CROWN CAPITAL LTD, MUMBAI v. ADIT (IT) 1(2), MUMBAI

ITA 8147/MUM/2010 | 2007-2008
Pronouncement Date: 19-01-2011 | Result: Allowed

Appeal Details

RSA Number 814719914 RSA 2010
Assessee PAN AACCC6047L
Bench Mumbai
Appeal Number ITA 8147/MUM/2010
Duration Of Justice 1 month(s) 24 day(s)
Appellant CROWN CAPITAL LTD, MUMBAI
Respondent ADIT (IT) 1(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 19-01-2011
Assessment Year 2007-2008
Appeal Filed On 25-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 8147/MUM/2010 (ASSESSMENT YEAR: 2007-08) M/S. CROWN CAPITAL LIMITED ADIT (INTERNATIONAL TAXA TION) 1(2) C/O. S.R. BATLIBOI & CO. SCINDIA HOUSE N.M. MARG 18TH FLOOR EXPRESS TOWERS VS. MUMBAI 400038 NARIMAN POINT MUMBAI 400021 PAN - AACCC 6047 L APPELLANT RESPONDENT APPELLANT BY: S/SHRI M.P. LOHIA & MANOJ ANCHALIA RESPONDENT BY: SHRI AJIT KUMAR SINHA O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER PA SSED BY THE A.O. IN PURSUANCE OF THE DIRECTIONS ISSUED BY THE DISPUTE R ESOLUTION PANEL-I (DRP) MUMBAI DATED 22.10.2010. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - GENERAL 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED AO BASED ON DIRECTIONS OF DRP ERRED IN ASSE SSING THE TOTAL INCOME AT ` 2 90 95 13 870/- AS AGAINST INCOME OF RS NIL COMPUT ED BY THE APPELLANT. DIRECTIONS OF DPR NOT CONSIDERED BY THE AO 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED AO HAS ERRED IN NOT CONSIDERING THE DIRECTI ONS OF THE DRP AND DENYING THE BENEFITS OF INDIA-UAE DOUBLE TAXATION A VOIDANCE AGREEMENT (TREATY) BY APPLYING THE AMENDED ARTICLE 4 AND ARTICLE 29 OF THE TREATY WITHOUT APPRECIATING THAT THE SAME AR E NOT APPLICABLE TO THE PREVIOUS YEAR UNDER APPEAL; APPELLANT NOT LIABLE TO TAX UNDER THE TREATY WITHOUT PREJUDICE TO GROUND NO. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED AO BASED ON DIRE CTIONS OF DRP: ITA NO. 8147/MUM/2010 M/S. CROWN CAPITAL LIMITED 2 3. ERRED IN HOLDING THAT THE APPELLANT IS NOT ENTIT LED TO THE BENEFITS OF THE TREATY SINCE THE APPELLANT IS NOT LIABLE TO TAX I N UAE AND HENCE NOT A RESIDENT OF UAE IN TERMS OF ARTICLE 4 OF THE TREA TY; 4. FAILED TO APPRECIATE THAT THE EXPRESSION LIABLE TO TAX UNDER ARTICLE 4 OF THE TREATY NOT ONLY INCLUDES THE PERSON ACTUALL Y LIABLE TO TAX IN UAE BY VIRTUE OF AN EXISTING LEGAL PROVISION BUT WOULD ALSO COVER THE CASES WHERE UAE HA THE RIGHT TO TAX SUCH PERSONS; LEVEY OF INTEREST UNDER SECTION 234B OR THE ACT 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED AO ERRED IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT. 3. BRIEFLY STATED THE A.O. PROPOSED DRAFT ASSESSMENT ORDER IN THE CASE OF M/S. CROWN CAPITAL LTD. WHICH IS A FIRM REGISTERED IN UAE. THE SAID ASSESSEE FILED RETURN OF INCOME DECLARING NIL INCOM E ON 29.10.2007 INTER ALIA CLAIMING THAT LONG TERM CAPITAL GAINS OF ` 20 331 007 856/- WERE EXEMPT UNDER SECTION 10(38) OF THE I.T. ACT AND SHORT TERM CAPITAL GAINS OF ` 3 149 099 660/- WERE EXEMPT BY CLAIMING BENEFIT UND ER ARTICLE 13 OF INDIA- UAE TREATY. IN SUPPORT OF THE FACT THAT THE CONTROL AND MAINTENANCE OF THE COMPANY IS IN UAE THE ASSESSEE HAS FILED CERTIFIED COPIES OF CERTIFICATE OF INCORPORATION AND OTHER DETAILS AS REQUIRED BY THE A.O. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE A.O. PROPOSED TO TA X THE SHORT TERM CAPITAL GAINS CONSEQUENT TO THE MODIFIED INDIA-UAE TAX TREA TY AND PROPOSED A DRAFT ASSESSMENT ORDER DATED 24.12.2009 TREATING THE SHOR T TERM CAPITAL GAINS AS INCOME AT ` 2 909 513 870/- AFTER SETTING OFF OF CARRY FORWARD SHORT TERM CAPITAL LOSSES. THE DISPUTE RESOLUTION PANEL-I AFTE R CONSIDERING THE OBJECTIONS OF THE ASSESSEE GAVE DIRECTIONS UNDER SE CTION 144C(5) HOLDING THAT THE OBJECTIONS RELATING TO APPLICATION OF AMENDED A RTICLE 29 FOR A.Y. 2007-08 WAS CORRECT AS THE AMENDED PROVISIONS AS WELL AS PR OTOCOL WOULD APPLY W.E.F. 1 ST APRIL 2008 AND ACCORDINGLY NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. HOWEVER THE DRP CONSIDERED