Investment flows from the UAE into India may see a spurt, just like from Mauritius, with the Union Cabinet giving its nod for removing certain ambiguities in the applicability of the double taxation avoidance agreement (DTAA) between India and the UAE.
While the Government did not elaborate on the ambiguities, tax experts said the ambiguity was on whether benefits of the DTAA could be claimed in situations where there was no incidence of payment of tax in any of the contracting countries.
The Authority for Advance Rulings (AAR) had, in a recent ruling, said that a person who is not liable to tax in the UAE would not get benefit of DTAA.
The Income Tax Appellate Tribunal (ITAT) in Mumbai, on the other hand, had ruled in another case that if the Government of the other country has powers to tax an individual, then such an individual would be entitled to treaty benefits, irrespective of whether he actually pays the tax or not.
Mr Aseem Chawla, Director (Taxation) Amarchand & Mangaldas, said that ITAT, Mumbai had recommended to the Government to sort out the uncertainty in interpretation of the DTAA. "If this ambiguity goes, it would give a fillip to investments into India from the UAE.''