Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (9) TMI 19 - GUJARAT HIGH COURT

2016 (9) TMI 19 - GUJARAT HIGH COURT - [2017] 390 ITR 427 - Applicability of Article 8 visavis Article 24 of DTAA - income assessable to tax at Singapore on the basis of accrual or remittance - Held that:- The certificate dated 09.01.2013 issued by the Inland Revenue Authority of Singapore assumes significance. In the said certificate, as noted, it was certified that the income in question derived by ST Shipping would be considered as income accruing in or derived from the business carried on in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

inly be guided by the factual declaration made by the said authority in the said certificate and this declaration is that the income would be charged at Singapore considering it as an income accruing or derived from business carried on in Singapore. In other words, the full income would be assessable to tax on the basis of accrual and not on the basis of remittance. This certificate was before the Commissioner while he passed the impugned order. The contents of this certificate were not doubted. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed the essence of Article 24.1 is that in case certain income is taxed by a contracting State not on the basis of accrual, but on the basis of remittance, applicability of Article 8 would be ousted to the extent such income is not remitted. This clause does not provide that in every case of nonremittance of income to the contracting state, Article 8 would not apply irrespective of tax treatment such income is given. When in the present case, we hold that the income in question was not taxable at .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

IAL CIVIL APPLICATION NO. 9150 of 2014 - Dated:- 24-8-2016 - MR. AKIL KURESHI AND MR.A.J. SHASTRI, JJ. FOR THE PETITIONER : MR B S SOPARKAR, ADVOCATE FOR THE RESPONDENT : MR NITIN K MEHTA, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Petitioner has challenged an order dated 25.03.2014 passed by the Commissioner of Income-tax, Ahmedabad, by which, he dismissed the petitioner's revision petition under section 264 of the Income Tax Act, 1961 ('the Act' for short) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

luding to the said ST Shipping which is engaged in the business of operating ships in the international waters. ST Shipping is a taxed resident of Singapore. 4. During the period relevant to assessment year 2011-12, ST Shipping had through ships owned or chartered by it, undertaken voyages from various Indian ports and earned income from exporters and out of other such business. ST Shipping through present petitioner, filed a return of income under section 172(3) of the Act, declaring the gross .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that the ST Shipping was not entitled to benefit of Article 8 of DTAA by virtue of the provisions contained in Article 24 therein. He noted that the fright receipts were remitted to London and not to Singapore. In his opinion, as per Article 24 of DTAA, the funds have to be remitted where the residents of the country is claiming benefit of the agreement which conditions in the present case was not satisfied. He held as under: 6. It is therefore amply clear that the funds were remitted to London .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e for exemption of freight tax for the above vessels is not allowed and is hereby rejected. The assessee furnished inaccurate particulars in the sense that it had claimed exemption of freight where it was not allowable. Though the DTA Agreement is a public document and the assessee had clear and complete access to the agreement, it ought to have claimed exemption as per the provisions of law. By completely ignoring the provisions of Article 24 of the DTA Agreement, the assessee has committed a b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ian rupees, which was 14.75 crores (rounded off), would be chargeable to tax; on which he levied tax of ₹ 46.72 lacs at the prescribed rate. He also initiated penalty proceedings under section 271(1)(c) of the Act. 7. At one stage, the petitioner filed appeal against the said order of assessment dated 26.12.2011. However, under the apprehension that at a future date the question of maintainability of such appeal may arise in view of the language used in section 246 and 246A of the Act, suc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

gapore, in which, it was stated that the income in question derived by the ST Shipping would be considered to be income accruing in or derived from a business carried on in Singapore and the income would be therefore assessable to tax in Singapore on accrual basis. This was in response to the petitioner's letter to the said Revenue authority of Singapore concerning the applicability of Article 24 of the DTAA. The contents of the letter dated 09.01.2013 of the authority may be reproduced. We .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