THAT IN THE INSTANT CASE THE ASSESSEE IS NOT LIABLE TO INCOME TAX IN UAE AS PER THE DOMESTIC TAX LAW OF UAE DTAA AS THERE IS NO LIABILITY TO TAX IN UAE. AC CORDINGLY AS PER THE DIRECTIONS OF THE DRP THE ASSESSMENT ORDER WAS PASS ED ON 22.10.2010 BY THE A.O. BRINGING TO TAX THE SHORT TERM CAPITAL GAI NS HOLDING THAT THE ASSESSEE IS NOT COVERED BY ARTICLE 4 OF THE DTAA AN D ACCORDINGLY THE ITA NO. 8147/MUM/2010 M/S. CROWN CAPITAL LIMITED 3 EXEMPTION UNDER ARTICLE 13 COULD NOT BE ALLOWED. TH E ASSESSEE IS QUESTIONING THE ABOVE ACTION OF THE A.O. 4. THE LEARNED COUNSEL SUBMITTED THAT THE DTAA BETWEEN INDIA AND UAE WERE CONSIDERED BY THE COORDINATE BENCHES IN VARIOU S DECISIONS AND MORE SO IN THE CASE OF ADIT VS. GREEN EMIRATE SHIPPING A ND TRAVELS 286 ITR 60 (AT). THE LEARNED COUNSEL FURTHER EXPLAINED THE PRO VISIONS OF INDIA-UAEE TREATY AS WELL AS VARIOUS COORDINATE BENCH DECISION S: - I) ADIT VS. GREEN EMIRATE SHIPPING AND TRAVELS 286 IT R 60 (AT) II) ITO VS. AMERICAN EXPRESS BANK LTD. ITAT NO. 4650/MU M/2007 DATED 09.07.2000 III) ITO VS. RAMESHKUMAR GOENKA 39 SOT 132 IV) ITO VS. BIRLA SUNLIFE MANAGEMENT CO. LTD. ITA NO. 3 734/MUM/ 2008 V) HINDUSTAN PETROLEUM CORPORATION LTD. VS. ADIT ITA N OS. 5273 5274 5761 & 5762/MUM/2004 VI) MEERA BHATIA VS. ITO ITA NO. 1876/MUM/2006 5. THE FINDINGS OF THE DRP WITH REFERENCE TO NON-APPLI CATION OF AMENDED PROTOCOL AND ALSO THE FACT THAT ASSESSEE WAS ENTITL ED TO THE TREATY BENEFITS EVENTHOUGH THE SAME ARE NOT CLAIMED IN A.Y. 2006-7 ON THE BASIS OF WHICH A.O. ALSO CONSIDERED THAT ASSESSEE IS NOT ELIGIBLE FOR TREATY BENEFITS. IT WAS ALSO FURTHER SUBMITTED THAT THE A.O. HAS ALLOWED TH E SET OFF OF CARRY FORWARD SHORT TERM CAPITAL LOSS OF A.Y. 2006-07 WHICH IS NO T AN ISSUE IN THE APPEAL. IT WAS HIS SUBMISSION THAT AS PER THE PRE-AMENDED I NDO-UAE ASSESSEE IS NOT LIABLE TO TAX ON THE BASIS OF INCORPORATION IN UAE AND ACCORDINGLY THE TREATY BENEFITS ARE EXTENDABLE TO THE ASSESSEE AND ASSESSI NG OFFICERS ORDER IS NOT CORRECT ON THIS ISSUE. 6. THE LEARNED D.R. HOWEVER RELIED ON THE ORDERS OF THE DRP TO SUBMIT THAT THERE IS NO TAX IN UAE OTHER THAN FEW FOREIGN BANKS AND PETROLEUM COMPANIES AND AS PER THE FINDINGS OF THE DRP SINCE THE ASSESSEE CANNOT BE TAKEN AS A TAXABLE ENTITY IN UAE THE BENEFITS OF TR EATY CANNOT BE APPLIED AS THE TREATY WILL APPLY ON WHEN THERE IS DOUBLE TAX. HE ALSO REFERRED TO VARIOUS PRINCIPLES ON THIS ISSUE. ITA NO. 8147/MUM/2010 M/S. CROWN CAPITAL LIMITED 4 7. WE HAVE CONSIDERED THE ISSUE AND THE REVENUES CONT ENTIONS. THE ONLY REASON WHY THE DRP CONSIDERED THAT ASSESSEE IS NOT ELIGIBLE FOR THE BENEFITS OF THE TREAT IS BECAUSE OF NON-TAXABILITY OF CCL IN UAE AND THE FINDINGS OF THE DRP ARE AS UNDER: - THE FACTS OF THE CASE ARE THAT IN THE YEAR UNDER C ONSIDERATION THE ASSESSEE EARNED INCOME FROM SHORT TERM CAPITAL GAIN S AT RS3 34 31 15 566/- AND LONG TERM CAPITAL GAINS OF R S20 33 10 07 856/-. WHILE THE LONG TERM CAPITAL GAINS HAVE ALSO CLAIMED AS EXEMPT U/S. 10(38) OF THE ACT THE SHORT TERM CAPITAL GAINS HAV E BEEN CLAIMED AS EXEMPT FROM TAX UNDER ARTICLE 13 OF THE INDIA UAE T REATY. THE A.O. HAS PROCEEDED ON THE WRONG PREMISE THAT THE AMENDED PRO VISIONS OF THE INDIA UAE TAX TREATY WHICH CAME INTO EFFECT ONLY FR OM 1 ST APRIL 2008 WOULD BE APPLICABLE IN THE INSTANT CASE AND HAS DEN IED THE EXEMPTION OF SHORT TERM CAPITAL GAINS BY APPLYING THE PROVISIONS OF AMENDED ARTICLE 4 AND ARTICLE 29 OF THE TAX TREATY BETWEEN INDIA AND UAE. AS MENTIONED ABOVE THE CORRECT AGREEMENT WHICH WILL BE APPLICAB LE IN THE ASSESSEES CASE IS THE DTAA DATED 29.04.1992 WHICH CAME INTO EFFECT FROM 1 ST APRIL 1994. UNDER ARTICLE 13(3) OF THIS DTAA GAIN S FROM ALIENATION OF ANY PROPERTY OTHER THAN THOSE MENTIONED IN PARA 1 & 2 OF THIS ARTICLE WILL BE TAXABLE ONLY IN THE STATE OF WHICH THE ALIENATOR IS A RESIDENT I.E. UAE. HOWEVER THE PROVISIONS OF THE INDIA UAE DTAA WILL BE APPLICABLE ONLY IF THE ASSESSEE QUALIFIES AS A RESIDENT OF UAE UNDER A RTICLE 