Abu Dhabi Investment Authority Vs DCIT (ITAT Mumbai)
Abu Dhabi Investment Authority (ADIA) faced a crucial tax dispute with the Income Tax Department in Mumbai. The dispute revolved around the denial of tax treaty benefits under the India-UAE Double Taxation Avoidance Agreement (DTAA) for certain income earned in India during the assessment year 2019-20.
The crux of the matter lay in ADIA’s claim for tax exemption on its income in India under Article 24 of the India-UAE DTAA. The ITAT Mumbai examined whether ADIA qualified as a government entity, thus making its income exempt from Indian taxation.
The dispute arose primarily from the Income Tax Department’s contention that ADIA’s identity was questionable, citing a mobile number provided in the return of income, which was flagged as fraudulent on True Caller. This led the department to challenge ADIA’s status as a government entity entitled to tax treaty benefits.
However, the ITAT Mumbai found the department’s reasoning flawed. It ruled that the mere presence of a mobile number tagged as fraudulent on True Caller couldn’t be used to discredit ADIA’s claim. Instead, the tribunal emphasized the need to verify crucial details such as ADIA’s registration, residency certificate, and the nature of its operations.
In a significant victory for ADIA, the ITAT Mumbai upheld its claim for tax treaty benefits under Article 24 of the India-UAE DTAA. The tribunal emphasized that ADIA’s status as a government entity entitled it to tax exemption in India. This ruling sets a precedent for similar cases and underscores the importance of thorough verification before disputing tax treaty benefits.
In conclusion, the case of Abu Dhabi Investment Authority vs. DCIT (ITAT Mumbai) highlights the importance of substantiating claims with concrete evidence and the risks associated with relying on superficial factors like caller ID tags.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The aforesaid appeal has been filed by the assessee against order dated 31-07-2023, passed by ld. CIT (A)-55 Mumbai for quantum of assessment passed u/s. 143(1)/154 for the assessment year 2019-20.
2. The effective ground raised by the assessee reads as under:-
“Ground No. 3: Denial of benefit under the Double Taxation Avoidance Agreement (‘DTAA’) between India-UAE (‘treaty’) with respect to income earned by the Appellant in India
3.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in denying the benefits of the DTAA between India and UAE with respect to capital gains and interest income earned by the Appellant during the impugned year.
3.2 While doing so, the Ld. CIT (A) erred in:
a) Disregarding the fact that the Appellant is a ‘Government within the meaning of Article 24(2) of the DTAA between India and UAE and therefore, eligible for treaty benefits in respect of its entire income earned in India under Article 24(1) of the said treaty;
b) Disregarding the fact that the Appellant is categorically recognised as a ‘Resident of UAE in terms of Article 4 of the DTAA between India and UAE;
c) Treating the Appellant as a private assessee, as against Government as defined under Article 24 of the DTAA between India and UAE and determining the treaty benefits considering it as a private company with respect to the income earned in India.
The Appellant prays that the claim of the Appellant be allowed the benefit under Article 24 of the DTAA between India and UAE and accordingly, the entire income of the Appellant in India be exempt from tax.”
3. Abu Dhabi Investment Authority holds a valid registration, as a Category 1 Foreign Portfolio Investor (FPI) obtained in accordance with the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations 2019 (the ‘FPI Regulations”). ADIA is a tax resident of United Arab Emirates (UAE) and holds a valid Tax Residency Certificate for calendar year 2018 and 2019. For the assessment year under consideration, the Appellant had electronically uploaded its return of income on 30 October 2019, declaring total income of Rs 365,40,12,280 and claiming a tax refund of Rs 1,18,99,120. During the year under consideration, the Appellant had the following streams of income-