raised the concern that the benefits accorded under Article 8 of the SingaporeIndia DTA to the profits of your company were limited by the provisions of Article 24.1 of the said DTA which state that any reliefs provided by the DTA would only apply to the amount of income remitted into Singapore. As such, the Indian tax authorities were likely to impose a tax on your company's charter income. 4. Based on the information provided in your letter, we would consider the charter income derived by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e, Article 24.2 would not be applicable in the first instance. For clarity, we should add that Article 24.2 seeks to make clear that Article 24.1 does not apply to Government income. Accordingly, Article 24.2 is not relevant to income derived by a taxpayer where the income is assessable to tax in Singapore by reference to the amount remitted to or received in Singapore. 5. We hope that this is sufficient to address your query. If you require any further clarifications, please do not hesitate to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e revision order reads as under: 4.3 The issue of applicability of Article 24 has also been examined by this office. The fact that the amount has not been remitted to Singapore has not been denied by the petitioner. Article 24 of the DTAA between India and Singapore does not talk about the issue of taxability of the amount not remitted to Singapore. Hence, the attempt of the Petitioner to prove the taxability of the amount in Singapore is of no consequence so far as interpretation of Article 24 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the above three issued were raised before CIT(A) and the documents furnished before this office have also been furnished before CIT(A), Gandhinagar. The CIT(A) has discussed all the above evidences before arriving at a conclusion that the claim of the assessee on all these three issues is liable to be rejected. 10. Before recording the rival contentions, we may reproduce relevant provisions of the DTAA. Article 1 PERSONAL SCOPE This Agreement shall apply to persons who are residents of one or bo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or in place of, the taxes referred to in paragraph 1. The competent authorities of the Contracting States shall notify each other of any substantial changes which are made in their respective taxation laws. Article 4 RESIDENT 1. For the purposes of this Agreement, the term "resident of a Contracting State" means any person who is a resident of a Contracting State in accordance with the taxation laws of that State. Article 8 SHIPPING AND AIR TRANSPORT 1. Profits derived by an enterpris .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, and the provisions of Article 11 shall not apply in relation to such interest. 4. For the purposes of this Article, profits from the operation of ships or aircraft in international traffic shall mean profits derived from the transportation by sea or air of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of the ships or aircraft, including profits from: (a) the sale of tickets for such transportation on behalf of other enterprises; (b) the incidental lease .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

racting State and under the laws in force in the other Contracting State the said income is subject to tax by reference to the amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the exemption or reduction of tax to be allowed under this Agreement in the firstmentioned Contracting State shall apply to so much of the income as is remitted to or received in that other Contracting State. 2. However, this limitation do .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

any in its shipping operations in India would also be accordingly taxed. In terms of Article 8 of the DTAA therefore, the same could not be taxed in India. II. The interpretation adopted by the Revenue authorities to Article 24 of DTAA is wholly erroneous. Clause1 of Article 24 would apply only in a case where such income is to be taxed in Singapore only on remittance basis, a condition not fulfilled in the present case. In this context, counsel placed heavy reliance on the certificate dated 09. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

from tax under the income tax law in Singapore, the same cannot be taxed in India. In this context, counsel relied on the decision of Division Bench of Delhi High Court in case of Emirates Shipping Line, FZE v. Assistant Director of Income-tax reported in [2012] 349 ITR 493 (Delhi) and of the Supreme Court in case of Union of India and Another v. Azadi Bachao Andolan and Another reported in 263 ITR 706. 12. On the other hand, learned counsel Shri Nitin Mehta for the department opposed the petit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ted 09.01.2013 issued by inland Revenue authority of Singapore is contrary to section 10 of the Singapore Income Tax Act, which would make it clear that unless income of any person accrues in or is derived from Singapore, the same would be taxed only on the basis of actual receipt. IV. Even otherwise, there is no evidence to show that the assessee had offered such income to tax in Singapore and that the assessee was actually taxed on such income. If for any reason, the income was exempt from pay .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