4 OF THE INDIA UAE DTAA. ARTICLE 4 OF THE SAID AGREEMENT READS AS UNDER: - FOR THE PURPOSE OF THIS AGREEMENT THE TERM RESID ENT OF A CONTRACTING SATE MEANS ANY PERSON WHO UNDER THE LAWS OF THAT STATE IS LIABLE TO TAX THEREIN BY REASON OF HIS DOMICILE RESIDENCE P LACE OF MANAGEMENT PLACE OF INCORPORATION OR ANY OTHER CRITERION OF A SIMILAR NATURE. IN THE INSTANT CASE THE ASSESSEE IS NOT LIABLE TO INCOME TAX IN UAE AS PER THE DOMESTIC TAX LAW OF UAE (THE DUBAI DECREE). ONLY CERTAIN BRANCHES OF FOREIGN BANKS AND A FEW PETROL/OIL COMP ANIES ARE LIABLE TO TAX IN UAE. THE ASSESSEE IS NEITHER A BRANCH OF A F OREIGN BANK NOR AN OIL COMPANY. IT IS THEREFORE NOT LIABLE TO INCOME TAX IN UAE. THUS THE ASSESSEE DOES NOT QUALIFY TO BE A RESIDENT OF UAE IN TERMS OF ARTICLE 4 OF THE PRE-AMENDED INDIA UAE DTAA. SINCE THE ASSESSEE DOES NOT QUALIFY AS RESIDENT UNDER ARTICLE 4 IT WILL NOT BE ELIGIBL E FOR THE BENEFITS OF THE PRE-AMENDED INDIA UAE DTAA AND ACCORDINGLY WILL ALS O NOT BE ELIGIBLE FOR EXEMPTION UNDER ARTICLE 13(3) OF THAT DTAA IN RESPECT OF SHORT TERM CAPITAL GAINS ARISING TO IT IN INDIA AT RS.3 34 31 15 566/-. THUS THE ADDITION MADE BY THE A.O. IS UPHELD THOUGH FOR DIF FERENT REASONS. 8. THE A.O. HAS REPEATED THE ABOVE OPINION OF THE DRP IN HIS ORDER. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL THIS ISS UE WAS ALSO CONSIDERED BY THE COORDINATE BENCH IN THE CASE OF ADIT VS. GREEN EMIRATE SHIPPING AND ITA NO. 8147/MUM/2010 M/S. CROWN CAPITAL LIMITED 5 TRAVELS 286 ITR 60 (AT) WHEREIN ON SIMILAR FACTS IN ASSESSEES CASE THE ISSUE WAS CONSIDERED AND HELD AS UNDER: - A TAX TREATY NOT ONLY PREVENTS 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 THE UAE RESIDENTS IN SPECIFIED CIRCUMSTANCES VESTS ONLY WIT H THE GOVERNMENT OF THE UAE THAT RIGHT WHETHER EXERCISED OR NOT CONT INUES TO REMAIN THE EXCLUSIVE RIGHT OF THE GOVERNMENT OF THE UAE. THE E XEMPTION AGREED TO UNDER THE ASSIGNMENT OR DISTRIBUTIVE RULE IS I NDEPENDENT OF WHETHER THE CONTRACTING STATE IMPOSES A TAX IN THE SITUATION TO WHICH EXEMPTION IMPLIES. THE TAXABILITY IN ONE COUNTRY IS NOT THE SINE QUA NON FOR AVAILING OF RELIEF UNDER THE TREATY FROM TAXABI LITY IN THE OTHER COUNTRY. ALL 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 INCORPORAT ION OR ANY OTHER CRITERION OF SIMILAR NATURE WHICH ESSENTIALLY REFER S TO THE FISCAL DOMICILE OF SUCH A PERSON. IN OTHER WORDS IF FISCAL DOMICIL E 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 TREA TED AS RESIDENT OF THAT CONTRACTING STATE. THE EXPRESSION LIABLE TO TAX I S NOT TO BE READ IN ISOLATION BUT IN CONJUNCTION WITH THE WORDS IMMEDIA TELY FOLLOWING IT THAT IS BY REASON OF DOMICILE RESIDENCE PLACE OF MANAGEMENT PLACE OF INCORPORATION OR ANY OTHER CRITERION OF SIMILAR NAT URE. THAT WOULD MEAN THAT MERELY A PERSON LIVING IN A CONTRACTING STATE WOULD NOT BE SUFFICIENT BUT THAT PERSON SHOULD ALSO HAVE 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 OF THAT IS DOMICILE RESIDENCE PLACE OF MANAGEMENT PLACE OF INCORPORATION ETC. ARE NO MORE THAN EXAMPLES OF LOCALITY RELATED ATTAC HMENTS THAT ATTRACT RESIDENCE TYPE TAXATION. THEREFORE AS LONG AS A PE RSON HAS SUCH LOCALITY RELATED ATTACHMENTS WHICH ATTRACT RESIDENC E 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 ACTU AL LEVY OF TAX ON THAT PERSON. THEREFORE BEING LIABLE TO TAX IN THE CON TRACTING STATE DOES NOT NECESSARILY IMPLY THAT THE PERSON SHOULD ACTUALLY B E LIABLE TO TAX IN THAT CONTRACTING STATE BY VIRTUE OF AN EXISTING LEG AL PROVISION BUT WOULD ALSO COVER CASES WHERE THAT OTHER CONTRACTING STATE HAS THE RIGHT TO TAX SUCH PERSON IRRESPECTIVE OF WHETHER OR NOT SUCH A RIGHT IS EXERCISED BY THE CONTRACTING STATE. UOI V. AZADI BACHAO ANDOLAN [2003] 263 ITR 706 (SC) ; [2003] 1 RC 742 FOLLOWED. THE ASSESSEE A SHIPPING LINE BASED IN THE UAE CLA IMED THAT IN TERMS OF ARTICLE 8 OF THE DOUBLE TAXATION AVOIDANCE AGREE MENT BETWEEN INDIA AND THE UAE ITS INCOME WAS LIABLE TO TAX ONLY IN TH E UAE. THE