANY WAY. THERE IS NO DISPUTE THAT THE ASSESSEE WAS LIABLE TO TAX IN UAE BY THE VIRTUE OF INCORPORATION IN UAE AND THEREFORE THE ASSESSEE WAS COVERED BY DEFINITION OF RESIDENT OF CONTRACTING STATE UNDER ARTICLE 4(1) OF THE INDO-UAE TAX TREATY. 10. IN VIEW OF THE ABOVE DISCUSSIONS AND BEARING IN MI ND ENTIRETY OF THE CASE WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LEARNED C IT(A) AND DECLINE TO INTERFERE IN THE MATTER. 11. IN THE RESULT ALL THE THREE APPEALS ARE DISMIS SED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 28 TH DAY OF NOVEMBER 2017. SD/- SD/- RAJPAL YADAV PRA MOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 28 TH DAY OF NOVEMBER 2017 **AM**BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDE NT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT 1. DATE OF DICTATION: ..28.11.2017- 6 PAGES DICTAT ION PAD ATTACHED -...... ... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ....28.11.2017....... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: 28.11.2017....... . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 28.11.2017.. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : 03.12.2017.. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE 8. ON THE ORDER: ..