ITO(IT)-4(1), MUMBAI V. SHRI. MAHAVIRCHAND MEHTA, MUMBAI

ITA 2958/MUM/2009

• Counselvise Citation: 295819914 RSA 2009
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 02-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 07-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G GURUSWAMI
• Keywords: Double taxation relief; Permanent establishment; Advance ruling
• Section: 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI B.RAMAKOTAIA H (A.M) ITA NO.2958/M/09(A.Y. 2006-07) ITO(IT) 4(1), ROOM NO.139, SCINDIA HOUSE, 1 ST FLOOR, BALLARD ESTATE, N.M.ROAD, MUMBAI 38. (APPELLANT) VS. SHRI MAHAVIRCHAND MEHTA, 310, REWA CHAMBERS, NEW MARINE LINES, MUMBAI 20. PAN: AKTPM 5301P (RESPONDENT) APPELLANT BY : SHRI G.GURUSWAMI RESPONDENT BY : NONE ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 30/3/2009 OF CIT(A)-XXXIII, MUMBAI RELATING TO ASSESSMENT YEAR 2 006-07. THE GROUND OF APPEAL RAISED BY THE REVENUE READS AS FOLLOWS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE 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 ACCORDING LY, THE ASSESSEE IS NOT LIABLE TO PAY ANY TAX ON THE SHORT TERM CAPI TAL GAIN AND LONG TERM CAPITAL GAIN EARNED FROM THE TRANSFER OF SECUR ITIES 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 RS48,65,911/- ON SALE OF SHARES IN INDIA. HE CLAIMED THAT THE SHORT TERM CA PITAL 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 AGRE EMENT FOR AVOIDANCE OF DOUBLE TAXATION BETWEEN INDIA AND THE UAE (HEREINAF TER REFERRED TO AS THE ITA NO.2958/M/09(A.Y. 2006-07) 2 INDIA-UAE TREATY) PROVIDES AN EXEMPTION FROM CAPIT AL GAINS TAX IN INDIA TO RESIDENTS OF UAE. IT READS AS UNDER :- ARTICLE 13 : CAPITAL GAINS : 1) GAINS DERIVED BY A RESIDENT OF A CONTRACTING STATE FROM THE ALIENATION OF IMMOVABLE PROPERTY REFERRED TO IN PAR AGRAPH 2 OF ARTICLE 6 AND SITUATED IN THE OTHER CONTRACTIN G STATE MAY BE TAXED IN THAT OTHER STATE. 2) GAIN FROM THE ALIENATION OF MOVABLE PROPERTY FORMIN G PART OF THE BUSINESS PROPERTY OF A PERMANENT ESTABLISHME NT WHICH AN ENTERPRISE OF A CONTRACTING STATE HAS IN T HE OTHER CONTRACTING STATE OR OF MOVABLE PROPERTY PERTAINING TO A FIXED BASE AVAILABLE TO A RESIDENT OF A CONTRACTING STATE IN THE OTHER CONTRACTING STATE FOR THE PURPOSE OF PERF ORMING INDEPENDENT PERSONAL SERVICES, INCLUDING SUCH GAINS FROM THE ALIENATION OF SUCH A PERMANENT ESTABLISHMENT (A LONE OR TOGETHER WITH THE ENTERPRISE) OR OF SUCH FIXED BASE MAY BE TAXED IN THAT OTHER STATE. 3) GAINS FROM THE ALIENATION OF ANY PROPERTY OTHER THA N THAT MENTIONED IN PARAGRAPH 1 AND 2 SHALL BE TAXABLE ONL Y IN THE CONTRACTING STATE OF WHICH THE ALIENATOR IS A R ESIDENT. 