ASSESSING OFFICER RELYING ON THE RULING OF THE AUTH ORITY FOR ADVANCE RULINGS IN CYRIL EUGENE PEREIRA IN RE [1999] 239 I TR 650 (AAR) IN SUPPORT OF THE PROPOSITION THAT IN ORDER TO AVAIL O F THE BENEFITS OF THE TAX ITA NO. 8147/MUM/2010 M/S. CROWN CAPITAL LIMITED 6 TREATY A PERSON SHOULD NOT ONLY BE A RESIDENT OF O NE OF THE CONTRACTING STATES BUT SHOULD ALSO BE LIABLE TO TAX THEREIN. H E REJECTED THE CLAIM ON THE GROUNDS THAT THE ASSESSEE HAD FAILED TO FURNISH PROOF/EVIDENCE IN SUPPORT OF THE CLAIM THAT IT WAS A TAX RESIDENT OF THE UAE. THE COMMISSIONER (APPEALS) REVERSED THE ORDER OF THE AS SESSING OFFICER AND HELD THAT THE ASSESSEE HAD SUBMITTED THE XEROX COPY OF THE TAX RESIDENCY CERTIFI-CATE ISSUED BY THE MINISTRY OF FI NANCE AND INDUSTRY IN THE UAE AND HENCE IT WAS ENTITLED TO THE BENEFIT OF TAX TREATY. ON APPEAL BY THE DEPARTMENT : HELD DISMISSING THE APPEAL THAT THE ASSESSING OFF ICER WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE ON THE GROUND THAT IN ORDER TO AVAIL OF THE BENEFITS OF THE INDIA UAE TAX TREATY A PERSON NEEDS NOT ONLY TO BE A RESIDENT OF ONE OF THE CONTRACTING STATES BUT SHOULD ALSO BE LIABLE TO TAX THEREIN. THE ASSESSING OFFICE R COULD NOT RELY ON THE RULINGS OF THE AUTHORITY FOR ADVANCE RULINGS FOR TH E REASON THAT THE SUPREME COURT HAD NOT ACCEPTED THE RULING THAT THE AVOIDANCE OF DOUBLE TAXATION CAN ARISE ONLY WHEN TAX IS ACTUALLY PAID IN ONE OF THE CONTRACTING STATES. THE COMMISSIONER (APPEALS) ARRI VED AT THE RIGHT CONCLUSION BUT THE REASONING ADOPTED BY HIM COULD N OT BE APPROVED. OBITER : IT IS CERTAINLY MORE DESIRABLE FOR THE GO VERNMENT TO TAKE A CLEAR CUT STAND ON THE ISSUE OR LET THE MATTER BE R ESOLVED AT THE LEVEL OF GOVERNMENTS OF THE CONTRACTING STATES. THAT PERHAPS IS A BETTER SOLUTION FOR QUICKLY RESOLVING DISPUTES ON SUCH A F UNDAMENTAL ASPECT OF A TAX TREATY AS TO WHO WILL BE ELIGIBLE FOR THE BEN EFITS OF THAT TAX TREATY. SIMILAR VIEW WAS ALSO EXPRESSED IN THE CASE OF ITO VS. AMERICAN EXPRESS BANK LTD. ITA NO. 4650/MUM2007 ITO VS. RAMESHKUMAR GOENKA 39 S0T 132 AND ITO VS. BIRLA SUNLIFE MANAGEMENT CO. LTD. I TA NO. 3734/ MUM/2008 WHILE INTERPRETING THE INDO-UAE TREATY FOL LOWING THE CASE OF ADIT VS. GREEN EMIRATES SHIPPING AND TRAVELS (SUPRA ). IN THE CASE OF HINDUSTAN PETROLEUM CORPORATION LTD. VS. ADIT ITA N OS. 5273 5274 5761 & 5762/MUM/2004 THE ISSUE IS DISCUSSED ELABORATELY AND HELD AS UNDER: - 5. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. WE HAVE NOTED THAT RIGHT FROM THE ASSESSMENT STAGE IT IS UNDISP UTED POSITION THAT THE RECIPIENT COMPANY IS A COMPANY DULY INCORPORATED IN UAE BUT THE TREATY BENEFIT HAS BEEN DECLINED ONLY ON THE GROUND THAT THE ASSESSEE IS NOT PAYING ANY TAX IN THE UAE. IT HAS NEVER BEEN THE CASE OF THE AO THAT THE RECIPIENT COMPANY CALTEX AL KHALIJ (LLC) IS NOT THE RESIDENT OF UAE. IT IS INTERESTING TO NOTE THAT IN THE IMPUGNED ORDER THE LEARNED CIT(A) OBSERVED THAT FOR CLAIMING TREATY BENEFIT T HE ASSESSEE HAS TO PROVE THAT IT IS A TAX RESIDENT OF UAE AND HAS ALSO REFERRED TO DOCUMENTARY EVIDENCE LIKE 'TAX RESIDENCY CERTIFICAT E'. THE CONNOTATION OF 'TAX RESIDENCE' HOWEVER HAS NOT BEEN ELABORATE D BY THE LEARNED ITA NO. 8147/MUM/2010 M/S. CROWN CAPITAL LIMITED 7 CIT(A). BE THAT AS IT MAY A CO-ORDINATE BENCH OF T HIS TRIBUNAL IN ASSTT. DIRECTOR OF IT VS. GREEN EMIRATE SHIPPING & TRAVELS (2006) 99 TTJ (MUMBAI) 988 : (2006) 100 ITD 203 (MUMBAI) HAS HEL D THAT THE ACTUAL PAYMENT OF TAX IN ONE OF THE CONTRACTING STATES IS NOT A CONDITION PRECEDENT TO AVAIL THE BENEFITS OF THE INDO-UAE TAX TREATY IN THE OTHER CONTRACTING STATES. IN OTHER WORDS IT IS NOT NECES SARY CONTRARY TO WHAT HAS BEEN HELD SO BY THE AO THAT UNLESS A PERSON IS TAXED IN THE UAE THAT PERSON CANNOT CLAIM THE BENEFITS OF INDO-UAE T AX TREATY IN INDIA. WE MAY IN THIS REGARD REFER TO THE FOLLOWING OBSE RVATIONS MADE BY THE TRIBUNAL IN MEERA BHATIA VS. ITO (ITA NO. 1876/MUM/ 2006 ORDER DT. 29TH OCT. 2009) : '3. