Page 65 - DHC Budget Book 2021-22 Final

benefit of Indo-UAE DTAA was denied by AO to assessee on the pretext that there is no tax laws in UAE and there is no actual payment of tax in UAE. The Hon’ble Mumbai Tribunal held that “Liable to Tax” not only includes existing legal provisions but also includes potential taxing rights whether such rights have been exercised or not. Hence, the benefit of Indo- UAE DTAA was granted in such case.
A contrary view prevails that the benefit of DTAA shall not be granted to tax payer based on contention that “Liable to Tax” does not include cases involving absence of tax laws in a State.
The proposed insertion speaks about liability of tax on a person and includes a case where after imposition of tax, exemption has been
— It is the vision of our Hon’ble Prime Minister that IFSC emerges as a hub for international financial services activities. The first IFSC was operationalized at Gujarat International Finance Tec-City Multi Services SEZ in April 2015.
The Union Budget 2016 provided competitive tax regime for the IFSCs and various other regulations were amended accordingly. In order to make location in IFSCs more attractive, it is proposed to provide the following additional incentives:-
— Sec. 9A(3) provides various conditions to be fulfilled by the eligible investment fund to be eligible for benefit of Sec. 9A. Similarly, Sec. 9A(4) provides various conditions to be fulfilled by the eligible fund manager to be eligible for benefit of Sec. 9A. Sec. 9A(8A) is now proposed to be inserted to provide that the CG may, by notification, specify that any one or more of the conditions specified in said sub-sections shall not apply/ shall apply with such modifications to an eligible investment fund and its eligible fund manager, if the fund manager is located in an IFSC and has commenced its operations on or before 31-03-2024.
— Hitherto, Sec. 10(4D) of the Act provides exemptions to specified funds in respect of income accrued or arisen or received as a result of –
—
granted. Thus, a view may be taken that in cases where there is no tax law, such cases may not be considered as covered under the expression “Liable to Tax”.
In addition, the proposed insertion seeks
to define the expression “Liable to Tax” for
the purpose of DTAAs also. This may raise questions regarding the impact of such changes in domestic law to “undefined terms” under various DTAAs. For instance, Explanation 4 to Section 90 of the Act states that any term which has not been defined under the treaty but are defined under Act shall derive its meaning from the Act. The question which arises is whether unilateral changes in domestic laws can affect the meaning of undefined terms under various DTAAs.
i. transfer of capital asset referred under
Sec. 47(viiab) on a recognised stock exchange located in any IFSC and where the consideration for such transaction is paid or payable in convertible foreign exchange; or
ii. transfer of securities (other than shares in a company resident in India); or
iii. any income in respect of securities issued by a non-resident (not being a permanent establishment of a non-resident in India) and where such income otherwise does not accrue or arise in India; or
iv. any income from a securitisation trust which is chargeable under the head “profits and gains of business or profession”.
to the extent such income accrued or arisen to, or is received, is attributable to units held by non-resident (not being the permanent establishment of a non-resident in India).
The benefit of exemption under Sec. 10(4D) is now proposed to be extended in case of any income accrued or arisen to, or received to the investment division of offshore banking unit to the extent attributable to it. Such unit has been defined as an investment division of a banking unit of a non-resident located in IFSC and which has commenced its operation on or before 31- 03-2024.
5.2
Tax incentives for units located in IFSC [Sec. 9A, Sec. 10(4D), Sec. 10(4E), Sec. 10(4F), Sec. 10(23FF), Sec. 47, Sec. 80LA & Sec. 115AD] [w.e.f. AY 2022-23]
Content International Taxation and Transfer Pricing Direct Tax 63