Treaty residence requires current liability to tax; mere UAE residence did not secure India-UAE treaty protection.

An individual must be presently liable to tax in the claimed State of residence to qualify as a "resident of a Contracting State" under Article 4(1) of the India-UAE treaty. Mere physical residence in the UAE, or possible future taxability, does not satisfy the treaty definition where the person is not a taxable unit under UAE domestic law. The treaty's personal scope therefore does not extend to that individual, and the distributive provisions for dividend, interest and capital gains income cannot be invoked on that basis.

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Issues: Whether an individual resident in the United Arab Emirates, who is not a taxable unit under the UAE domestic law, is entitled to the benefit of the India-UAE tax treaty and thereby claim treaty protection in respect of dividend, interest and capital gains income.

Analysis: The definition of "resident of a Contracting State" in Article 4(1) requires a person to be liable to tax in that State by reason of domicile, residence, place of management, place of incorporation or a similar criterion. The expression "liable to tax" refers to legal coverage by the taxing law and not necessarily actual payment, but the treaty still requires that the person fall within the domestic tax net of the other State. Article 3(e) makes "person" inclusive of an individual only if the individual is treated as a taxable unit under the relevant domestic law. Since an individual was not a taxable unit under the UAE Decree, mere residence in UAE did not satisfy the treaty definition. The court rejected the argument that future or potential taxability would suffice, and held that the treaty could not be extended on the basis of general considerations of effectiveness or by importing broader OECD commentary contrary to the treaty text.

Conclusion: The applicant was not entitled to treaty benefits as a resident of UAE, and the questions on capital gains, dividend and interest taxation under the treaty failed.

Final Conclusion: The advance ruling holds that an individual who is not liable to tax under UAE domestic law is outside the personal scope of the India-UAE treaty and cannot invoke its distributive provisions for income arising in India.

Ratio Decidendi: For treaty entitlement under Article 4(1), the claimant must presently be within the domestic tax net of the claimed residence State; a person who is not a taxable unit there is not a resident for treaty purposes.

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