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE I SSUE IS COVERED BY THE TRIBUNAL S DECISION DT. 30TH NOV. 2005 IN THE C ASE OF ASSTT. DIRECTOR OF IT VS. GREEN EMIRATE SHIPPING & TRAVELS (2006) 9 9 TTJ (MUMBAI) 988 : (2006) 100 ITD 203 (MUMBAI) WHEREIN THE TRIBUNAL HAS HELD THAT ACTUAL PAYMENT OF TAX IN ONE OF THE CONTRACTING STA TES IS NOT A CONDITION PRECEDENT TO AVAIL THE BENEFITS OF DTAA IN THE OTHE R CONTRACTING STATES BECAUSE THE TAX TREATY PREVENTS NOT ONLY CURRENT TAXATION BUT ALSO POTENTIAL DOUBLE TAXATION. ONCE THE RIGHT TO TAX UAE RESIDENTS IN SPECIFIED CIRCUMSTANCES VESTS ONLY WITH PRINCIPAL S TATE OF THE UAE UNDER A TAX TREATY THAT RIGHT WHETHER THAT RIGHT EXERCISED OR NOT CONTINUES TO REMAIN EXCLUSIVE RIGHT OF THAT STATE. IN THIS CASE SPEAKING THROUGH ONE OF US (I.E. THE ACCOUNTANT MEMBER) TH E TRIBUNAL FURTHER OBSERVED AS FOLLOWS : ....AS NOTED ABOVE THE EXEMPTION AGREED TO UNDER THE ASSIGNMENT OR DISTRIBUTIVE RULE IS INDEPENDENT OF WHETHER TH E CONTRACTING STATE IMPOSES A TAX IN THE SITUATION TO WHICH EXEMPTION IMPLIES . IN THE CASE OF JOHN N. GLADDEN VS. HER MAJESTY THE QUEEN 85 TC 5188 WHICH WAS QUOTED WITH APPROVAL BY THE HON'BLE SUPREME COURT IN AZADI BACH AO ANDOLANS CASE (SUPRA) FEDERAL COURT OF CANADA HAS OBSERVED THAT THE NON-RESIDENT CAN BENEFIT FROM THE EXEMPTION (UNDER THE TREATY) REGAR DLESS OF WHETHER OR NOT HE IS TAXABLE ON THAT CAPITAL GAIN IN HIS OWN COUNTRY. IF CANADA OR THE US WERE TO ABOLISH THE CAPITAL GAINS TAX COMPLETELY WHILE THE OTHER COUNTRY DID NOT A RESIDENT OF THE COUNTRY WHICH HAS ABOLISHED THE CAP ITAL GAINS WOULD STILL BE EXEMPT FROM CAPITAL GAINS IN THAT COUNTRY . IT IS THUS CLEAR THAT TAXABILITY IN ONE COUNTRY IS NOT SINE QUA NON FOR AVAILING RELIEF UNDER THE TREATY FROM TAXABILITY IN THE OTHER COURTS. ALL THAT IS NECESSA RY FOR THIS PURPOSE IS THAT THE PERSON SHOULD BE LIABLE TO TAX IN THE CONTRACTING S TATE BY REASON OF DOMICILE RESIDENCE PLACE OF MANAGEMENT PLACE OF INCORPORAT ION OR ANY OTHER CRITERION OF SIMILAR NATURE WHICH ESSENTIALLY REFERS TO THE F ISCAL DOMICILE OF SUCH A PERSON. IN OTHER WORDS IF FISCAL DOMICILE OF A PER SON IS IN A CONTRACTING STATE IRRESPECTIVE OF WHETHER OR NOT THAT PERSON IS ACTUA LLY LIABLE TO PAY TAX IN THAT COUNTRY HE IS TO BE TREATED AS RESIDENT OF THAT CO NTRACTING STATE. THE EXPRESSION LIABLE TO TAX IS NOT TO READ IN ISOLAT ION BUT IN CONJUNCTION WITH THE WORDS IMMEDIATELY FOLLOWING IT I.E. BY REASON O F 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 FIS CAL DOMICILE IN THAT COUNTRY. THESE TESTS OF FISCAL DOMICILE WHICH ARE GIVEN BY W AY OF EXAMPLES FOLLOWING THE EXPRESSION LIABLE TO TAX BY REASON OF I.E. DOMICILE RESIDENCE PLACE OF ITA NO. 8147/MUM/2010 M/S. CROWN CAPITAL LIMITED 8 MANAGEMENT PLACE OF INCORPORATION ETC. ARE NO MO RE THAN EXAMPLES OF LOCALITY RELATED ATTACHMENTS WHICH ATTRACT RESIDENC E TYPE TAXATION. THEREFORE AS LONG AS A PERSON HAS SUCH LOCALITY RELATED ATTAC HMENTS WHICH ATTRACT RESIDENCE TYPE TAXATION THAT PERSON IS TO BE TRE ATED AS RESIDENT AND THIS STATUS OF BEING A RESIDENT OF THE CONTRACTING STA TE 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 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. 4. LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER DU TIFULLY RELIES UPON THE ORDERS OF THE AUTHORITIES BELOW AND URGES US T O CONFIRM THE SAME. SHE HIGHLIGHTS THE REASONING ADOPTED BY THE CIT(A) RELIES UPON THE RULINGS OF THE HONBLE AUTHORITY FOR ADVANCE RULING S 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 VIE W OF THE MATTER THAN THE VIEW SO TAKEN BY THE CO-ORDINATE BENCH IN THE CASE OF GREEN EMIRATE SHIPPING & TRAVELS (SUPRA). IT MAY RESULT I N DOUBLE NON- TAXATION BUT THEN WE CANNOT BE OBLIVIOUS TO THE FAC T THAT DOUBLE NON- TAXATION IS ALSO A FACT OF LIFE AND TAX SPARINGS WHICH FIND PLACE IN SEVERAL INDIAN TAX TREATIES ARE ALSO A REALITY IN INTERNATIONAL TAXATION. TO ENTER OR NOT TO ENTER IN A TAX TREATY WHICH MAY LEAVE SCOPE FOR DOUBLE NON-TAXATION IS A CONSCIOUS DECISION OF THE RESPECTIVE CONTRACTING STATES BUT ONCE SUCH A TAX TREATY AS MAY LEAVE SCOPE FOR DOUBLE NON-TAXATION IS ENTERED INTO JUDICIAL FORU MS HAVE TO INTERPRET THE PROVISIONS OF TAX TREATY AS THEY EXIST. