Ita/1000/2011 Of Director Of Income Tax v. Mushtaq Ahmed Vakil

% 23.08.2011 Present:Mr.AnupamTripathi,Sr.StandingCounselfortheAppellant/Revenue.Mr. Ajay Vohra and Ms. KavltaJha along with Mr. SomnathShukia, Advocates for the Respondent. + ITA Nos.1000/2011& 1001/2011 It Is an undisputedfact that India has enteredInto a Double TaxationAvoidanceAgreement (DTAA) with United Arab Emirates (UAE). It Is also anundisputedfact that as perthe provisionofthis agreement, no tax Is payableby non-residenton an Income earned under short-term capital gain. This Isspecifically provided In Article 13(3) of the said DTAA between India and UAE.In the Instant case, respondent /assessee, who Is a resident of UAE, had filedreturn for the assessmentyear 2004-05 and declaredIncome at ? NIL afterclaiming short-termcapital gain of ?77,10,248/-accrued to him In India as thesame was not taxable In India due to benefits under DTAA betweenIndia andUAE Invokingarticle 13(3) of the said treaty. The Assessing Officer, however,disallowedthe exemption on the ground that there was no tax regime In UAEand as the assessee was not liable to taxation In UAE, the question of benefitunder the said DTAA was not applicable. The assesseepreferred an appealbefore the CIT(A) which was allowed reversing the order of the AssessingOfficer having regard to the judgment of the Apex Court In Union of India vAzadi Bachao Andoian (2003) 263 ITR 706. This view Is upheld by ITAT In Itsorder dated24thSeptember 2010 confirming the aforesaidview of CIT(A) anddismissingthe appealof the revenue.Challengingthat order, the presentappeal Is preferred. s The only contention raised by the revenue in this appeal (which wasbased on the assessment order passed by the Assessing Officer) that inabsenceofany tax laws in UAE and as the respondentis not liableto pay thetax on the aforesaid short term capital gain in UAE, the provisions of DTAAwould not be applicable as there is no question of avoiding payment ofdouble tax in the said case. Howsoeverattracted this proposition may be, weare not in a position to accept the same inasmuch as this very contention wasnegatedbytheSupremeCourtin AzadiBachaoAndolan(supra).Interestingly,that was a case where Azadi Bachao Andolan had filed a PublicInterest Litigation raising this contention which was accepted by the HighCourt. However, against that order, the appeal filed by none else than theUnion of India itself and had argued that even if tax revenue actually paid bya non-residentin other countrywith which India has enteredinto such atreaty, that would be of no consequenceand that contentionwas acceptedby the Supreme Court in the following words: "Theappellants(I.e.UnionofIndia)contendthat,acceptanceof the respondent'ssubmissionthat doubletaxationavoidanceIs not permissibleunlessthe taxIspaid In both countriesIs contraryto the Intendmentofsection 90. It Is urgedthat clause (b) of the sub-section(1) of section 90 applies to a situationwhere Income-taxhas been paid In both the countries,but clause (b) dealswiththesituationof avoidanceof doubletaxationofIncome,InasmuchasParliamenthasdistinguishedbetween the two situation.It is not open to a Court of lawto Interpretclause(b) distinguishedbetweenthe two \ situations, it is not open to a Court of iaw to interpretciause (b) of section 90 sub section(1), as if it were thesame as situations contempiated under ciause (a)" Having regardto the aforesaidpronouncementof the Apex Courtwhich is binding on us, we are of the view that no question of iaw much lesssubstantialquestionof law arisesin these appeals.We, therefore,dismissboth these appeals. kiCSIKRI,J. M.L. MEHTA, J. AUGUST 23, 2011rd