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TMI Blog2010 (9) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject." 2. The assesee claimed that it was a non-resident and that it was resident of UAE. During the previous year it entered into an agreement with M/s.Nortel Network (India) Ltd. for providing technical consultancy services by providing technical personnel in the execution of the project undertaken by the latter with BSNL. During the previous year the assessee received a sum of Rs.3,35,55,309/- as fees for technical services. 3. The assessee company filed its return of income declaring total income of Rs. 29,80,200/- after deducting the expenses incurred for earning the said income which were paid to non-resident from abroad as the assessee company does not have any office or bank account in India. The said return was filed in view of the stand taken by the department while passing the order u/s. 197 of the Income Tax Act, 1961 (the Act) for deduction of TDS at lower rate on 7-6-2005. The assessee thereafter filed a revised return of income declaring nil income. According to the Assessee, the fees received by the assessee company for rendering technical services in India is not taxable because of the following reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion was not charged to tax. The AO however placed reliance on the decision of the Authority for Advance Rulings (AAR) in Cyril Eugene Pereira (239 ITR 650).... 6. The A.O also placed reliance on decision of the AAR in the case of Abdul Razak A. Meman (276 ITR 306). In this case, once again the AAR had taken a view that an individual cannot be regard as "resident" for the purpose of Indo-UAE DTAA and hence that cannot avail of the benefits available under that DTAA. The relevant extracts from that ruling are reproduced below for ready reference. "That once it was accepted that there was no provision in the UAE Tax Decree to tax the income of individuals, as a necessary corollary it followed that an individual could not be a "resident" in the UAE within the meaning of paragraph (1) of article 4. The applicant was not a tax entity under the UAE Tax Decree and could not under the guise of liberal interpretation of article 4(1) be enable to avail of the benefit of articles 10, 11 and 13 of the Double Taxation Avoidance Agreement." 7. On appeal by the Assessee, the CIT(A) held that the Assessee was entitled to the benefits of Article 22 of Indo-UA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '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. The experts appointed in the early 1920s by the League of Nations describe this method of cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve noted earlier also, the revenue is on record to have opposed the very argument that the revenue has taken in the present case, as evident from the Hon'ble Supreme Court's following observation : "The appellants (i.e., Union of India) contend that, acceptance of the respondent's submission that double taxation avoidance is not permissible unless the tax is paid in both countries is contrary to the intendment of section 90. It is urged that clause (b) of sub-section (1) of section 90 applies to a situation where income-tax has been paid in both the countries, but clause (b) deals with the situation of avoidance of double taxation of income. Inasmuch as Parliament has distinguished between the two situations, it is not open to a Court of law to interpret clause (b) of section 90 sub-section (1) as if it were the same as situations contemplated under clause (a)." The very contention which has been raised by the revenue in this case was successfully challenged by the Union of India before the Hon'ble Supreme Court. It cannot be open to us to take any other view of the matter than the view so taken by the Hon'ble Supreme Court." 11. The Tribunal then dealt with the question a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E actually levies taxes on non-corporate entities, once the right to tax UAE residents in specified circumstances vests only with the Government of UAE, that right, whether exercised or not, continues to remain exclusive right of the Government of UAE. As noted above, the exemption agreed to under the 'assignment' or 'distributive' rule, is independent of 'whether the Contracting State imposes a tax in the situation to which exemption implies'. In the case of John N. Gladden v. Her Majesty the Queen 85 TC 5188, which was quoted with approval by the Hon'ble Supreme Court in Azadi Bachao Andolan's case (supra), Federal Court of Canada was observed that "the non-resident can benefit from the exemption (under the treaty) regardless 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 capital gains would still be exempt from capital gains in that other 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 country. All that is ne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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