The Income Tax Appellate Tribunal (ITAT), Rajkot bench has held that the benefit of the Double Tax Avoidance Agreement (DTAA) between India and UAE cannot be denied to a Company registered in the UAE merely because the directors are of different nationality and the same shall be granted if the company is a tax resident of UAE.
The assessee, M/s. Qawareb Ship Management LLC Dubai has filed its return and claimed Rs.4,83,497/- as exempted as per DTAA between the Government of India and U.A.E. The Assessing Officer observed that local Agent has not submitted certain documents in respect of the company which is incorporated in the UAE and which is managed and controlled only in UAE. The local agent produced certain documents and after taking cognizance of the said documents, the Assessing Officer observed that the said companies not residents of UAE as per Article 4 of DTAA agreement executed with Government of India and UAE and its place of effective control and management which is situated out of UAE.
A bench of Ms. Suchitra Kamble (Judicial Member) and Shri Waseem Ahmed (Accountant Member) has observed that the assessee is a limited liability company which is non-resident. As relates to commercial licence of the company, the same is issued by Dubai Maritime City which is UAE country.
“Besides this, the assessee has also submitted the Bank details of Standard Chartered Bank related to outward payment customer advise that of UAE only. Though the partners/Directors are Yemenis national except one of the partner, the address of that partner/director of the resident is Dubai, United Arab Emirates (UAE) only. The UAE court (Ministry of Finance) has issued Tax Residency Certificate to the assessee company on 19.06.2008 which set out that licence No.234584 has been given to the assessee company which is domiciled in UAE. From the perusal of the additional evidence, the assessee company has given business licence details once again which clearly set out that the assessee company is a resident of UAE. Thus, the Assessing Officer as well as the CIT(A) has totally ignored these facts. Merely Partner’s/Director’s nationality will not suffice the company’s residency when the company is registered and operational in a particular country in the present case is in UAE Dubai and has obtained the business licence from the said resident company is the resident of UAE,” the Tribunal said.
Granting relief to the assessee, the Tribunal held that “Now coming to whether the exemption claimed by the assessee is applicable to assessee company or not is the question for which Article 4(1) defines the residents and it clearly set out that the individual who is present in the UAE for period or periods totalling in the aggregate at least 183 days in the calendar year concerned, and a company which is incorporated in the UAE and which is managed and controlled wholly in UAE. In the present case, the company is incorporated in UAE and is managed and controlled only in UAE. In fact, the company and its business is operational from UAE only. Thus, it is a tax resident of UAE and, therefore, treaty between India and UAE (DTAA) is applicable in the present case. Thus, Article 8 where Shipping Business and its profit has been determined in respect of taxability the same is applicable in the present case and thus the assessee is entitled for the treaty benefit. The Assessing Officer was not right in denying the exemption and hence the addition does not sustain.”
Shri Vimal Desai appeared for the assessee and Shri B.D. Gupta, Sr. DR appeared for the Revenue.
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