India-UAE DTAA relief applies where UAE residence exists and actual UAE tax payment is not required for capital gains exemption.

Article 13(3) of the India-UAE DTAA allocates taxing rights over gains from property other than immovable and business property gains to the State of residence of the alienator, and Article 4(1) treats a person as resident if liable to tax there by reason of domicile, residence or a similar criterion. Applying Azadi Bachao Andolan, treaty relief is available to prevent potential as well as current double taxation, and actual payment of tax in the UAE is not required. The phrase "liable to tax" was read as referring to the existence of the other State's taxing right, not actual levy. On that basis, a UAE resident could claim Article 13(3) relief, and the short-term capital gains were not taxable in India.

---

---

Issues: Whether a resident of the UAE was entitled to the benefit of Article 13(3) of the India-UAE DTAA so as to avoid tax in India on short-term capital gains, and whether actual payment of tax in the UAE was necessary to claim treaty relief.

Analysis: Article 13(3) allocates taxing rights over gains from property other than immovable and business property gains to the State of residence of the alienator. Article 4(1) defines a resident by reference to liability to tax in that State by reason of domicile, residence, place of management, place of incorporation, or a similar criterion. The Tribunal applied the principle recognised in Azadi Bachao Andolan that a tax treaty prevents not only current but also potential double taxation, and that treaty relief is not dependent on actual tax payment in the other Contracting State. The expression 'liable to tax' was read as referring to fiscal domicile and the existence of the other State's taxing right, not to the actual levy of tax.

Conclusion: The assessee, being a resident of the UAE within the meaning of the treaty, was entitled to the benefit of Article 13(3), and the short-term capital gains were not taxable in India.

---