TMI Blog2013 (8) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... Mum/2011 - - - Dated:- 17-7-2013 - Shri R. S. Syal And Shri Vivek Varma,JJ. For the Applicant : Ms. Neeraja Pradhan For the Respondent : Mr. Pankaj R. Toprani ORDER Per Vivek Varma, J.M. The two appeals are filed by the department against the order of CIT(A)-11, Mumbai, dated 22.03.2011. 2. Since there is involvement of the DTAA Treaty with UAE in both cases, we are disposing off the two appeals through this common order for the sake of brevity. 3. The department has raised the following founds of appeal:- 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the assessee company is eligible for the benefit of DTAA between India and UAE ignoring the fact that during the relevant period under reference, the benefit of DTAA between India and UAE are not available to the assessee as the Notification 282/2007-FTD(F.No. 503/52004-FTD) is effective w.e.f. 03.10.2007. 2. The Appellant prays that the order of the Ld. CIT(A) on the above ground(s) be set aside and that of the Assessing Officer restored. 4. The facts in brief are that the assessee is a resident of UAE, engaged in the business of shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odel. 6. Before the AO, in the assessment proceedings, the controversy pertained to whether time charter and hiring of slots fell within the Article 8 of the Treaty or not. It was argued that, under the DTAA Treaty, time charter definitely fell under Article 8 of the Treaty, but whether, the sale of slots in the joint pool agreements with other shipping companies fell under Article 8(4) of the DTAA between India and UAE, was a subject matter of litigation for a long time. It was pointed out to the revenue authorities, that, coordinate Bench of the ITAT in the case of Balaji Shipping UK Ltd.(supra), has decided this issue in the favour of the appellant company that leasing out of slot is also covered under the Treaty. Accordingly, it was submitted that, the appellant company was eligible, to be assessed under the treaty provisions, between India and UAE. 7. These arguments did not find favour with the A.O., who rejected the contention of the assessee for the application of DTAA and held that the assessee was not eligible for Treaty benefit. He, therefore invoked the provisions of section 44B of the Income Tax Act, 1961, and computed the presumptive profit on total receipt of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case to be assessed under the provisions of the treaty between India and UAE. Consequently, the Assessing Officer is directed to allow DIT Relief u/s 90(1)(a)(ii) of the Income-tax Act as claimed by the appellant company in accordance with the law. The CIT(A), thus, allowed the contentions raised by the assessee. 10. Aggrieved, the department is in appeal before the ITAT. 11. Before us, the DR pointed out that CIT(A) had primarily relied on the decision of DDIT vs Balaji Shipping UK Ltd. reported in 117 TTJ 865 (Mum), which is primarily on slot hire and not on ship charter and based on India UK Treaty. The DR also pointed out that India UAE Treaty is similar to India USA Treaty, whereas, the UK Treaty is differently worded. She, therefore, submitted that reliance on Balaji Shipping by the CIT(A) was infirm, as the expression "that enterprise", does not figure in the UK Treaty. She submitted a chart, which gives a telescopic view, as follows: USA UK UAE SINGAPORE ARTICLE 8 - Shipping and air transport - 1. Profits derived by an enterprise of a Contracting State from the operation by that enterprise of ships or aircraft in international ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis and any other activity directly connected with such transportation. 4. Gains derived by an enterprise of a Contracting State from the alienation of aircraft owned and operated by the enterprise, the income from which is taxable only in that State, shall be taxed only in that State. ARTICLE 9 - Shipping - I. Income of an enterprise of a Contracting State from the operation of Ships in international traffic shall be taxable only in that State. 2. The provisions of paragraph I of this Article shall not apply to income from joumeys between places which are situated in a Contracting State. 3. For the purposes of this Article, income from the operation of ships includes income derived from the rental on a bareboat basis of ships if such rental income is incidental to the income described in paragraph I of this Article. 4.Notwithstanding the provisions of Article 7 (business profits) of this Convention, the provisions of paragraphs I and 2 of this Article shall likewise apply to income of an enterprise of a Contracting State from the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) used for the transport of goods or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply in relation to such interest. 4. For the purposes of this Article, profits from the operation of ships or aircraft in international traffic shall mean profits derived from the transportation by sea or air of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of the ships or aircraft, including profits from (a) the sale of tickets for such transportation on behalf of other enterprises; (b)the incidental lease of ships or aircraft used in such transportation; (c)the use, maintenance or rental or containers (including trailers and related equipment for the transport of containers) connection with such transportations and (d) any other activity directly connected with such transportation. 12. The DR, further strengthen her case, placed reliance on the decision of ACIT(IT) vs Federal Express Corporation, USA, ITA Nos. 4452, 4453 9482/Mum/2004 and pointed out that since this case closest to the ease of the assessee, as it pertained to India US Treaty, the views expressed herein should be followed and accordingly, the case of the AO should be sustained. 13. The AR, submitted that the CIT(A) had taken into consideration the views expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, 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 vs. Her Majesty the Queen 85 Tax Cases 5188, which was quoted with approval by the Hon'ble Supreme Court in Azadi Bachao Andolan's case,. (supra), Federal Court of Canada has 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 necessary for this purpose is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected the appeal of the department u/s 260A, the CIT(A)'s findings should be sustained. 15. We have heard the contentions raised by either parties and have perused the language used in the Treaties, referred to before us, Taking up the issue of availability of DTAA between India and UAE, on the assessee, who is tax resident of that country, but has not paid taxes there, the revenue is interpreting that since the assessee has not paid taxes in UAE, there can be no curtailment of tax liability as per the Act, by pressing the DTAA. The reason, being that DTAA applies on juridical double taxation, i.e. if income is not taxed in one state, then it should be taxed in full in the other, if it is otherwise taxable, without grating any benefit of the Treaty. This argument, in our opinion cannot be sustained, because, the assessee is 'otherwise liable to tax' in UAE. Simply because there is no tax incidence in UAE, does not mean that the assessee ceases to be 'otherwise liable to tax', as per Article 4. Once the assessee, gets within the expression 'otherwise liable to tax' in UAE Treaty, DTAA becomes operative. This, exactly is the ratio laid down by the coordinate Bench of the ITAT at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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