Treaty protection for UK partnership firm upheld where domestic tax status did not defeat India-UK DTAA coverage.

A partnership firm registered in the UK was considered entitled to the India-UK Double Taxation Avoidance Agreement because treaty coverage was extended to persons resident in one or both contracting states, and a firm could fall within that framework where domestic law treats it as a person liable to tax. The analysis relied on the Income-tax Act definition of "person" and the fact that a firm is treated as an assessee for charge purposes, so treaty protection could not be denied merely because the firm was not taxed as a separate entity under UK domestic law. On that basis, the receipts were treated as not taxable in India.

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Issues: Whether a partnership firm registered in the UK, though not itself a taxable entity under UK domestic law, was entitled to the benefit of the India-UK Double Taxation Avoidance Agreement and could claim that the receipts were not taxable in India.

Analysis: The Tribunal followed the Calcutta High Court's view that the treaty applied to persons who are residents of one or both contracting states, and that a partnership firm could fall within the treaty framework where the domestic law treated the firm as a person liable to tax. The Tribunal noted that under the Income-tax Act, a firm is included within the definition of person, and once the firm is treated as an assessee for charging tax, it cannot be denied treaty coverage merely because it is not taxed as a separate entity in the UK. On that basis, the Tribunal accepted the assessee's entitlement to treaty protection.

Conclusion: The assessee was entitled to the benefit of the India-UK Double Taxation Avoidance Agreement, and the receipts were not taxable in India on the reasoning adopted.

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