If UAE has right to charge tax on certain payments received by a person, then India cannot charge tax on the same even if person does not pay tax in UAE

 

Assessee made reimbursement of expenses to payee in U.A.E., incurred for rendering professional services in India - Assessee claimed that as payee did not have a permanent establishment in India and had stayed in India for less than 183 days, payee was not chargeable to tax and there was no need to deduct tax - Assessing Officer held that assessee was not resident of U.A.E. as per Article 4(1) of Indo-UAE DTAA as he did not pay any tax there, and was therefore chargeable to tax in India - He disallowed payments under section 40(a)(i) for non-deduction of tax at source- Whether, as per Article 4(1) of Indo-U.A.E. DTAA, it is not necessary to pay tax in contracting State to be a resident of contracting State; mere right of contracting State to tax such person by reason of domicile, place of management or incorporation is sufficient - Held, yes - Whether, therefore, payee was not chargeable to tax in India - Held, yes


TDS not deductible on payment for Professional Services to US residents if there is neither PE  in India nor services have been 'make available'.

Assessee paid fees to professionals from U.S.A., U.K. and Malaysia without deducting tax - It claimed that professionals did not have any permanent establishment in India and services were not in nature of make-available of technical knowledge, experience, skill, know-how or process and therefore, in view of DTAA with USA and U.K, services were not taxable - Assessing Officer disallowed payments under section 40(a)(i) for non-deduction of tax - Whether, where foreign professionals did not have permanent establishment in India, nor were the services in nature of make-available of technical knowledge, experience, skill, know-how or process, professional fees were taxable in India, in view of DTAA provision - Held, no

 

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