The meaning of 'Resident' for the purposes of Art.

4 of a DTAC, with most of the States, uses the expression any person who, under the law of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. In some of the DTACs; namely: Australia,Singapore,Italy, Romania,the expression used is if the person is a resident of that contracting state for the purposes of its tax. It is therefore clear that, under both the situations, for a person to be Resident of a State, he should be a resident for the purposes of taxation as per the Laws of that State or he should be Resident by reason of his domicile, residence, place of management in such a manner so as to make him liable to tax as per the Laws of that State. Under both the situations, if he is not covered under the taxation Laws of the State, he would not be a Resident of that State, and consequently, DTAC would not apply to such a person. 2. It is obvious that it would be the tax authorities of the respective contracting States who would be deciding whether a person is a resident of its State or not. A certificate in a prescribed manner to that effect is to be issued by the tax authorities of the contracting State as required under section 90(4) of the Income Tax Act. In this regard, the CBDT has amended the Income-tax Rules, through notification no. 39/2012 dated 17.09.2012, prescribing required particulars to claim the status of being a resident of his country. The timely act is welcomed. 3. It may be noted here that the relief under a DTAC would not be granted to such a person if the requirements under section 90(1) are not satisfied. Under section 90(1), the Central Government may enter into an agreement (DTAC) with the Government of any country outside India for the granting of relief in respect of income-tax chargeable under the Act and under the corresponding law in force in that country, or for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country. Then section 90(4), which applies to a person who is not a resident, requires production of a certificate of his residency from the Government of his country to be entitled to claim relief under the DTAC. The condition for grant of relief is two

folds: it is in respect of income-tax chargeable under the Acts of contracting countries and the tax residency certificate issued by contracting countries. 4. Let us take the first thing second. Under section 6(3) of the Act, a company is said to be resident in India in any previous year, if (I) it is an Indian company ; or (ii) during that year, the control and management60 of its affairs60 is situated wholly60 in India. Take the case of a company which is neither an Indian Company under the provision of section 2(26) of the Act nor the control or management of its affairs is wholly situated in India. As the company does not satisfy either of the conditions stipulated under section 6(3) of the Act for it to be considered as a resident, accordingly, the company is a non-resident as per section 2(30) of the Act. Thus, on the basis being a non-resident, the company has been taking advantage of double taxation relief under Chapter IX. 5. This, does not appear to be the correct position of law as the granting of relief is in respect of income on which have been paid both income-tax under this Act and income-tax in that country, or income-tax is chargeable under this Act and under the corresponding law in force in that country. The relief is in respect of income which is chargeable to tax or on which tax has has been paid. Whether that company is a resident of that state or not, is not the condition precedent to allow relief. But a restriction has been brought in to allow relief only when the company is a resident of the other state and not to a company which alone is a non-resident under section 2(30) of the Act in view of the new sub-section (4) inserted after sub-section (3) of section 90 by the Finance Act, 2012, w.e.f. 1-4-2013 Thus, an assessee, not being a resident in India, shall not be entitled to claim any relief under such agreement unless a certificate, containing such particulars as may be prescribed, of his being a resident in any country outside India, is obtained by him from the Government of that country. 6. The meaning of phrases income on which have been paid both income-tax under this Act and income-tax in that country or specified territory, as the case may be, or income-tax chargeable under this Act and under the corresponding law in force in that country or specified territory, as the case may be used in section 90(1) has been explained in Castleton

Investment Limited. A.A.R. No. 999 of 2010, wherein, the AAR has observed thatthe heading of Chapter IX of the Income-tax Act is Double Taxation Relief. Does it not indicate that the chapter contemplates double taxation for the relief specified in that Chapter for it to be extended? Taxation means actual taxation and at best, the threat or possibility of actual taxation. When one of the convention countries does not tax a particular income at all, can it not be said that there is no question of double taxation? Would the Chapter be then attracted? 7. Explaining further, the AAR observed thatSection 90(1) says that the Central Government may enter into an agreement for granting of relief in respect of income on which tax have been paid both under the Act and in the other country. Here, the emphasis is on payment. Then it deals with income tax chargeable under the Act and under the corresponding law in the other country. If the income is not chargeable to tax in that other country, this provision may not have application.Then occurs the purpose of the section, namely, of avoidance of double taxation of income. If double taxation is given the meaning actual taxation or clear possibility of taxation then alone the provision may apply. Is the existence of a power to tax in one country sufficient to invoke the Double Taxation Avoidance Convention between that country and India that seeks to tax it under the Act? Similarly, merely because a person may qualify to be a resident of a convention state, being liable to taxation therein, can it be said that he can also take advantage of the DTAC when he is not taxed at all in one of the states? 8. Though the view was taken by this Authority in Cyril Eugene Pereira, In re (239 ITR 650) that unless there is real double taxation, the DTAC cannot be invoked, the said view was disapproved by the Supreme Court in UOI v. Azadi Bachao Andolan. This Authority is bound by this decision. If the Revenue wants to persist in this line of argument, it has to raise it in the Supreme Court and not here. 9. The argument that unless the applicant is actually taxed in Mauritius or is liable to be actually taxed on the capital gains that would arise in Mauritius, the DTAC is attracted since a DTAC can apply only when there is actual taxation in two countries, through may sound attractive, cannot also be accepted.