3. ARTICLE 4 OF THE INDIA UAE DTAA DEFINES RESIDENT OF A CONTRACTING STATE AS ANY PERSON WHO UNDER THE LAWS OF THAT STATE IS L IABLE TO TAX THEREIN. THERE IS NO DISPUTE THAT THE ASSESSEE IS A RESIDENT OF UAE. THE AO HOWEVER REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND TH AT THE ASSESSEE IS NOT PAYING TAXES IN UAE. THE ASSESSING OFFICER RELIED UPON THE DECISION OF THE AAR IN THE CASE OF ABDUL RAZACK MENON 276 ITR 306 W HICH HAD CONSIDERED THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF AZADI BACHAO ANDOLAN 263 ITR 706 (SC) AND HELD THAT THE ASSESSE E HAS FAILED TO DISCHARGE THE ONUS ON IT TO PROVE THAT IT IS LIABLE TO PAY TA X IN UAE. ACCORDING TO THE AO IT IS NOT SUFFICIENT FOR A PERSON TO CLAIM THE B ENEFITS OF ARTICLE 13(3) TO BE ITA NO.2958/M/09(A.Y. 2006-07) 3 JUST A RESIDENT OF THE OTHER CONTRACTING STATE, B UT HE MUST ALSO HAVE PAID TAX ON THE INCOME IN RESPECT OF WHICH THE BENEFIT O F ARTICLE 13(3) IS CLAIMED. IN UAE THE CAPITAL GAIN IN QUESTION WAS ADMITTED N OT CHARGED TO TAX. 4. ON APPEAL BY THE ASSESSEE, THE CIT(A) HELD THAT THE ASSESSEE WAS ENTITLED TO THE BENEFITS OF ARTICLE 13(3) OF INDO-UAE TREATY AND THEREFORE CAPITAL GAIN CANNOT BE BROUGHT TO TAX IN INDIA. IN DOING SO HE FOLLOWED THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ASSISTA NT DIRECTOR OF INCOME- TAX (INTERNATIONAL TAXATION), RANGE 1(2) VS. GREEN EMIRATE SHIPPING & TRAVELS 100 ITD 203 (MUM) ITAT. IN THE CASE OF A SSISTANT DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION), RANGE 1(2) VS. GREEN EMIRATE SHIPPING & TRAVELS 100 ITD 203 (MUM) ITAT, THE MUMBAI TRIBU NAL HAD AN OCCASION TO DEAL WITH AN IDENTICAL CASE. THE FACTS OF THE C ASE 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. 28,3 5,628 FROM SHIPPING OPERATIONS. THE ASSESSEES CLAIM WAS THAT IN TERMS OF ARTICLE 8 OF THE INDO- UAE DOUBLE TAXATION AVOIDANCE AGREEMENT , THE ASSES SEES 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 THA T 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 [199 9] 239 ITR 6501 IN SUPPORT OF THE PROPOSITION THAT THE PROVISIONS OF T HE 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 EXP RESSED BY THE AAR IN THE CASE OF CYRIL EUGENE PERERIA (SUPRA) ON THE GROUND THAT THE SAID DECISION WAS HELD TO BE NOT LAYING DOWN THE CORRECT LAW AS L AID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA V. AZAD I BACHAO ANDOLAN [2003] 263 ITR 7061, AT PAGE 742. THE TRIBUNAL IN THIS RE GARD OBSERVED AS FOLLOWS: ITA NO.2958/M/09(A.Y. 2006-07) 4 6. UNDOUBTEDLY, IN CYRIL EUGENE PERERIAS CASE (SU PRA), HONBLE AUTHORITY FOR ADVANCE RULING, DEVIATING FROM THE ST AND TAKEN BY IT IN THE EARLIER RULINGS INCLUDING RULING IN MOHSINALLY ALIMOHAMMED RAFIK, IN RE [1995] 213 ITR 3171, CONCLUDED THAT AN INDIV IDUAL WHO IS NOT LIABLE TO PAY TAX UNDER THE UAE LAW CANNOT CLAIM AN Y RELIEF FROM THE ONLY TAX ON INCOME WHICH IS PAYABLE IN INDIA UNDER THE AGREEMENT AND THAT THE PROVISIONS OF THE DOUBLE TAXATION AVO IDANCE AGREEMENT DO NOT APPLY TO ANY CASE WHERE THE SAME INCOME