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claims that he being non resident and a resident of Dubai nike air max 2017 zwart goedkoop , he is eligible for the benefits of DTAA between Dubai and India. As a result dividends should be taxed at a concessional rate of 15% and interest should be taxed at 12.5%.???????

Decision of the AAR: The decision of the AAR after considering the aforesaid facts and the law is given below in a nutshell:
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(i)???????????????? Us.90(1) of the Income-tax Act, 1961, the Central Government may enter into an agreement with the Government of any country outside India


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(a)??? For granting of relief in respect of income on which have been paid both income tax under this Act and income tax in that country, or


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(b)??? For the avoidance of double taxation of income under this Act and under the corresponding law in force in that country nike air max 2017 grijs dames goedkoop , or


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(c)??? For exchange of information for the purpose of information for the prevention of evasion or avoidance of income tax chargeable under this Act or under the corresponding law in force in that country or investigation of cases of such evasion or avoidance or


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(d)??? For recovery of income tax under this Act and under the corresponding law in force in that country and may by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement.?

In view of this position the Central Government does not have the power to enter into DTAA with Dubai as there is no tax on individuals and companies except certain category of companies. However the Central Government can enter into DTAA with Dubai as the Dubai does levy tax on certain categories of companies.

But the individuals and other entities who do not pay any tax in the Dubai at present cannot access the Treaty which is a precondition for accessing a Treaty.


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(ii)?????????????? In terms of Article 4(1) Resident of a Contracting State means any person who, under the laws of that State, is liable to tax therein by reason of his domicile nike air max 2017 wit dames goedkoop , residence, place of management, place of incorporation or any other criterion of a similar nature.????????

The AAR held that unless actual tax has been paid by the person in the Dubai one is not regarded as Resident.???

In view of this position, Cyril Pereira nike air max 2017 zwart dames goedkoop , though residing in the Dubai and domiciled in the Dubai and having close economic ties with the Dubai, cannot be termed as the Resident of Dubai for accessing the DTAA between the Dubai and India. The decision of Rafique was held to be incorrect in view these factors. This is because no tax is paid by Cyril Pereira in the Dubai.


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(iii)???????????? The term ?liable to tax? is equated with the term ?Subject to Tax? (actual payment of tax).


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(iv)???????????? The contention that the Dubai has not granted immunity from taxation and has kept its right to tax alive and that the subject is liable to tax was not accepted by the AAR.???

The AAR held that Cyril Pereira was not entitled to the benefits of DTAA between Dubai and India as there is no tax on individuals in the Dubai.

Though the decision is applicable only to Cyril Pereira, it has wide ramifications in view of the observations of the AAR and the conclusions arrived there from.


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AAR Observations on Ruling - Cyril Pereira Case


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(i)????????????????? S. 90(1) is alternative and not cumulative. Clause (c) of S. 90(1) provides for exchange of information between the two states entering into DTAA and S. 90(1) is the enabling Section to enter into treaty. It is submitted with respect that the AAR appears to have overlooked Clause (c) of S. 90(1). Under this Clause individuals and other classes of persons are covered.


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(ii)??????????????? Resident of a Contracting State is one who is liable to tax. The term ?Liable to tax? is much wider than the term ?subject to tax?. Equating both the terms to mean the same thing is not the spirit of the international convention. Dubai is not a tax haven. It has not given up its right to tax its residents. It has retained its right to tax at any time it so feels, though presently it does not subject its residents to tax.

It has not given any exemption from tax even for a limited period let alone immunity from tax. Its residents remain exposed to ?liability to tax? without any notice.


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(iii)?????????????? It is generally accepted that the AAR would be consistent in giving its views and not air divergent views nike air max 2017 wit goedkoop , for the sake of uniformity, consistency, harmony and non discrimination.

For instance the decision in the matter of Cyril Pereira acts adversely as compared to the decision in the matter of Rafique.???????????

This would adversely discriminate Cyril Pereira as compared to Rafique on identical issues.


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(iv)????????????? On balance and after considering the above points and well accepted international convention, the decision in the matter of Mohd. Rafique appears to represent the correct view.


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Some Other International DTAA with Dubai


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