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TMI Blog2005 (11) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,628 from shipping operations. The assessee's claim was that in terms of article 8 of the Indo-UAE Double Taxation Avoidance Agreement (205 ITR St. 49), the assessee's income was liable to tax only in the country of domicile i.e., UAE, but this contention was rejected by the Assessing Officer on the ground that the assessee 'is not paying taxes in UAE'. The Assessing Officer relied upon the decision of the AAR in the case of Cyril Eugene Pereria, In re [1999] 239 ITR 6501 in support of the proposition that the provisions of the DTAA do not apply to any case which the 'same income is not liable to be taxed twice by the existing laws of both the Contracting States'. The Assessing Officer also noted that 'the assessee has failed to furnish proof/evidences in support of claim of being eligible for benefit of India-UAE DTAA and, consequently, the assessee has failed to discharge the onus on it to prove that it is liable to pay tax in UAE'. It was in this backdrop that the assessee's claim for non-taxability of shipping income in India was rejected by the Assessing Officer. Aggrieved, assessee carried the matter in appeal before the CIT(A). The CIT(A) reversed the action of the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is material for this purpose or is it even prospect of future tax liability which is sought to be prevented by the said DTAA ? 5. As for the Assessing Officer's reliance on ruling given by the Authority for Advance Ruling in Cyril Eugene Pereria's case (supra), we deem it necessary to produce the following extracts from the judgment of Hon'ble Supreme Court in the case of Union of India v. Azadi Bachao Andolan [2003] 263 ITR 7061, at page 742 wherein Their Lordships of Hon'ble Supreme Court had an occasion to deal with the said AAR ruling : "The respondents placed great reliance on the decision by the Authority for Advance Ruling constituted under section 245-O of the Income-tax Act, 1961, in Cyril Eugene Pereria's case [1999] 239 ITR 650 (AAR). Section 245S of the Act provides that the Advance Ruling pronounced by the Authority under section 245R will be binding only : '(a) on the applicant who had sought it; (b) in respect to the transaction in relation to which the ruling had been sought; (c) on the Commissioner, and the income-tax authorities subordinate to him, in respect to the applicant and the said transaction.' It is, therefore, obvious that, apart from whatever i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acting States". However, in Azadi Bachao Andolan's case (supra), Their Lordships of Hon'ble Supreme Court, after referring to the said ruling and after elaborate discussions on the various aspects of this issue, concluded that "it is . . . . not possible for 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". The reasoning given by Their Lordships included the following : "According to Klaus Vogel "Double Taxation Conventions establishes an independent mechanism to avoid double taxation through restriction of tax claims in areas where overlapping tax claims are expected, or at least theoretically possible. In other words, Contracting States mutually bind themselves not to levy taxes or to tax only to a limited extent in cases when the treaty reserves taxation for the other Contracting State either entirely or in part. Contracting States are said to waive 'tax claims' or more illustratively to divide 'tax sources', 'taxable objects', amongst themselves". Double taxation avoidance treaties were in vogue even from the time of the League of Nations. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts. We are, however, unable to accept this plea and we decline to treat this as a sort of, to use the phraseology employed in legal parlance, a covered matter. As Hon'ble Supreme Court has duly taken of in Azadi Bachao Andolan's case (supra), a ruling given by the Authority for Advance Ruling is not even binding on the Commissioner of Income-tax, and authorities subordinate thereto, in any case except in the case of the very assessee in which the such a ruling is given and even in such a case it is binding in respect of transaction in respect of which the ruling is given. Whatever be the respect and deference judicial authorities indeed have for the rulings given by the Authority, the Authority for Advance Ruling, not being a part of the judicial hierarchy, cannot lay down a binding precedence for anyone - the revenue, the assessees or the appellate authorities. By no stretch of logic, therefore, a ruling given by the Hon'ble Authority of Advance Ruling has any precedence value in general. Therefore, learned Departmental Representative's reliance on the ruling given in Abdul Razak A. Menon's case (supra) by itself is not sufficient to decide the matter one way or the other. Lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 arises 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 guidance from the judgment of Hon'ble Supreme Court in the case of Azadi Bachao Andolan (supra). Referring to the Klaus Vogel's Commentary on Double Taxation Conventions, Their Lordships, inter alia, observed as follows : "In other words, Contracting States mutually bind themselves not to levy taxes or to tax only to a limited extent in cases when the treaty reserves taxation for the other Contracting State either entirely or in part. Contracting States are said to waive 'tax claims' or more illustratively to divide 'tax sources', 'taxable objects', amongst themselves. Double taxation avoidance 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 this method of classification of items and their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r not that 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 read 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 living in a Contracting State should not be sufficient, that person should also have fiscal domicile in that country. These tests of fiscal domicile which are given by way of examples following the expression 'liable to tax by reason of' i.e., domicile, residence, place of management, place of incorporation etc. are no more than examples of locality related attachments that attract residence type taxation. Therefore, as long as a person has such locality related attachments which attract residence 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 actual levy of tax on that person. Viewed in this perspective, we are of the considered opinion that being 'liable to tax' in the Contracting State ..... X X X X Extracts X X X X X X X X Extracts X X X X
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