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS EXPRESSED BY THE CO-ORDINA TE BENCH. RESPECTFULLY FOLLOWING THE SAME GRIEVANCE OF THE AS SESSEE MUST BE UPHELD. IT WOULD PERHAPS ALSO BE APPROPRIATE TO ADD A FEW LINES ON THE DEVELOPMENTS POST THE SAID DECISION IN THE CASE OF GREEN EMIRATE SHIPPING & TRAVELS (SUPRA). 6. THE VIEW TAKEN BY TH E TRIBUNAL IN THE CASE OF GREEN EMIRATE SHIPPING & TRAVELS (SUPRA) HA S ALSO BEEN CONFIRMED A FEW MONTHS LATER BY A DUTCH HIGH COUR T VIDE JUDGMENT DT. 15TH FEB. 2006. WE CONSIDER IT APPROPRIATE TO REPR ODUCE THE OBSERVATIONS MADE BY LATE PROF. KLAUS VOGEL IN THE BULLETIN FOR INTERNATIONAL TAXATION (VOLUME 60 NO. 6 OF 2006 AT PP. 218-219) PUBLISHED BY THE INTERNATIONAL BUREAU OF FISCAL DOC UMENTATION AMSTERDAM. PROF. DR. KLAUS VOGEL AFTER REFERRING T O THE TRIBUNAL DECISION IN THE CASE OF GREEN EMIRATE SHIPPING & TR AVELS (SUPRA) HAD OBSERVED AS FOLLOWS : AN UNUSUAL CASE DECIDED BY THE DUTCH GERECHTSH OF AMSTERDAM COURT OF APPEALS ON 15TH FEB. 2006 CONFIRMS THIS DECISIO N. THE OWNERS OF THE DEFUNCT COMPANY EMIGRATED FROM THE NETHERLANDS TO GREECE IN 1995 AND ADVISED THE DUTCH TAX AUTHORITIES THAT THE Y NOW EXERCISED MANAGEMENT AND CONTROL FROM THEIR NEW LOCATION AS A CONSEQUENCE OF WHICH THE COMPANY BECAME A GREEK RESIDENT. THIS WAS NOT IN DISPUTE ITA NO. 8147/MUM/2010 M/S. CROWN CAPITAL LIMITED 9 IN MAY 2000 THE TAXPAYERS INFORMED THE DUTCH AUTH ORITIES THAT SINCE THEIR RELOCATION THEY HAD ENDEAVOURED TO REGISTER THE COMPANY WITH THE GREEK TAX AUTHORITIES BUT FAILED TO SUCCEED BECAUS E OF THE GREEK BUREAUCRACY THE COMPANY HAD NOT YET BEEN ASSESSED T O THE GREEK CORPORATE INCOME-TAX. THESE FACTS WERE NOT CONTESTED BY THE DUTCH AUTHORI TIES. BUT IN 2004 THEY ASSESSED THE TAXPAYERS FOR THE DUTCH CORPORATE INCOME-TAX RETROSPECTIVE FOR THE YEAR 1995. THE TAX INSPECTOR ARGUED THAT FOR APPLYING ART. 4(1) OF THE NETHERLANDS GREECE TAX TR EATY TAX LIABILITY IS NOT SUFFICIENT RATHER A FACTUAL SUBJECTIVE INDEBTE DNESS (EEN.FEITELIKE SUBJECTIVE ONDERWORPNHELD) IS REQUIRED. THE COURT HOWEVER REFUTED THIS ARGUMENT IT POINTED OUT THAT THE TAX TREATY D ID NOT POSTULATE FACTUAL TAXATION INSTEAD A LEGAL OBLIGATION TO PAY TAX ON WORLDWIDE INCOME WAS CALLED FOR WHICH UNDER GREEK LAW WAS ES TABLISHED. 7. IN LEGAL MATTERS LIKE INTERPRETATION OF INTERNAT IONAL TAX TREATIES AND WITH A VIEW TO ENSURE CONSISTENCY IN JUDICIAL INTER PRETATION THEREOF UNDER DIFFERENT TAX REGIMES IT IS DESIRABLE THAT T HE INTERPRETATION GIVEN BY THE FOREIGN COURTS SHOULD ALSO BE GIVEN DUE RESP ECT AND CONSIDERATION UNLESS OF COURSE THERE ARE ANY CONT RARY DECISIONS FROM THE BINDING JUDICIAL FORUMS OR UNLESS THERE ARE ANY OTHER GOOD REASONS TO IGNORE SUCH JUDICIAL PRECEDENTS OF OTHER TAX REG IMES. THE TAX TREATIES ARE MORE OFTEN THAN NOT BASED ON THE MODELS DEVELOP ED BY THE MULTILATERAL FORUMS AND JUDICIAL BODIES IN THE REGI MES WHERE SUCH MODELS ARE BEING USED GET OCCASIONS TO EXPRESS THEI R VIEWS ON EXPRESSIONS EMPLOYED IN SUCH MODELS. IT IS ONLY WHE N THE VIEWS SO EXPRESSED BY JUDICIAL BODIES GLOBALLY CONVERGE TOWA RDS A COMMON GROUND THAT AN INTERNATIONAL TAX AS IN THE CASE OF CIT VS. VISAKHAPATNAM PORT TRUST (1984) 38 CTR (AP) 1 : (19 83) 144 ITR 146 (AP) CAN TRULY COME INTO EXISTENCE BECAUSE UNLESS EVERYONE USING A WORD OR A SET OF WORDS IN A LANGUAGE DOES NOT UN DERSTAND IT IN THE SAME MANNER THAT LANGUAGE WILL MAKE LITTLE SENSE. THERE IS ONE DECISION IN FAVOUR OF THE ASSESSEE ON THIS ISSUE BY THE DUTCH COURT OF APPEAL AND NO OTHER COUNTRY JUDICIAL PRECEDENT FROM ANY OTHER JURIDICAL FORUM HAS BEEN BROUGHT TO OUR NOTICE. THE VIEW TAKE N BY THIS TRIBUNAL HAS BEEN FOLLOWED IN THE AFORESAID SUBSEQUENT DUTCH COURT OF APPEAL JUDGMENT. THESE THINGS TAKEN TOGETHER WHEN VIEWED IN PERSPECTIVE DISCUSSED ABOVE ALSO PERSUADE US NOT TO TAKE ANY O THER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE TRIBUNAL IN TH E CASE OF GREEN EMIRATE SHIPPING & TRAVELS (SUPRA). 