Commissioner of Income Tax vs Heinrich Wetting

The Tribunal has referred following question for the opinion of this Court:

Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the Dy. CIT(A) order holding that the relief under the agreement for the avoidance of double taxation of income was available to the assessee and the salaries and perquisites received by the assessee were exempt under the IT Act, 1961?

In spite of service, none appeared for the respondent.

The issue raised in this question is whether the assessee is entitled for the relief under the agreement for the avoidance of double taxation of income.

Mr. Manish Bhatt, learned Counsel for the Revenue has brought to our notice a decision of this Court in the case of Emmerich Jaegar Vs. Commissioner of Income Tax, where this Court has laid down some conditions when this benefit of agreement to avoid double taxation should be allowed in case of foreign technicians. The relevant part of the order of this Court in Emmerich Jaegar v. CIT (supra), reads as under:

The view taken by the Court accords with the enunciation made by the Hon''ble apex Court in the case of Union of India (UOI) and Another Vs. Azadi Bachao Andolan and Another, wherein, in an almost similar situation, it was stated (p. 741) ''in our view, the contention of the respondents proceeds on the fallacious premise that liability to taxation is the same as payment of tax. Liability to tax is a legal situation; payment of tax is a fiscal fact.'' The Court further takes into consideration the Model Tax Convention of 1992 and reproduces Article 4.1 which reads as under:

It seems clear that a person does not have to be actually paying tax to be ''liable to tax'' otherwise a person who had deductible losses or allowances, which reduced his tax bill to zero would find himself unable to enjoy the benefits of the convention. It also seems clear that a person who would otherwise be subject to comprehensive taxing but who enjoys a specific exemption from tax is nevertheless liable to tax, if the exemption were repealed, or the person no longer qualified for the exemption, the person would be liable to comprehensive taxation.

Therefore, the view taken by the authorities below that unless and until the assessee produces proof for payment of tax, he would not be entitled to claim relief under the agreement does not accord with the terms of the agreement and the language employed in Article XIV(2)(c) of the agreement. In fact, the Tribunal did observe on these lines but did not insist thereafter for applying the Austrian law when it observed that, if India was to give up its right to tax for the income earned in India, it had to be satisfied that the assessee was liable to pay tax in respect of that income in the foreign country with whom the agreement was concluded.

In the circumstances, it is necessary that the provisions of the Austrian statute are brought on record and the parties get an opportunity to make their submissions thereon. As the applicant assessee is claiming benefit under an exception (exemption) provision, it will be upon the assessee to discharge the onus to show that it is subject to Austrian tax. It will be open to the assessee to rely upon the provisions of the Austrian tax statute as well as any other evidence that the assessee may choose to bring on record and the Tribunal shall, after taking the same into consideration, decide the issue between the parties. In the light of what is stated hereinbefore, it is not necessary to answer the questions referred to us for opinion, and we decline to answer the same leaving the parties to adduce whatever necessary evidence they may choose to place on record, and direct the Tribunal to decide the issue in accordance with law after taking into consideration further evidence that may be adduced by the parties. The reference stands disposed of accordingly. There shall be no order as to costs.

Considering the view taken by this Court by following the decision of their Lordships in the case of Union of India (UOI) and Another Vs. Azadi Bachao Andolan and Another, , we remand the matter to the authorities concerned to find out the facts in the light of the issue discussed by this Court in the case of Emmerich Jaegar v. CIT (supra), and decide the issue afresh whether the benefit of agreement to avoid double taxation can be given to the assessee.

The reference stands disposed of accordingly.