Case Law Details
ITO Vs Rajeev Suresh Ghai (ITAT Mumbai)
It is always useful to bear in mind the fact that, on the first principles, the trigger for taxation of an income in a source jurisdiction is either the economic activity or the linkage of an income with that jurisdiction, and that in the absence of such a linkage or economic activity nexus, there cannot be any source taxation, The assessee before us is certainly an Indian national, but he is admittedly resident in the UAE so far as his residential status, under the Indo UAE tax treaty is concerned, is of the UAE tax resident. The residuary taxation rights, in terms of the treaty provisions, belong to the residence jurisdiction, but even if that was not to be so, the residence rights can at best go to the source jurisdiction, which in turn refers to a jurisdiction in which the income is earned, rather than a jurisdiction in which the income is invested. By no stretch of logic, therefore, such an income could be taxed in India, which is neither residence nor source jurisdiction; it is at best investment jurisdiction. However, the scheme of tax treaties limits the rights of taxation either to residence or to source jurisdiction.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The assessee before us is an Indian national fiscally domiciled in, and tax resident of, the United Arab Emirates for over three decades. He is said to have invested his unexplained income in specific residential properties in India. The short question requiring our adjudication in the present case is whether his unexplained investments, even if that be so, can be taxed in India upon investment in India, even when he is not carrying out any income generating activities in India. The only trigger to the taxation is his investments in India.
2. To set out the backdrop in which this question arises, a few things need to be taken note of. By way of this appeal, the Assessing Officer has challenged the correctness of the order dated 29th July 2019, passed by the learned CIT(A), in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2010-11. Grievances raised by the appellant Assessing Officer are as follows:
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In all the four questions framed for appellate decision / adjudication, as has been the conventional practice, the opening pet phrase reads, – “Whether on the facts and in the circumstance of the case AND IN LAW …..”
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However, most often than not the problem arises in identifying/ ascertaining as to adjudication has to be made having regard to which law; that is, which one or more of the legislated provisions in force and at what point in time?
In a manner of critical viewing, such problem has been ridiculously given an added dimension by a recent amendment of the law. Reference is to the novel idea of ‘deemed resident’ enacted (NEW SECTION 6 (1A), despite there being no rhyme or logic /legality or legitimacy in doing so. For, the said change has cut at the very roots of the principal concept of relevance for taxation, being the ‘source ‘ from which income accrues or arises /or is deemed to accrue or arise, -under the obtaining -for – long erstwhile scheme of the domestic law!
For a dilation, go through the points of view shared in expert professional circles, through the tax websites so also in social media!
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