8. WHILE CONCLUDING THE AFORESAID DECISION THE TRI BUNAL HAD MADE THE FOLLOWING OBSERVATIONS : BEFORE PARTING WITH THE MATTER WE MAY ADD THAT IN STEAD OF ALLOWING SUCH MATTERS AS IS THE DISPUTE BEFORE US BE SUBJE CTED TO CONFUSING SIGNALS RESULTING IN UNCERTAINTY AND PROLONGED LITI GATION IT IS CERTAINLY MORE DESIRABLE FOR THE GOVERNMENT TO TAKE A CLEAR-C UT STAND ON THE ISSUE OR LET THE MATTER BE RESOLVED AT THE LEVEL OF GOVERNMENTS OF THE CONTRACTING STATES. THAT PERHAPS IS A BETTER SOLUTI ON FOR QUICKLY ITA NO. 8147/MUM/2010 M/S. CROWN CAPITAL LIMITED 10 RESOLVING THE DISPUTES ON SUCH A FUNDAMENTAL ASPECT OF A TAX TREATY AS TO WHO WILL BE ELIGIBLE FOR THE BENEFITS OF THAT TA X TREATY. WE HOPE GOVERNMENT WILL RESOLVE THIS MATTER ONCE FOR ALL AN D WOULD NOT ALLOW THAT UNCERTAINTY TO LAST FOR LONG. 9. WE HAVE NOTED THAT A SUCCESSFUL INITIATIVE HAS I NDEED BEEN MADE TO RESOLVE THIS ISSUE AT LEVEL OF THE CONTRACTING STAT ES. ON 6TH MARCH 2007 A PROTOCOL AMENDING THE INDO-UAE TAX TREATY HAS BEEN ENTERED INTO. THIS PROTOCOL HAS SINCE BEEN NOTIFIED BY THE GOVERNMENT OF INDIA VIDE NOTIFICATION NO. 282 OF 2007 DT. 28TH NOV. 2 007 [(2007) 213 CTR (ST) 64]. ONE OF THE AMENDMENTS MADE BY THIS PROTOC OL IS THE CHANGE IN DEFINITION OF RESIDENT IN ART. 4(1)(B) WHICH NOW PR OVIDES THAT FOR THE PURPOSE OF THE INDO-UAE TAX TREATY RESIDENT OF A C ONTRACTING STATE IN THE CASE OF THE UAE MEANS AN INDIVIDUAL WHO IS P RESENT IN THE UAE FOR A PERIOD OR PERIODS AGGREGATING TOTALLING IN AG GREGATE AT LEAST 183 DAYS IN THE CALENDAR YEAR CONCERNED AND A COMPANY WHICH IS INCORPORATED IN UAE AND WHICH IS MANAGED AND CONTRO LLED 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 BENEFI TS IN THE OTHER CONTRACTING STATE. THE FUNDAMENTAL ASSUMPTION BY TH E AO THAT AN INDIVIDUAL WHO IS NOT LIABLE TO PAY TAX UNDER THE U AE LAW CANNOT CLAIM ANY RELIEF FROM THE ONLY TAX WHICH IS PAYABLE IN IN DIA UNDER THE AGREEMENT AND THAT THE PROVISIONS OF DTAA DO NO T APPLY TO ANY CASES WHERE THE SAME INCOME IS NOT LIABLE TO BE TAX ED TWICE BY THE EXISTING LAWS OF BOTH THE CONTRACTING STATES IS T HUS 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 T REATY HAS COME INTO EFFECT FROM 1ST APRIL 2008 BUT THAT IS NOT REALLY RELEVANT IN THE PRESENT CONTEXT. WHAT IS MATERIAL IS THE FUNDAMENTAL APPROA CH 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 ADOPTED BY US IN THE CASE OF GREEN EMIRATES SHIPPING & TRAVELS (SUPR A) AND THE AMENDMENTS SO BROUGHT ABOUT BY THE AMENDMENTS IN TH E INDO-UAE TAX TREATY HAVE THUS INTRODUCED GOOD DEAL OF CLARITY AB OUT THE LEGAL POSITION ON SUCH FUNDAMENTAL ASPECTS OF A TAX TREATY AS TO W HO WILL BE ELIGIBLE FOR TAX TREATY BENEFITS' 6. IN VIEW OF THE ABOVE LEGAL POSITION WHAT IS REA LLY RELEVANT TO SEE IS WHETHER OR NOT THE RECIPIENT WAS RESIDENT OF THE UA E. THE ASSESSEE HAD DULY FILED THE EVIDENCE IN SUPPORT OF RESIDENT STATUS IN THE UAE BUT SINCE THE LEARNED CIT(A) DID NOT HAVE THE BENEFIT O F EXAMINING THE SAME AT THE TIME OF PASSING THE IMPUGNED ORDER SHE HAD NO OCCASION TO DEAL WITH THAT ASPECT OF THE MATTER. LEARNED COUNSEL FAI RLY STATES THAT SHE HAS NO OBJECTION NOT THE MATTER BEING RESTORED TO T HE FILE OF THE AO FOR THIS LIMITED PURPOSE OF VERIFYING THE FACTS REGARDI NG RESIDENTIAL STATUS OF THE RECIPIENT IN THE UAE. SHE UNDERTAKES ONCE AG AIN TO FILE REQUISITE EVIDENCE BEFORE THE AO LEARNED DEPARTMENTAL REPRES ENTATIVE ALSO DOES NOT OPPOSE THE ABOVE SUBMISSIONS OF THE LEARNE D COUNSEL. IN THIS ITA NO. 8147/MUM/2010 M/S. CROWN CAPITAL LIMITED 11 VIEW OF THE MATTER AND AT THE SUGGESTION OF BOTH TH E PARTIES WE RESTORE THE MATTER TO THE FILE OF THE AO FOR DE NOVO ADJUDI CATION IN THE LIGHT OF THE ABOVE OBSERVATIONS AND IN THE LIGHT OF THE LAW LAID DOWN BY THIS TRIBUNAL IN THE CASE OF GREEN EMIRATE SHIPPING & TR AVELS (SUPRA). 