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2017 (2) TMI 849 - AT - Income TaxBenefit of Article 8 denied - Limitation clause as appearing in Article 24 of India-Singapore DTAA applicability - Eligibility of Article 8 in respect of income earned from shipping operations by the assessee from India - Held that:- There is no stipulation about exemption under Article 8 of the shipping income which as pointed out by ld. Senior Counsel has been specifically provided in some of the Articles like Article 20, 21 & 22. Hence, it cannot be reckoned that shipping income earned from India is to be treated as exempt from tax or taxed at reduced rate, which is a condition precedent for applicability of Article 24, albeit India at the threshold does not have the jurisdiction to tax the shipping income of the non-resident entity. Thus, the condition of Article 24 is not satisfied in the present case from this angle also. In conclusion, we hold that the ld. CIT (A) was not justified in denying the benefit of Article 8 by invoking the limitation clause of Article 24 of India- Singapore DTAA as per our discussion above The definition of “operation of ships” also alludes to the concept of charterer of ships, which even includes part of ship in an arrangement such as slot charter, space charter or joint charter. The slot charter and space charter of a ship cannot be segregated or read in isolation from the meaning of “charterer” as appearing in para 4 of Article 8. There is no stipulation under Article 8 that wherever passengers or cargos etc. are transported under charter arrangement with third party which includes slot or space charter, then, one leg of journey should be on vessel owned or leased by the shipping or Aircraft Company. As mentioned above, the word “Charterer” will include third party/joint service arrangement of slot or space in a ship and hence the transportation under such arrangement will be reckoned as profit from operation of ships. Thus, we agree with the contentions of the ld. Senior Counsel that even if the entire leg of journey is undertaken by a shipping company through and through charter arrangement or joint service arrangement, the benefit of Article 8 cannot be denied, because it will still fall within the ambit and scope of “operation of ships” under Article 8 (even under India- Singapore DTAA). So far as the issue of establishing linkage between transportation by feeder vessel and mother vessel of the ship owned or leased by the assessee, once it is held that chartering includes slot charter, space charter and it falls within the ambit of “operation of ships”, then the benefit of Article 8 cannot be denied simple on the ground that the transportation has been done either partly or fully through slot charter arrangement or joint charter arrangement, etc. Thus, in view of our discussion above, we hold that so far as denial of benefit of Article 8 in respect of 97 ships for sums aggregating to ₹ 97,29,89,746/- is not justified and we direct the Assessing Officer to give the benefit of Article 8 in respect of 97 ships, which has been denied by the CIT(A). So far as the freight receipt in respect of 4 ships is concerned, it is an admitted fact that no evidence whatsoever or documents could be furnished by the assessee either before the Assessing Officer or the CIT(A) or even before us and, therefore, we hold that to the extent of freight receipt the benefit of Article 8 will not be available to the assessee and same is directed to be taxed in India under the relevant statutory provisions. Thus, the issue relating to benefit of Article 8 is decided partly in favour of the assessee. The issue relating to Permanent Establishment (PE) and attribution of income to PE has become purely academic and, therefore, no separate adjudication is required. Once we have held that assessee is entitled for benefit of Article 8, then attribution of income in India through agency PE will not arise. Allowability of interest u/s 234B - Held that:- It is admitted by both the parties that the issue is covered in favour of the assessee by the decision of the Jurisdictional High Court in the case of NGC Network Asia LLC (2009 (1) TMI 174 - BOMBAY HIGH COURT ).
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