Tax Residency Requires more than Partner/Director Nationality, TRC Determines Treaty Benefits: ITAT

Case Details: Qawareb Ship Management LLC v. ITO (International Taxation) - [2023] 150 taxmann.com 435 (Rajkot-Trib.)

Judiciary and Counsel Details

• • Ms Suchitra Kamble, Judicial Member & Waseem Ahmed, Accountant Member
  • Vimal Desai, AR for the Appellant.
  • B.D. Gupta, Sr. DR for the Respondent.

Facts of the Case

Assessee was a UAE-based company engaged in the shipping business. It filed a provisional return of income under section 172 through a local agent in India. The local agent produced certain documents and after taking cognisance of the said documents, the Assessing Officer (AO) observed that the said company was not resident of UAE as per Article 4 of DTAA as its place of effective control and management situated out of UAE.

AO made additions and denied the exemption claimed by the assessee based on DTAA between India and UAE. The matter reached Rajkot Tribunal.

ITAT Held

The Tribunal held that it is an undisputed fact that the assessee was a non-resident limited liability company. Regarding the company’s commercial licence, the same was issued by Dubai Maritime City (UAE). Besides this, the assessee also submitted Bank details of Standard Chartered Bank related to outward payment customer advise that of UAE only. All the partners/directors, except for one, hold Yemeni nationality. However, the residence of that particular partner/director is solely located in Dubai, United Arab Emirates (UAE).

The UAE court (Ministry of Finance) has also issued Tax Residency Certificate to the assessee, which set out that the licence was given to it, which was domiciled in the UAE. Merely Partner’s/Director’s nationality will not suffice for the company’s residency when the company was registered and operational in UAE and obtained the business licence there.

Since the company was incorporated, managed and controlled only in UAE, it was a tax resident of the UAE. Thus, the treaty between India and UAE will be applicable.