MUMBAI: In a current order, the Revenue-Tax Appellate Tribunal (ITAT), Mumbai bench, has held that buy of a flat by a non-resident utilizing his abroad revenue is an act of investing or software of revenue. It’s distinct from incomes an revenue in India from immovable property and the sum invested can’t be topic to tax within the nation.
The home tax provisions referring to unexplained investments or unexplained revenue wouldn’t apply in such instances and the person can be ruled by the tax treaty (which on this case was the Indo-UAE tax treaty), noticed the ITAT. The tribunal’s order will profit non-resident traders who’ve invested in India, utilizing their abroad funds, however discovered themselves embroiled in tax litigation.
On this matter which was lately settled by the ITAT, Rajeev Ghai, a resident of the UAE for the final three a long time, had invested Rs 8.5 crore in residential flats in Mumbai. He said all these funds from abroad have been made by way of official channels and he supplied the required proof.
Primarily based on a search-and-seizure operation carried out on a builder group, the investigation wing of the income-tax (I-T) division supplied info to the tax officer that Ghai had allegedly paid money of Rs 2.5 crore as ‘on-money’ to the builder and in addition acquired Rs. 4.47 lakh as curiosity in money. The I-T officer handled these sums as ‘unexplained funding’ and ‘unexplained revenue’, which might be taxable beneath sections 69 and 68 of the I-T Act. The essential tax price beneath these sections is 60% with a surcharge of 25%. With cess and penalty, the mixture tax price is upwards of 80%.
The UAE resident was not given a possibility to view incriminating materials or cross-examine the builder.
Below tax treaties, the taxing proper is vested with both the supply nation (nation the place the revenue arises) or the residence nation (of which the person is a tax resident). On this case, India was at finest an funding jurisdiction, identified the ITAT bench comprising vice-president Pramod Kumar and judicial member Ravish Sood.
Unexplained investments could possibly be taxed in India beneath Part 69, provided that it may be proved that such investments have been made out of revenue earned in India.
An financial exercise or a linkage of an revenue with the supply nation (India) would set off a tax incidence in India, however this was absent.
Even when the sum of Rs 2.5 crore was to be handled as an revenue, the appropriate to tax the identical would beneath Article 22 of the India-UAE treaty vest with the nation of residence (which was UAE) and never India, the bench added. Accordingly, the ITAT bench upheld the order of the commissioner (appeals), which was in favour of the UAE resident.
As regards the alleged curiosity revenue of Rs 4.47 lakh, the I-T division failed to supply any concrete proof, therefore the ITAT dismissed its taxability in India.
The home tax provisions referring to unexplained investments or unexplained revenue wouldn’t apply in such instances and the person can be ruled by the tax treaty (which on this case was the Indo-UAE tax treaty), noticed the ITAT. The tribunal’s order will profit non-resident traders who’ve invested in India, utilizing their abroad funds, however discovered themselves embroiled in tax litigation.
On this matter which was lately settled by the ITAT, Rajeev Ghai, a resident of the UAE for the final three a long time, had invested Rs 8.5 crore in residential flats in Mumbai. He said all these funds from abroad have been made by way of official channels and he supplied the required proof.
Primarily based on a search-and-seizure operation carried out on a builder group, the investigation wing of the income-tax (I-T) division supplied info to the tax officer that Ghai had allegedly paid money of Rs 2.5 crore as ‘on-money’ to the builder and in addition acquired Rs. 4.47 lakh as curiosity in money. The I-T officer handled these sums as ‘unexplained funding’ and ‘unexplained revenue’, which might be taxable beneath sections 69 and 68 of the I-T Act. The essential tax price beneath these sections is 60% with a surcharge of 25%. With cess and penalty, the mixture tax price is upwards of 80%.
The UAE resident was not given a possibility to view incriminating materials or cross-examine the builder.
Below tax treaties, the taxing proper is vested with both the supply nation (nation the place the revenue arises) or the residence nation (of which the person is a tax resident). On this case, India was at finest an funding jurisdiction, identified the ITAT bench comprising vice-president Pramod Kumar and judicial member Ravish Sood.
Unexplained investments could possibly be taxed in India beneath Part 69, provided that it may be proved that such investments have been made out of revenue earned in India.
An financial exercise or a linkage of an revenue with the supply nation (India) would set off a tax incidence in India, however this was absent.
Even when the sum of Rs 2.5 crore was to be handled as an revenue, the appropriate to tax the identical would beneath Article 22 of the India-UAE treaty vest with the nation of residence (which was UAE) and never India, the bench added. Accordingly, the ITAT bench upheld the order of the commissioner (appeals), which was in favour of the UAE resident.
As regards the alleged curiosity revenue of Rs 4.47 lakh, the I-T division failed to supply any concrete proof, therefore the ITAT dismissed its taxability in India.
Supply: Times of India