Whether in cases where no tax is payable in India, the Assessing Officer shall be competent to issue an annual ‘No Objection Certificate’, valid for a year, in respect of taxation of ship­ping profits under section 172, after carefully verifying ap­plicability of relevant provisions concerning taxation of ship­ping profits in double taxation agreement with country of which owner or charterer is resident - Income Tax - 732

Circular: No. 732 dated 20-12-1995. Whether in cases where no tax is payable in India, the Assessing Officer shall be competent to issue an annual No Objection Certificate , valid for a year, in respect of taxation of ship ping profits under section 172, after carefully verifying ap plicability of relevant provisions concerning taxation of ship ping profits in double taxation agreement with country of which owner or charterer is resident 1. Under the provisions of section 172 of the Income-tax Act, 1961 seven and a half per cent of the amount paid or payable to the owner or charterer of a ship on account of carriage of pas sengers, livestock, mail or goods shipped at a port in India, is deemed to be income accruing in India to the owner or the char terer. The port clearance is granted only after the return of the full amount to be paid is filed, evidence of payment of tax on such income is produced before the Customs authorities, or satis factory arrangements are made to file the return and pay the tax within thirty days of departure of the ship. 2. In cases where such ships are owned by an enterprise belonging to a country with which India has entered into an agreement on avoidance of double taxation, which provides for taxation of shipping profits only in the country of which the enterprise is a resident, no tax is payable by such ships at the Indian ports. Under such circumstances, a No Objection Certificate is to be obtained by the master of the ship from the concerned income-tax authority. 3. It has been represented to the Board that in cases where no tax is payable in India, the procedure of obtaining a No Objec tion Certificate from the income-tax authorities before each voyage, should be done away with. 4. The Board have considered the matter. It has been decided that in such cases, the Assessing Officer shall be competent to issue an annual NOC, valid for a year, in respect of taxation of ship ping profits under section 172 of the Income-tax Act, 1961 after carefully verifying the applicability of the relevant provisions concerning taxation of shipping profits in the DTAA with the country of which the owner or the charterer is a resident. 5. While examining the relevant Articles of the DTAA, the Assess ing Officer should ensure that the non-resident shipping company is engaged in international traffic , a term which is invariably defined in the DTAA itself. An undertaking from the non-resident company that during the period of the currency of the NOC, no ship belonging to it will be in any traffic other than interna tional traffic , shall be obtained before the issue of the NOC.