IS N OT LIABLE TO BE TAXED TWICE BY THE EXISTING LAWS ON BOTH THE CONTRA CTING STATES. HOWEVER, IN AZADI BACHAO ANDOLANS CASE (SUPRA), TH EIR LORDSHIPS OF HONBLE SUPREME COURT, AFTER REFERRING TO THE SAID RULING AND AFTER ELABORATE DISCUSSIONS ON THE VARIOUS ASPECTS OF THI S ISSUE, CONCLUDED THAT IT IS . . . . NOT POSSIBLE FOR US TO ACCEPT T HE CONTENTIONS SO STRENUOUSLY URGED BY THE RESPONDENTS THAT THE AVOID ANCE OF DOUBLE TAXATION CAN ARISE ONLY WHEN TAX IS ACTUALLY PAID I N ONE OF THE CONTRACTING STATES. THE REASONING GIVEN BY THEIR L ORDSHIPS INCLUDED THE FOLLOWING : ACCORDING TO KLAUS VOGEL DOUBLE TAXATION CONVENTI ONS ESTABLISHES AN INDEPENDENT MECHANISM TO AVOID DOUBL E TAXATION THROUGH RESTRICTION OF TAX CLAIMS IN AREAS WHERE OV ERLAPPING TAX CLAIMS ARE EXPECTED, OR AT LEAST THEORETICALLY POSS IBLE. IN OTHER WORDS, CONTRACTING STATES MUTUALLY BIND THEMSELVES NOT TO LEVY TAXES OR TO TAX ONLY TO A LIMITED EXTENT IN CASES W HEN THE TREATY RESERVES TAXATION FOR THE OTHER CONTRACTING STATE E ITHER ENTIRELY OR IN PART. CONTRACTING STATES ARE SAID TO WAIVE T AX CLAIMS OR MORE ILLUSTRATIVELY TO DIVIDE TAX SOURCES, TAXAB LE OBJECTS, AMONGST THEMSELVES. DOUBLE TAXATION AVOIDANCE TREA TIES WERE IN VOGUE EVEN FROM THE TIME OF THE LEAGUE OF NATIONS. THE EXPERTS APPOINTED IN THE EARLY 1920S BY THE LEAGUE OF NATIO NS DESCRIBE THIS METHOD OF CLASSIFICATION OF ITEMS AND THEIR AS SIGNMENTS TO THE CONTRACTING STATES. WHILE THE ENGLISH LAWYERS C ALLED IT CLASSIFICATION AND ASSIGNMENT RULE, THE GERMAN JU RISTS CALLED IT THE DISTRIBUTIVE RULE (VERTEILUNGSNORM). TO THE E XTENT THAT AN EXEMPTION IS AGREED TO, ITS EFFECT IS IN PRINCIPLE INDEPENDENT OF BOTH WHETHER THE CONTRACTING STATE IMPOSES A TAX IN THE SITUATION TO WHICH THE EXEMPTION APPLIES, AND IRRES PECTIVE OF WHETHER THE STATE ACTUALLY LEVIES THE TAX. COMMENTI NG PARTICULARLY ON THE GERMAN DOUBLE TAXATION CONVENTI ON WITH THE UNITED STATES, VOGEL COMMENTS : THUS, IT IS SA ID THAT THE TREATY PREVENTS NOT ONLY CURRENT BUT ALSO MERELY POTENTIAL DOUBLE TAXATION. FURTHER, ACCORDING TO VOGEL, ONL Y IN EXCEPTIONAL CASES, AND ONLY WHEN EXPRESSLY AGREED T O BY THE PARTIES, IS EXEMPTION IN ONE OF THE CONTRACTING STA TES DEPENDENT UPON WHETHER THE INCOME OR CAPITAL IS TAXABLE IN TH E OTHER CONTRACTING STATE, OR UPON WHETHER IT IS ACTUALLY T AXED THERE. ITA NO.2958/M/09(A.Y. 2006-07) 5 IT IS, THEREFORE, NOT POSSIBLE FOR US TO ACCEPT THE CONTENTIONS SO STRENUOUSLY URGED BY THE RESPONDENTS THAT THE AVOID ANCE OF DOUBLE TAXATION CAN ARISE ONLY WHEN TAX IS ACTUALLY PAID I N 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. MENON, IN RE [ 2005] 276 ITR 306 WAS ALSO NOT GOOD LAW. 7. THE TRIBUNAL DEALT WITH THE ARGUMENT OF THE LEA RNED DEPARTMENTAL REPRESENTATIVE THAT AS NON-CORPORATE ENTITIES ARE NOT TAXABLE ENTITIES UNDER THE UAE TAX