subordinate to the Commissioner, he may either on his own motion or on application by assessee, call for the record of any proceedings in which, such an order has been passed and may make inquiry and subject to the provisions of the Act, pass such order thereon not being an order prejudicial to the assessee, as he thinks fit. Thus, under subsection (1) of section 264, the Commissioner has power either on his own motion or on the petition filed by the assessee to revise an order passed by a subor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er (Appeals)] [or to the Commissioner (Appeals)] or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired, or, in the case of an appeal [to the Commissioner (Appeals) or] to the Appellate Tribunal, the assessee has not waived his right of appeal; or (b) where the order is pending on an appeal before the [Deputy Commissioner (Appeals)]; or (c) where the order has been made the subject of an appeal [to the Commissioner (Appeals) or] to th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g at a future date in view of the provisions contained in section 246 and 246A of the Act, would not prevent the assessee from presenting a revision petition within the framework provided under section 264 of the Act. In fact, the Commissioner had not even dismissed the petition as not maintainable. 15. This brings us to the core issue strenuously debated by both sides viz. that of applicability of Article 8 visavis Article 24 of DTAA. We may quickly refresh the facts. ST Shipping is a company b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

be taxable only in Singapore, is not in serious dispute. The moot question therefore is whether operation of Article 8 is ousted by virtue of Clause1 of Article 24. As noted, Article24 of DTAA pertains to limitation of relief. Under clause1 thereof where the agreement provides that the income from sources in contracting states (in the present case, India) shall be exempt from tax or tax at a reduced rate and under the laws in force in other contracting states (i.e. Singapore), such income is su .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

apply and dependent on the facts of the case, exemption as per Article 8 either in whole or in part would be excluded. 17. It is, in this context, that the certificate dated 09.01.2013 issued by the Inland Revenue Authority of Singapore assumes significance. In the said certificate, as noted, it was certified that the income in question derived by ST Shipping would be considered as income accruing in or derived from the business carried on in Singapore and such income therefore, would be assessa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ion of the relevant clauses of DTAA. However, in absence of any rebuttal material produced by the Revenue, we would certainly be guided by the factual declaration made by the said authority in the said certificate and this declaration is that the income would be charged at Singapore considering it as an income accruing or derived from business carried on in Singapore. In other words, the full income would be assessable to tax on the basis of accrual and not on the basis of remittance. This certi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

invoking Article 24.1 of DTAA an interpretation which according to us does not flow from the language used. As noted the essence of Article 24.1 is that in case certain income is taxed by a contracting State not on the basis of accrual, but on the basis of remittance, applicability of Article 8 would be ousted to the extent such income is not remitted. This clause does not provide that in every case of nonremittance of income to the contracting state, Article 8 would not apply irrespective of ta .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

icate. It cannot dispute the contention on the ground that the same are opposed to the statutory provision. 19. By way of a reference, we may notice that the Tribunal also in case of this very assessee in case of Alabra Shipping Pte Ltd. v. Income-tax Officer - International Taxation, Gandhidham, reported in 62 Taxmann.com 185 has taken a somewhat similar view by observing as under: 6. As a plain reading of Article 24(1) would show, this LOB clauses comes into play when (i) income sourced in a c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e benefit of treaty protection is restricted to the amount of income which is eventually subject matter of taxation in the source country. This is all the more relevant for the reason that in a situation in which territorial method of taxation is followed by a tax jurisdiction and the taxability for income from activities carried out outside the home jurisdiction is restricted to the income repatriated to such tax jurisdiction, as in the case of Singapore, the treaty protection must remain confi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fore closing, we may briefly touch on one more aspect sought to be raised by the Revenue viz. of the actual tax being paid by the assessee on such income at Singapore. On the ground that such income is exempt from payment of tax, the Revenue desired to impose tax in India. In this context, the petitioner has relied on the decision of Delhi High Court in case of Emirates Shipping Line, FZE (supra), in which it was held that the assessee, a UAE based shipping company, whose income from such busine .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version