2022 (6) TMI 1370 - AT - Income Tax

Income taxable in India u/s 44B with respect to its shipping income - freight collections derived from operation of ships in international traffic - HELD THAT:- As decided in own case [2021 (8) TMI 1355 - ITAT MUMBAI] after examining the facts and the decision rendered in the case of CIT vs. Balaji Shipping (UK) Ltd [2012 (8) TMI 681 - BOMBAY HIGH COURT] uphold the plea, of the assessee and direct that benefit of article 8 must be extended to entire freight receipts-irrespective of whether the earnings are relating to feeder] vessels or by the ships in international traffic. The assessee gets the relief accordingly

Benefit of Article 8 of the India - UAE Tax Treaty on Inland Haulage Charges - Denial of benefit and taxing the same at 10% as per Rule 10 of the Income-tax, Rules 1962 - HELD THAT:- Though Article-8 of India -UAE DTAA does not spell out explicitly that rental of containers include trailers and related equipment for the transport of container as has been mentioned in India-Belgium DTAA Article 8(2)(c) or India-Denmark DTAA , Article-9(4)(b), nevertheless, considering the nature of activity and the services provided by the assessee to its customers vide a composite Bill of Lading it can be safely inferred that the activity of Inland Haulage is directly connected with transportation of goods in international traffic. The leg of transportation of containers from Inland to Port for further transportation in International traffic is a composite activity for which single Bill of Lading is issued by the assessee.

No hesitation in holding that Inland Haulage Charges earned by the assessee are inextricably linked to shipping business in international traffic. The activity of shipping container from inland to the Port for further shipping it to international traffic is an integral part of operation of ships. Hence, ‘IHC’ cannot be disintegrated from profit derived from shipping business as envisaged under Article -8 of India-UAE DTAA. Ergo, ‘IHC’ are not taxable as business profit in India. The ground No.5 of appeal is allowed.