TREATY SUCH NON-CORPORATE ENTITIES, EV EN THOUGH BASED IN UAE, CANNOT BE TREATED AS RESIDENT FOR THE PURPOSES OF THE INDIA-UAE DTAA AS FOLLOWS: OUR ATTENTION IS ALSO INVITED TO THE LEARNED ASSESS ING OFFICERS OBSERVATIONS TO THE EFFECT 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 A ND THAT SINCE THE ASSESSEE HAS FAILED TO PROVE THAT IT IS PAYING TAXE S IN UAE, THE DIT RELIEF SOUGHT BY THE ASSESSEE IS REJECTED BUT IT I S THE VERY PROPOSITION UNDERLYING THESE OBSERVATIONS WHICH WAS REJECTED BY THE HONBLE SUPREME COURT HOLDING THAT IT IS . . . . NOT POSSI BLE FOR US TO ACCEPT THE CONTENTIONS SO STRENUOUSLY URGED BY THE RESPOND ENTS THAT THE AVOIDANCE OF DOUBLE TAXATION CAN ARISE ONLY WHEN TA X IS ACTUALLY PAID IN ONE OF THE CONTRACTING STATES. AS WE HAVE NOTED EARLIER ALSO, THE REVENUE IS ON RECORD TO HAVE OPPOSED THE VERY ARGUM ENT THAT THE REVENUE HAS TAKEN IN THE PRESENT CASE, AS EVIDENT F ROM THE HONBLE SUPREME COURTS FOLLOWING OBSERVATION : THE APPELLANTS (I.E., UNION OF INDIA) CONTEND THAT , ACCEPTANCE OF THE RESPONDENTS SUBMISSION THAT DOUBLE TAXATION AV OIDANCE IS NOT PERMISSIBLE UNLESS THE TAX IS PAID IN BOTH COUN TRIES IS CONTRARY TO THE INTENDMENT OF SECTION 90. IT IS URG ED THAT CLAUSE (B) OF SUB-SECTION (1) OF SECTION 90 APPLIES TO A S ITUATION WHERE INCOME-TAX HAS BEEN PAID IN BOTH THE COUNTRIES, BUT CLAUSE (B) DEALS WITH THE SITUATION OF AVOIDANCE OF DOUBLE TAX ATION OF INCOME. INASMUCH AS PARLIAMENT HAS DISTINGUISHED BE TWEEN 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 T HE SAME AS SITUATIONS CONTEMPLATED UNDER CLAUSE (A). THE VERY CONTENTION WHICH HAS BEEN RAISED BY THE RE VENUE IN THIS CASE WAS SUCCESSFULLY CHALLENGED BY THE UNION OF INDIA B EFORE THE HONBLE ITA NO.2958/M/09(A.Y. 2006-07) 6 SUPREME COURT. IT CANNOT BE OPEN TO US TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE HONBLE SUPREM E COURT. 8. THE TRIBUNAL THEN DEALT WITH THE QUESTION AS TO WHETHER EXISTING LIABILITY TO PAY TAXES IN UAE IS A SINE QUA NON TO AVAIL THE BENEFIT OF INDIA-UAW TAX TREATY IN INDIA AS FOLLOWS: 8. ALTHOUGH THE ASSESSING OFFICERS OBJECTION TO A PPLICABILITY OF INDIA- UAE TAX TREATY WAS ONLY ON THE GROUND THAT THE PROV ISIONS OF DOUBLE TAXATION AVOIDANCE AGREEMENTS DO NOT COME INTO PLAY UNLESS IT IS ESTABLISHED THAT THE ASSESSEE IS PAYING TAX IN BOTH THE COUNTRIES IN RESPECT OF THE SAME INCOME, IN THE GROUNDS OF APPEA L BEFORE US IT IS ALSO CONTENDED THAT THE ASSESSEE-COMPANY FAILED TO PRODUCE ANY EVIDENCE TO THE EFFECT THAT IT WAS LIABLE TO PAY T AXES 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 JUDGM ENT OF HONBLE SUPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN ( SUPRA). REFERRING TO THE KLAUS VOGELS COMMENTARY ON DOUBLE TAXATION CONVENTIONS, THEIR LORDSHIPS, INTER ALIA, OBSERVED AS FOLLOWS : IN OTHER WORDS, CONTRACTING STATES