ITAT Chides IT Department For Refusing Tax Benefit To Abu Dhabi Investment Authority

ITAT Chides IT Department For Refusing Tax Benefit To Abu Dhabi Investment Authority

Admonishes it for not verifying the genuinity of the government-owned company through its address and PAN details

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the assessee Abu Dhabi Investment Authority (ADIA) is liable to benefit provided under Article 24 of the India-UAE Double Taxation Avoidance Agreement (DTAA).

The DTAA denotes that the government of one contracting state shall be exempt from tax in other states on any income derived from those provinces.

The bench of Amit Shukla (Judicial Member) and Amarjit Singh (Accountant Member) observed that the Commissioner of Income Tax (Appeals), disbelieving that the assessee was in fact the ADIA, denied the benefit of Article 24, as mentioned in Article 24(2)(b)(ii).

Based on the mobile number '9999999999' mentioned in the Income Tax Return (ITR) of the ADIA, the CIT(A) stated that the assessee was a fraudulent entity. It added that the number was listed as ‘fraud’ in Truecaller, a smartphone application that has caller ID features.

The tribunal admonished the CIT(A) and defined its reasoning being very flimsy. It chided the department for doubting the entity despite being provided with other details in the ITR. The bench added that since the Permanent Account Number (PAN) and address were mentioned, the genuinity of the government-owned company could have been verified easily.

The assessee-appellant, ADIA, holds a valid registration as a Category 1 Foreign Portfolio Investor (FPI) obtained in accordance with the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations 2019. It is a tax resident of the United Arab Emirates (UAE) and holds a valid Tax Residency Certificate for the Assessment Year 2018-2019. The appellant electronically uploaded its ITR, declaring a total income and claiming a tax refund.

The Assistant Director of the Income Tax Centralised Processing Centre (CPC), Income Tax Department, Bengaluru, processed the ITR and an intimation under Section 143(1) was issued.

However, the Assessing Officer (AO) made additions to the total income and raised the tax demand. In response, the appellant filed a request with the CPC on the income tax portal to reprocess the ITR.

On reprocessing, the CPC issued a rectification order under Section 154. It mentioned that the AO erred in raising the tax demand. The loss on long-term and short-term capital gain was treated as gains. The intimation accepted the assessee’s submission that the CPC erred because the assessee declared a total long-term and short-term capital loss. However, it upheld the interest amount of Rs.365.40 crores, claimed to be exempt under Article 24 of the India-UAE DTAA, which was denied, stating that it was taxable by 20 percent.

The CIT (A) held that the assessee could not clarify that it was the same company mentioned in Article 24(2)(b). The reason for denying the benefit was that in the ITR, the mobile number mentioned signified on Truecaller as a fraud and spam.

The ITAT observed that from the details mentioned in the ITR, the ADIA was recognized as the shareholder in the Department of Finance of Abu Dhabi. Its address indicated the building of the Government of Abu Dhabi. Moreover, the ITR contained the email address and PAN, denoting that the assessee was the ADIA and a tax resident of the UAE.

The bench added that since the ITR cannot be uploaded if the mobile number is not mentioned, the assessee, like many others who do not have an India mobile number, mentioned 9999999999. However, the CIT (A) failed to verify if the assessee was an authority mentioned in Article 24(2)(b), therefore, the order could not be supported.

The tax department submitted that matter be restored to the file of the CIT(A) to examine the tax residency certificate and the applicability of Article 24.

The ITAT thus held that since the ADIA was specifically mentioned in Article 24(2)(b)(ii), its income was not taxable in India.