7. NOW WE TAKE UP ASSESSEES APPEAL IN ITA NO. 5274 /MUM/2004 WHICH IS ALSO DIRECTED AGAINST THE ORDER DT. 8TH MA RCH 2004. BY WAY OF THIS APPEAL ALSO THE ASSESSEE HAS CALLED INTO THE SAME QUESTION CORRECTNESS OF ORDER CITED SUPRA PASSED BY THE LEA RNED CIT(A)-XXXIII MUMBAI HOLDING THAT THE ASSESSEE IS NOT ENTITLED T O THE BENEFITS OF INDO-UAE TAX TREATY. 8. THE MATERIAL FACTS OF THE CASE ARE LIKE THIS. TH E ASSESSEE HAD PLACED PURCHASE ORDER DT. 27TH JUNE 2009 AND 1ST JULY 200 2 TO M/S SIG WHICH WAS FOR THE PURPOSE OF CARRYING OUT THE JOB O F INTELLIGENT PIGGING SURVEY OF ASSESSEE S PIPELINES VIZ. VVPL MPPI AND MUMBAI ATF PIPELINES. AS PER THE TERMS OF THE PURCHASE ORDER M/S SIG DUBAI WAS TO BE PAID THE AMOUNT AS SPECIFIED IN THE PURCHASE ORDER AFTER COMPLETION OF THE JOB. THE ASSESSEE VIDE THEIR APP LICATION DT. 17TH MARCH 2002 HAD APPLIED FOR NOC SEEKING AUTHORIZAT ION TO REMIT US $ 101563 TO THE FOREIGN PARTY WITHOUT DEDUCTION OF TA X. THE AO ISSUED NOC PERMITTING THE ASSESSEE TO REMIT THE SUM WITHOU T DEDUCTION OF TAX. FOR FURTHER REMITTANCE OF US$ 631556 AND US$ 75350 TO FOREIGN PARTY THE ASSESSEE AGAIN APPLIED TO EXTEND THE VALIDITY O F NOC ISSUED EARLIER AT NIL RATE OF TDS. BUT THIS TIME THE AO DID NOT GR ANT PERMISSION TO REMIT MONEY WITHOUT DEDUCTION OF TAX AT SOURCE. REL YING UPON THE LOGIC THAT SINCE SIG WAS NOT PAYING ANY TAXES IN UAE IT IS NOT ELIGIBLE FOR TAX TREATY BENEFITS THE AO HELD THAT PROVISIONS OF IND IAN IT ACT WILL APPLY AND ACCORDINGLY TAXES ARE REQUIRED TO BE DEDUCTED AT THE RATE OF 20 PER CENT. IN APPEAL THE LEARNED CIT(A) UPHELD THE ACTION OF THE AO BY OBSERVING THAT .....NO DOUBT THE APPELLANT IS ELIG IBLE FOR THE BENEFIT UNDER ART. 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 ASSESSEES CONTENTION .......NO DOCUMENTARY EVIDENCE LIKE TAX RESIDENT CERTIFICATE HAS BEEN FILED BY THE APPELLANT'. ON THE BASIS OF THESE REASONS THE LEARNED CIT(A) UPHELD T HE ACTION OF THE AO. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE U S. 9. WE HAVE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY US IN ITA NO. 5273/MUM/2004 AS SE T OUT IN PARAS 5 AND 6 ABOVE. THE SAME OBSERVATIONS WILL APPLY MUTAT IS MUTANDIS HERE AS WELL. WE ACCORDINGLY REMIT THE MATTER TO THE F ILE OF THE AO FOR THE LIMITED PURPOSE OF VERIFYING THE FACT AS TO WHETHER OR NOT THE RECIPIENT WAS INDEED A RESIDENT OF UAE. THE APPEAL IS THUS AL LOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. 10. AS REGARDS ITA NOS. 5761/MUM/2004 AND 5762/MUM/ 2004 THESE APPEALS ARE IN THE MATTER OF ASSESSEES RECTI FICATION PETITIONS UNDER S. 154 OF THE ACT FILED BEFORE THE LEARNED CI T(A) IN RESPECT OF THE ORDERS UPHOLDING THE ABOVE MENTIONED TAX WITHHOLDIN G DEMANDS. HOWEVER NOW THAT THE DECISIONS WHICH WERE SOUGHT TO BE RECTIFIED ITA NO. 8147/MUM/2010 M/S. CROWN CAPITAL LIMITED 12 HAVE BEEN ADJUDICATED UPON AND THE MATTER IS RESTOR ED TO THE FILE OF THE AO WITH THE CONSENT OF THE PARTIES THESE TWO APPEA LS HAVE BECOME INFRUCTUOUS. THE ASSESSEE DOES NOT PRESS THE SAME. 9. IN VIEW OF THIS DECISION ON THE ISSUE WE ARE OF THE OPINION THAT SINCE THE ASSESSEE HAS FURNISHED A RESIDENCE CERTIFICATE OF UAE ACCORDING TO THE PRE-AMENDED INDO-UAE TREATY THE BENEFITS OF THE TRE ATY ARE APPLICABLE IN THE SHORT TERM CAPITAL GAINS. ACCORDINGLY THE A.O. IS E RRED IN BRINGING TO TAX THE SHORT TERM CAPITAL GAINS IN THE IMPUGNED ASSESSMENT YEAR. THE ORDER OF THE A.O. IS MODIFIED TO THAT EXTENT. GROUNDS ARE CONSID ERED ALLOWED. SINCE GROUND NO. 1 IS ALLOWED ON THE IMPUGNED ISSUE OF TA XABILITY OF SHORT TERM CAPITAL GAINS THE OTHER GROUNDS ON INTEREST BECOMES ACADEMIC AS THERE IS NO INCOME TO BE TAXED. ACCORDINGLY GROUND NO. 2 ON LEV Y OF INTEREST IS ALSO CONSIDERED ALLOWED. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 19 TH JANUARY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT CONCERNED 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.