MUTUALLY BIND T HEMSELVES NOT TO LEVY TAXES OR TO TAX ONLY TO A LIMITED EXTEN T IN CASES WHEN THE TREATY RESERVES TAXATION FOR THE OTHER CONTRACT ING 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 AVOID ANCE TREATIES WERE IN VOGUE EVEN FROM THE TIME OF THE LEAGUE OF N ATIONS. THE EXPERTS APPOINTED IN THE EARLY 1920S BY THE LEAGUE OF NATIONS DESCRIBE THIS METHOD OF CLASSIFICATION OF ITEMS AND THEIR ASSIGNMENTS TO THE CONTRACTING STATES. WHILE THE EN GLISH LAWYERS CALLED IT CLASSIFICATION AND ASSIGNMENT RU LE, THE GERMAN JURISTS CALLED IT THE DISTRIBUTIVE RULE (VERTEI-L UNGSNORM). TO THE EXTENT THAT AN EXEMPTION IS AGREED TO, ITS EFFECT I S IN PRINCIPLE INDEPENDENT OF BOTH WHETHER THE CONTRACTING STATE I MPOSES A TAX IN THE SITUATION TO WHICH THE EXEMPTION APPLIES , AND IRRESPECTIVE OF WHETHER THE STATE ACTUALLY LEVIES T HE TAX. COMMENTING PARTICULARLY ON THE GERMAN DOUBLE TAXATI ON CONVENTION WITH THE UNITED STATES, VOGEL COMMENTS : THUS, IT IS SAID THAT THE TREATY PREVENTS NOT ONLY CURRENT BU T ALSO MERELY POTENTIAL DOUBLE TAXATION. [EMPHASIS SUPPLIED] IT IS THUS CLEAR THAT A TAX TREATY NOT ONLY PREVENT S CURRENT BUT ALSO POTENTIAL DOUBLE TAXATION. THEREFORE, IRRESPECTIV E OF WHETHER OR NOT THE UAE ACTUALLY LEVIES TAXES ON NON-CORPORATE ENTITIES , ONCE THE RIGHT TO TAX UAE RESIDENTS IN SPECIFIED CIRCUMSTANCES VESTS ONLY WITH THE ITA NO.2958/M/09(A.Y. 2006-07) 7 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 DIST RIBUTIVE RULE, IS INDEPENDENT OF WHETHER THE CONTRACTING STATE IMPOS ES 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 QUOT ED WITH APPROVAL BY THE HONBLE SUPREME COURT IN AZADI BACH AO ANDOLANS 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 GAI N IN HIS OWN COUNTRY. IF CANADA OR THE US WERE TO ABOLISH THE CAPITAL GAI NS TAX COMPLETELY, WHILE THE OTHER COUNTRY DID NOT, A RESIDENT OF THE COUNTRY WHICH HAS ABOLISHED THE CAPITAL GAINS WOULD STILL BE EXEMPT F ROM CAPITAL GAINS IN THAT OTHER COUNTRY. IT IS THUS CLEAR THAT TAXABILI TY IN ONE COUNTRY IS NOT SINE QUA NON FOR AVAILING RELIEF UNDER THE TREATY F ROM TAXABILITY IN THE OTHER COUNTRY. ALL THAT IS NECESSARY FOR THIS PURPO SE IS THAT THE PERSON SHOULD BE LIABLE TO TAX IN THE CONTRACTING STATE B Y REASON OF DOMICILE, RESIDENCE, PLACE OF MANAGEMENT, PLACE OF INCORPORAT ION OR ANY OTHER CRITERION OF SIMILAR NATURE WHICH ESSENTIALLY REFE RS TO THE FISCAL DOMICILE OF SUCH A PERSON. IN OTHER WORDS, IF FISCA L DOMICILE OF A PERSON IS IN A CONTRACTING STATE, IRRESPECTIVE OF WHETHER OR NOT THAT PERSON IS ACTUALLY LIABLE TO PAY TAX IN THAT COUNTRY, HE IS T O BE TREATED AS RESIDENT OF THAT CONTRACTING STATE. THE EXPRESSION LIABLE TO TAX IS NOT TO READ IN ISOLATION BUT IN CONJUNCTION WITH THE WO RDS IMMEDIATELY FOLLOWING IT I.E., BY REASON OF DOMICILE, RESIDENC E, PLACE OF MANAGEMENT, PLACE OF