Treaty protection for foreign consultancy income where no permanent establishment existed under the India-UAE DTAA

A foreign company with a valid Tax Residency Certificate and no permanent establishment in India was treated as entitled to treaty protection for consultancy or marketing commission income under the India-UAE DTAA. Article 7 was found inapplicable because the income was not attributable to a permanent establishment, and the income was not specifically covered by the preceding treaty articles. It therefore fell within the residuary "other income" provision under Article 22, requiring recomputation of tax liability on that basis.

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Issues: Whether the consultancy income of a foreign company without a permanent establishment in India was taxable in India under Article 7 of the India-UAE DTAA or entitled to treaty protection under Article 22, warranting recomputation of tax liability.

Analysis: The assessee produced a valid Tax Residency Certificate for the relevant period and the income was earned as consultancy or marking commission income. Since there was no permanent establishment in India, Article 7 was held inapplicable on the facts. The income was not expressly dealt with in the preceding treaty articles, and therefore fell within the residuary provision governing other income. On that basis, the treaty benefit was held available under Article 22, and the tax computation required revision accordingly.

Conclusion: The issue was decided in favour of the assessee. The tax liability was directed to be recomputed by applying Article 22 of the India-UAE DTAA.

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