Facts:
a) The case of assessee was selected for scrutiny by revenue under CASS. She had earned capital gains on sale of property situated in Sri Lanka.
b) Assessee submitted that such capital gains were taxable only in Sri Lanka as per Article 13 of India-Sri Lanka DTAA.
c) The AO and the CIT(A) rejected the contentions of assessee and taxed such long-term capital gains. The aggrieved-assessee filed the instant appeal.
The Tribunal held as under:
1) As per Article 13(1) read with Article 13(6) of the India-Sri Lanka DTAA, the capital gain arisen to the assessee from sale of immovable property situated in Sri-Lanka is taxable in Sri-Lanka as the Government of Sri-Lanka has right to tax the same because the immovable property is situated in Sri-Lanka. The Government of India cannot brought the same to tax under the provisions of the Act as the provisions of DTAA will prevail being beneficial to the assessee over the provisions of the Act.
2) Even though the word ‘may be taxed’ is used in Article 13(1) of DTAA between India and Sri- Lanka as the same is to be read in a manner that it takes away the power of the other Contracting State to tax the same income, of which power to tax is vested by virtue of DTAA in the Contracting State in which the immovable property is situated.
