TMI Blog2015 (10) TMI 2374X X X X Extracts X X X X X X X X Extracts X X X X ..... have been invoked on the facts of this case either. In such a situation, once there is reasonable evidence to suggest that the affairs of the company are conducted from UAE, as is the case before us, and there is no material to controvert the same or to establish that the company is controlled or managed from outside UAE, learned CIT(A) was indeed quite justified in reversing the action of the Assessing Officer and in granting the benefits of India UAE tax treaty. The profits arising out of operations of ship in question in international water, by the appellant is not subject to taxation in India due to applicability of Article 8 read with Article 4 of India-UAE DTAA. - Decided in favour of assessee. - I.T.A. No. 405/RJT/2013 - - - Dated:- 23-10-2015 - Pramod Kumar AM and Rajpal Yadav JM For The Appellant : Prasoon Kabra For The Respondent : J P Shah ORDER Per Pramod Kumar : 1, By way of this appeal, the appellant Assessing Officer has challenged correctness of the order dated 30th August 2013, passed by the CIT(A) in the matter of assessment under section 172(4) of the Income Tax Act, 1961, in respect of sailing by M V Eleni T Voy I relatable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility whosoever on the Ministry of Finance. This proved beyond doubt that the said company merely got registration license for doing the business and place of effective control and management of the enterprise situated out of UAE. 2) The Commercial License issued by the government of UAE to do their business in UAE for certain years (i.e. 3 years from 08.10.2006 to 07.10.2009) nothing more that. The said license also issued in favour of Manager Mr. Karsten Ambak his nationality also shown Danish, vide No.80043. 3) Copies of companies AGM not submitted. The said AGM should be taken in to General Assembly of UAE, it also meant that the said not situated in UAE and its effective control and management is also out of UAE. 4) Memorandum of Association of Mur Shipping FZCo, the Directors of the company are not 100% UAE resident. The name nationality of the directors as follows :- Sr. No. Name of the director Designation Nationality 1. Robert Muirhead Director Scottish 2. Karsten Ambak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAA agreement executed with Government of India UAE and its place of effective control and Management are situated in out of UAE. On foregoing discussion and narration of the fact of this case, that the M/s MUR SHIPPING DMC Co. of UAE is not entitled to claim the DTAA benefit. The matter is very simple, that the said company has got just registration for doing their business in UAE. In this case, from the documents available on records the matter was crystal clear that the agent/freight beneficiary is not entitled to claim the DTAA benefit. This action of the Agent has itself proved the mala fide intention and the wrong claim of benefit of DTAA. Under this fact and circumstance of the case the DTAA benefit already claimed in the provisional return for the aforesaid vessel is hereby withdrawn. 3. Aggrieved, assessee carried the matter in appeal before the learned CIT(A). Learned CIT(A), while reversing the stand so taken by the Assessing Officer, observed as follows: 5. The matter has been considered, keeping in view the submissions and report of the A.O. filed during the appellate proceedings as well as the remand proceedings. The issue at hand is about the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and having permanent residential status . Place of holding of AGM and residential status of share holders are not relevant factor for determining residential status of the company. The place of holding AGM is governed by law of the country where the company is incorporated. Further shareholders do not have say or direct interference in the management of company therefore in my view the Assessing Officer s stand in this regard is not correct to say that effective control and management is not situated in UAE just because shareholders are not resident of UAE or just because AGM was not held in UAE. Also Assessing Officer seems to be wrongly considering nationality of director as factor to decide the residential status of the company. Appellant has been able to prove that manager director Shri Karsten Ambak (as per Govt. of Dubai License No.80043) of the company is residing at UAE and has permanent residential visa of UAE. Further, it has been proved that at least two other directors, Mr. Dean and Mr. Robert Michael Muirhead have permanent residential visa of UAE. Further as per DTAA Article 4 residential status of the company is to be determined as :. ARTICLE 4 Resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng License and other documents to prove that it is resident of Dubai. It is also worthwhile to mention here that the Hon ble High Court of Gujarat in Tax Appeal No.12 of 2012 in the case of appellant itself vide its order dated 04.07.2012 for A.Y. 2007- 08, on similar issue, has decided the issue in favour of the appellant. Therefore, considering all the facts and circumstances, I hold that the profits arising out of operations of ship in