Indo-U.A.E. treaty benefits do not require actual UAE tax payment; residential status remains the key eligibility test.

Entitlement to Indo-U.A.E. treaty benefits does not depend on actual tax payment in the UAE; the relevant enquiry is whether the recipient is resident in the UAE within the meaning of the treaty. The Tribunal held that treaty relief cannot be denied merely because no tax is presently paid there. However, because the recipient's UAE residence had not been examined on the material available, the matter was remitted for limited verification of residential status before treaty eligibility is determined.

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Issues: Whether actual payment of tax in the UAE was a condition precedent for claiming benefits under the Indo-U.A.E. tax treaty, and whether the recipient's residence status in the UAE required verification before denying treaty relief.

Analysis: The Tribunal followed its earlier view that entitlement to treaty benefits does not depend on actual tax payment in the other Contracting State. The relevant enquiry is whether the recipient is resident in the UAE within the meaning of the treaty, and the benefit cannot be denied merely because no tax is presently paid there. Since the lower authorities had proceeded on an incorrect legal premise and the factual aspect of UAE residence had not been examined on the material then available, the matters were restored for limited verification of the recipient's residential status.

Conclusion: The requirement of actual tax payment in the UAE was held to be unnecessary for treaty eligibility, but the issue of the recipient's UAE residence was remitted to the Assessing Officer for fresh examination.

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