INCORPORATION OR ANY OTHER CRI TERION OF SIMILAR NATURE. THAT WOULD MEAN THAT MERELY A PERSON LIVIN G IN A CONTRACTING STATE SHOULD NOT BE SUFFICIENT, THAT PERSON SHOULD ALSO HAVE FISCAL DOMICILE IN THAT COUNTRY. THESE TESTS OF FISCAL DOM ICILE WHICH ARE GIVEN BY WAY OF EXAMPLES FOLLOWING THE EXPRESSION LIABLE TO TAX BY REASON OF I.E., DOMICILE, RESIDENCE, PLACE OF MANAGEMENT, PLA CE 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 RES IDENCE TYPE TAXATION, THAT PERSON IS TO BE TREATED AS RESIDEN T AND THIS STATUS OF BEING A RESIDENT OF THE CONTRACTING STATE IS INDE PENDENT OF THE ACTUAL LEVY OF TAX ON THAT PERSON. VIEWED IN THIS PERSPECT IVE, WE ARE OF THE CONSIDERED OPINION THAT BEING LIABLE TO TAX IN TH E CONTRACTING STATE DOES NOT NECESSARILY IMPLY THAT THE PERSON SHOULD A CTUALLY BE LIABLE TO TAX IN THAT CONTRACTING STATE BY THE VIRTUE OF AN E XISTING LEGAL PROVISION BUT WOULD ALSO COVER THE CASES WHERE THAT OTHER CON TRACTING STATE HAS THE RIGHT TO TAX SUCH PERSONS - IRRESPECTIVE OF WHE THER OR NOT SUCH A RIGHT IS EXERCISED BY THE CONTRACTING STATE. IN OUR HUMBLE UNDERSTANDING, THIS IS THE LEGAL POSITION EMERGING OUT OF HONBLE SUPREME COURTS JUDGMENT IN AZADI BACHAO ANDOLANS CASE (SUPRA). THE PLEA TAKEN BY THE REVENUE THAT THE ASSESSEE WAS NOT LIABILE TO TAX, ITA NO.2958/M/09(A.Y. 2006-07) 8 WHICH WAS ANYWAY NOT TAKEN BY THE ASSESSING OFFICER OR BEFORE THE CIT(A), IS ALSO NOT SUSTAINABLE IN LAW EITHER. 9. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE SUBMISSIONS OF LEARNED DEPARTMENTAL REPRESENTATIVE WHO RELIED ON THE ORDER OF THE ASSES SING OFFICER. IN OUR VIEW DECISION IN THE CASE OF GREEN EMIRATE SHIPPING & TR AVELS (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. AS HEL D IN THE AFORESAID CASE, EXPRESSION LIABLE TO TAX IN THE CONTRACTING STATE AS USED IN ARTICLE 4(1)OF INDO-UAE-DTAA DOES NOT NECESSARILY IMPLY THAT THE P ERSON SHOULD ACTUALLY BE LIABLE TO TAX IN THAT CONTRACTING STATE AND THAT IT IS ENOUGH IF OTHER CONTRACTING STATE HAS RIGHT TO TAX SUCH PERSON, WHE THER OR NOT SUCH A RIGHT IS EXERCISED. IN THE LIGHT OF THE RATIO LAID DOWN IN T HE AFORESAID DECISION, WHICH HAS BEEN FOLLOWED BY CIT(A), WE FIND NO GROUNDS TO INTERFERE WITH THE ORDER OF CIT(A). WE THEREFORE CONFIRM THE ORDER OF CIT(A) AN D DISMISS THE APPEAL BY THE REVENUE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED, ORDER PRONOUNCED IN THE OPEN COURT ON TH E 4 TH DAY OF MAY, 2011. SD/- SD/- (B.RAMAKOTAIAH ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 4 TH MAY.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RF BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.2958/M/09(A.Y. 2006-07) 9 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 2/5/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 2/5/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER