TMI Blog2011 (5) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... , JJ. G. Guruswami for the Appellant. ORDER N.V. Vasudevan, Judicial Member. This is an appeal by the revenue against the order dated 30-3-2009 of CIT(A)-XXXIII, Mumbai relating to assessment year 2006-07. The ground of appeal raised by the revenue reads as follows : "1. On the facts and in the circumstances of the case and in law, the ld. CIT(Appeals) erred in holding that the assessee is entitled for the benefit of DTAA between India and UAE and accordingly, the assessee is not liable to pay any tax on the short term capital gain and long term capital gain earned from the transfer of securities in India." 2. The assessee is an individual. He is a resident of UAE. During the previous year he earned short term capital gain of Rs. 48,65,911 on sale of shares in India. He claimed that the short term capital gain cannot be brought to tax in India in view of Article 13(3) of the Indo-UAE DTAA. Since the assessee was a Resident of UAE, it is only UAE which has a right to tax capital gain and not India. Article 13 of the agreement for avoidance of double taxation between India and the UAE (hereinafter referred to as 'the India-UAE Treaty') provides an exemption from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DIT v. Green Emirate Shipping Travels [2006] 100 ITD 203. In the case of Green Emirate Shipping Travels (supra) the Mumbai Tribunal had an occasion to deal with an identical case. The facts of the case were that the assessee was a shipping line based in United Arab Emirates. In the relevant previous year, the assessee had a taxable income of Rs. 28,35,628 from shipping operations. The assessee's claim was that in terms of article 8 of the Indo-UAE Double Taxation Avoidance Agreement, 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 650/105 Taxman 273 (AAR-New Delhi) 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'. 5. The Tribunal firstly disagreed with the view expressed by the AAR in the case of Cyril Eugene Pereria (supra) on the ground that the said decision was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mposes a tax in the situation to which the exemption applies, and irrespective of whether the State actually levies the tax. Commenting particularly on the German Double Taxation Convention with the United States, Vogel comments : "Thus, it is said that the treaty prevents not only 'current' but also merely 'potential' double taxation". Further, according to Vogel, "only in exceptional cases, and only when expressly agreed to by the parties, is exemption in one of the Contracting States dependent upon whether the income or capital is taxable in the other Contracting 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 double taxation can arise only when tax is actually paid in one of the Contracting States." 6. The Tribunal also held that the decision of the Authority for Advance Ruling in the case of Abdul Razak A. Meman, (supra) was also not good law. 7. The Tribunal dealt with the argument of the Learned Departmental Representative that as non-corporate entities are not taxable entities under the UAE Tax Treaty such non-corporate entities, even thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see 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 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 item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f whether or 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 Contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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