Indo-UAE DTAA treaty residency issue followed prior year ruling and kept capital gains outside Indian tax

The Indo-UAE DTAA was applied to exempt capital gains from tax in India where the assessee claimed treaty protection under Article 13(3). The Revenue argued that the assessee was not a resident of the contracting state because individuals were not liable to tax in the UAE under Article 4. The Tribunal followed its earlier decision for the immediately preceding year, holding that the materially identical facts required the same treaty interpretation. The treaty benefit was therefore allowed and the capital gains were treated as not taxable in India.

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Issues: Whether the assessee was entitled to the benefit of the Indo-UAE DTAA so as to keep the capital gains from taxation in India.

Analysis: The assessee had claimed exemption from capital gains on the basis of Article 13(3) of the Indo-UAE DTAA. The Revenue's objection was that the assessee could not be treated as a resident of the contracting state because individuals were not liable to tax in the UAE under Article 4. The Tribunal noted that an identical issue for the immediately preceding assessment year had already been decided in the assessee's favour. As the facts for the present year were materially the same, the earlier view was followed.

Conclusion: The assessee was held entitled to the benefit of the Indo-UAE DTAA and the capital gains were not taxable in India.

Ratio Decidendi: Where the facts for the relevant year are identical to an earlier year in which treaty benefit was allowed, the same treaty interpretation will be followed and the assessee will be entitled to exemption from capital gains tax under the DTAA.

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