Income earned in Dubai by UAE resident and invested in India is not taxable as unexplained investment: ITAT Mumbai


Income earned in Dubai by UAE resident and invested in India is not taxable as unexplained investment: ITAT Mumbai


Shri Rajeev Suresh Gehi (ITA No.792/Mum/2022)


  1. The assessee is an Indian National, fiscally domiciled in and tax resident of UAE for over three decades and therefore he is eligible for benefit of India UAE Double Taxation Avoidance Agreement.
  1. The assessee has paid cash amounting to Rs. 3,65,00,000/- as loan during the year under consideration to M/s Ahuja Group.
  1. During the course of assessment proceedings, the assessee submitted that only – payment made by him was towards properties purchases and/or advances against such purchases. Further, the assessee denied, to have made undisclosed investment in India.
  1. The A.O. did not agree with the submissions of the assessee and treated the amount of Rs. 3,65,00,000/- as unexplained investment of the assessee made from the undisclosed sources and added the same to the total income of the assessee u/s 69 of the Act.

ITAT Mumbai held as follows:

  1. Unexplained investment could be taxed in India under sec 69, only if it can be proved that such investments were made out of income earned in India and that in the said case, an economic activity or a linkage of an income with the source country (India) which would trigger a tax incidence in India, was absent.
  1. As for article 23(1), which refers to taxation of capital represented by immovable property, the said article refers to taxation of capital but does not provide, as learned Departmental Representative seem to suggest, for taxation by virtue of investment in the immovable property.
  1. If, under the domestic tax laws of the UAE, the amounts in question be treated as of income nature, the tax implications of these amounts, under the scheme of the Indo UAE tax treaty, can at best follow in the UAE, but that is not relevant in the present context of holding these amounts to be, even if so permissible in our domestic tax laws, taxable in India.
  1. Since, under the terms of the Indo UAE tax treaty, the right to tax the amounts in question, even if that be of income nature in the hands of the present assessee, does not belong to India, all these issues being raised by the learned counsel are wholly academic as of now, and do not call for our adjudication.