2024 (6) TMI 1129 - AT - Income Tax

Income taxable in India of not? - Denial of benefit under DTAA between India-UAE ( treaty ) with respect to income earned by the Appellant in India - interest income which has been claimed as exempt by virtue of benefit provided under Article 24 of the DTAA as per Article 24(1) and especially Article 24(2)(b)(ii) of India UAE-DTAA provides any income including material gain earned from India is not taxable in India - CIT(A) has denied the benefit of Article 24 disbelieving the assessee is not Abu Dhabi Investment Authority as mentioned in Article 24(2)(b)(ii) on a very flimsy ground as reason given by him is that mobile number was mentioned 9999999999 which he tried to find it from True Caller that it is a fraud number and therefore the Abu Dhabi Investment Authority is a fraud company rather it is not company belonging to Abu Dhabi Government. HELD THAT - Once all the other details have been provided and if that is doubted then he should have verified the PAN and the address provided in the return to see whether it is an Abu Dhabi Government owned company i.e. Abu Dhabi Investment Authority. If he was incapable of himself verifying then he should have asked from the assessee itself. It is really surprising that first appellate authority will deny the status of the Government owned authority simply by looking the mobile number in the true caller. Such an approach is to be frowned upon and is liable to be rejected at the threshold. If the assessee i.e. Abu Dhabi Investment Authority had shown its valid registration as category of foreign portfolio investor obtained with SEBI and holds a valid residency certificate and given the particulars of income then we do not find any reason to doubt that it is not authority as mentioned in Article 24. Accordingly we hold Abu Dhabi Investment Authority is liable to benefit provided u/s 24 which provides that Government of one contracting state shall be exempt from tax in other contracting states in respect of any income derived by such income from that other contracting states. Since Abu Dhabi Investment Authority has been specifically mentioned in Article 24(2)(b)(ii) therefore none of its income is taxable in India. In the result charging of interest is held to be non- taxable in India. Appeal of the assessee is allowed.

Summary

Issues:
Denial of benefit under the Double Taxation Avoidance Agreement (DTAA) between India-UAE with respect to income earned by the Appellant in India.

Analysis:
1. The appeal was filed against an order by ld. CIT (A)-55 Mumbai for the assessment year 2019-20, concerning the denial of DTAA benefits by the assessee.
2. The primary ground raised was the denial of benefits under the DTAA between India and UAE regarding capital gains and interest income earned by the Appellant during the relevant year.
3. The Appellant, Abu Dhabi Investment Authority, a tax resident of UAE, claimed exemption from tax in India under Article 24 of the DTAA based on its registration as a Category 1 Foreign Portfolio Investor and holding a Tax Residency Certificate.
4. The initial income declaration was challenged by the Ld AO, CPC, resulting in a revised tax demand, including the denial of exemption for interest income under the DTAA.
5. Ld. CIT (A) upheld the denial of benefits under Article 24, questioning the identity of the Appellant as Abu Dhabi Investment Authority based on discrepancies in the return details, especially the mobile number flagged as suspicious.
6. The Appellant contended that the return details clearly indicated its status as Abu Dhabi Investment Authority, a Government-owned entity, and challenged the CIT (A)'s decision.
7. The Tribunal criticized the CIT (A)'s reliance on the mobile number issue to deny DTAA benefits, emphasizing the need for proper verification and questioning the validity of such reasoning.
8. Ultimately, the Tribunal ruled in favor of the Appellant, recognizing Abu Dhabi Investment Authority's entitlement to DTAA benefits under Article 24(2)(b)(ii), thereby declaring the interest income as non-taxable in India.
9. The decision highlighted the importance of factual verification and proper assessment in determining eligibility for DTAA benefits, emphasizing the need to consider all relevant evidence before denying such entitlements.

This detailed analysis covers the key issues and the Tribunal's decision regarding the denial of DTAA benefits in the legal judgment.