question in international water, by the appellant is not subject to taxation in India due to applicability of Article 8 read with Article 4 of India-UAE DTAA. 4. The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us. 5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 6. We find that, as learned Departmental Representative rightly contends and so far as the judgment dated 4th July 2012 passed by Hon ble jurisdictional High Court in Tax Appeal No. 12 of 2012 is concerned, the issue before Their Lordships was with respect to the evidences in support of place of effective management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether or not, in such a situation, the UAE tax residents will be eligible for treaty protection in respect of their income sourced in India, a coordinate bench of this Tribunal, in the case of ADIT Vs Green Emirate Travels [(2006) 100 ITD 203 (Bom)] , observed that, . .... 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 and concluded that Viewed in this perspective, we are of the considered opinion that being 'liable to tax in the Contracting State does not necessarily imply that the person should actually be liable to tax in that Contracting State by virtue of an existing legal provision but would also cover the cases where that other Contracting State has the right to tax such persons irrespective of whether or not such a right is exercised by the Contracting State . However, uncomfortable with the fact that the judicial bodies were called upon to adjudicate on such a fundamental aspect as the eligibility for treaty benefits, and with the wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer to decline the treaty protection to a UAE tax resident , in respect of India sourced income, on the ground that the UAE tax resident has not actually been taxed in respect of his income in UAE. To that extent, learned Departmental Representative is completely in error and we reject his stand on this issue. 11. The amendment of treaty definition for resident in a contracting state , however, did come with a built in check to ensure that this provision is not abused by incorporating special purpose vehicles in UAE only to seek undue benefits in India. As a plain reading of the Article 29 shows, this article seeks to decline the treaty benefits in a case in which main purpose, or one of the main purposes of the creation of an entity is to obtain benefits of that benefits of this agreement which would otherwise not be available. In other words, only when creation of an entity is part of manoeuvring, wholly or mainly, to obtain the benefits of the India UAE tax treaty which would not be otherwise available , the benefits of India UAE tax treaty are to be declined under article 29. Even this limitation of benefit clause is subject to the rider that the cases of legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer had invoked Article 29, it has been stated that the income from operations of ships of the Switzerland based entities in international traffic is not covered by Article 8 of India Switzerland DTAA [(1995) 214 ITR (Statute) 223; Indo Swiss tax treaty, in short] and therefore if both the Swiss shareholders, which wholly own capital of the assessee company, were to carry on business directly, the treaty protection would not have been available. 15. This line of reasoning is clearly fallacious inasmuch as the assessment year before us is post the amendment vide protocol dated 16th February 2000 [Notification no. 35 of 2001, dated 7th February 2001; 165 CTR (Statute) 47] which gives residuary taxation rights to the residence jurisdiction. While it is indeed correct that Article 8 of Indo Swiss tax treaty does not cover income from operation of ships in international traffic and restricts itself to income operation of aircraft in international traffic, Article 22(1), inserted with effect from 1st April 2001, provides that items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... article 4(1), all that is required is that the company is incorporated in the UAE and which is managed and controlled wholly in UAE . We find that there is no dispute that the assessee is incorporated in the UAE. As regards the stand of the Assessing Officer that the directors of the assessee company are not UAE nationals, this is wholly irrelevant as the directors are residents of the UAE and nationality of the directors, dehors their place of residence and business activity, is not decisive of the fact as to whether or not the company is managed and controlled in the UAE. We also find that the directors of the assessee company are residents of UAE and the board, as also shareholders, meetings have taken place in the UAE. Copies of the minutes of these meetings have also been placed before us, and no defects have been pointed out in the same. We have also noted, as evident from the annual accounts and the list of employees filed before us, that the assessee company is not merely a paper company and has actually carried out material business operations from the UAE. As regards the issue raised by the Assessing Officer on the wording of the tax residency certificate issued by t ..... 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