Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (12) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (12) TMI 697 - AT - Income TaxIncome accrued/taxable in India - Tax Resident - Taxability of investment of unexplained income in specific residential properties in India - taxability of income arising from immovable property - scope of Indo UAE tax treaty - assessee is an Indian national fiscally domiciled in, and tax resident of, the United Arab Emirates for over three decades - whether unexplained investments, even if that be so, can be taxed in India upon investment in India, even when he is not carrying out any income generating activities in India ? - whether CIT(A) erred in considering the interest income to be taxable under article 22 of India-UAE DTAA not under article 11 of the treaty? - HELD THAT:- The plea that the India- UAE treaty provides for taxability of income arising from immovable property, this plea is contextually irrelevant inasmuch as what we are dealing with right now is not an income from the immovable property, but an income said to have been invested in an immovable property. The plea is thus devoid of any legally sustainable merits. As for article 23(1), which refers to taxation of capital represented by immovable property, the said article refers to taxation of capital but does not provide, as learned Departmental Representative seem to suggest, for taxation by virtue of investment in the immovable property. The assessee before us is certainly an Indian national, but he is admittedly resident in the UAE so far as his residential status, under the Indo UAE tax treaty is concerned, is of the UAE tax resident. The residuary taxation rights, in terms of the treaty provisions, belong to the residence jurisdiction, but even if that was not to be so, the residence rights can at best go to the source jurisdiction, which in turn refers to a jurisdiction in which the income is earned, rather than a jurisdiction in which the income is invested. By no stretch of logic, therefore, such an income could be taxed in India, which is neither residence nor source jurisdiction; it is at best investment jurisdiction. However, the scheme of tax treaties limits the rights of taxation either to residence or to source jurisdiction. As for the alleged interest income, there is no finding whatsoever to suggest that there was indeed any interest income inasmuch as even the Assessing Officer is tentative when he states that the related entry “probably” refers to interest receipt. The taxability of interest is, even by the standards of the revenue authorities, also thus far from established. There is no evidence whatsoever, or even a serious allegation, that there is an interest income. The assessee before us is a tax resident of the United Arab Emirates and is thus entitled to the benefits of the Indo UAE tax treaty. When the rights to tax the income in question, under the applicable tax treaty provisions, are allocated to the residence jurisdiction, it is wholly immaterial whether or not the source jurisdiction has the right to tax that income, and, in any event, India is not even a source jurisdiction for the income in question as no economic activities have been carried out in India- it is at best the jurisdiction in which earnings are invested. That cannot anyway have any bearing on the taxation of income. In our considered view, therefore, since, under the terms of the Indo UAE tax treaty, the right to tax the amounts in question, even if that be of income nature in the hands of the present assessee, does not belong to India, all these issues being raised by the learned counsel are wholly academic as of now, and do not call for our adjudication. Having said that, however, in due deference to the legitimate rights of the assessee, we make it clear that, if so necessary in future, the assessee will be at liberty to raise these issues. We approve the well-reasoned conclusions arrived at by the learned CIT(A) and decline to interfere in the matter.
|