Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

M/s. Far Shipping (Singapore) Pte. Ltd., M/s. Samsara Shipping (P) Ltd. Mumbai Versus The Income Tax Officer (International Taxation) , NELLORE

2017 (8) TMI 406 - ITAT HYDERABAD

Applicability of Article 8 vis-a-vis Article 24 of DTAA - DTAA between India and Singapore - shipping income - returns of the voyages u/s. 172(3) - denial of the benefit on the ground that assessee has not substantiated the remittance of money to Singapore in all the voyages - Held that:- As in M.T. Maersk Mikage & Ors. Vs. DIT [2016 (9) TMI 19 - GUJARAT HIGH COURT ]clinches the issue in favour of assessee, as the Hon'ble High Court has categorically held that the shipping company is not tax .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hipping income of non- resident entity, which is exclusive domain of the resident state, there is no question of any kind of exemption or reduced rate of taxation in the source state. It only envisages territorial and jurisdictional rights for taxing the income and India has no jurisdiction for any taxing right which are governed by Article 8. There is no stipulation about exemption under Article 8 of the shipping income - AO/ Ld.CIT(A) was not justified in denying the benefit of Article 8 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dispute with reference to residence of the ship being that of Singapore, the jurisdiction to tax the remittances specified therein under Article 8 lies exclusively with Singapore. In view of that, the orders of the AO and CIT(A) are set aside and they are directed to allow the benefit of Article 8 to all the voyages involved in all these appeals. - Decided in favor of assessee. - 399/Hyd/17, 400/Hyd/17, 401/Hyd/17, 402/Hyd/17, 403/Hyd/17, 404/Hyd/17, 405/Hyd/17, 406/Hyd/17, 407/Hyd/17, 408/Hyd/1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

se batch of appeals pertain to 38 voyages undertaken by M/s. Far Shipping (Singapore) Pte. Ltd., Singapore from Krishna Patnam Port. 2. Initially, when the ship was being sailed out of the port, a Port Clearance Certificate was issued, without demanding any tax but on the assurance of the agent to file the returns within thirty days. Assessee is represented by M/s. Samsara Shipping (P) Ltd., Mumbai, who filed separate returns for each of the voyages u/s. 172(3) of the Income Tax Act [Act], seeki .....

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 additional evidence in the form of certificate from the Inland Revenue Authority of Singapore that the amount has been considered for tax on accrual basis. Assessee also furnished various details of bank accounts and remittances and also certificate from the auditor of assessee-company that the amounts/invoices pertaining to the voyages have been taken into account. The AO however, in the remand proceedings did not accept stating that assessee has not furnished voyage wise remittance to ver .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at pg. 31 of the Paper Book, along with the decisions of Hon'ble Gujarat High Court and Delhi High Court on the issue whether Article 24 will apply when Article 8 of the DTAA empowers the other contracting state to tax the relevant income. He also relied on the Co-ordinate Bench decisions which are discussed later on in the body of the order. He also placed on record the judgment of the Hon'ble Madras High Court in the case of CIT Vs. Lakshmi Textile Exporters Ltd., [245 ITR 521] to subm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mitation clause as appearing in Article 24 of India - Singapore DTAA is applicable to the facts of the present case or not, it would be relevant to extract the Article itself, which for the sake of ready reference is reproduced as under: Article 24: Limitation of relief - 1. Where this Agreement provides (with or without other conditions) that income from sources in a Contracting State shall be exempt from tax, or taxed at a reduced rate in that Contracting State and under the laws in force in t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ent of a Contracting State or any person approved by the competent authority of that State for the purpose of this paragraph. The term "Government" includes its agencies and statutory bodies. 5.1. The aforesaid Article provides a limitation of relief relating to remittance basis of taxation which is in few countries like Singapore and United Kingdom. However, whether this limitation clause will apply to the DTAA, so as to oust the provisions of Article 8 has been considered by the Hon& .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

business carried out at Indian ports, ST Shipping earned income, on which, it claims immunity from Indian income tax. The Revenue contends that the remittance of such accrued income not having taken place at Singapore, Article 24 will apply and consequently Article 8 providing for avoidance of table taxation would not apply. 16. The fact, that the income in question which arises out of shipping operations by virtue of Clause- 1 of Article 8 of the DTAA would be taxable only in Singapore, is not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mount thereof which is remitted or received in that State and not by reference to the full amount thereof then the exemption or reduction of tax under the agreement would be limited to so much of the income as is remitted to or received in that contracting State. In plain terms therefore, if the income in question was taxable in Singapore on the basis of receipt or remission and not by reference to the full amount of income accruing, clause-1 of Article 24 would apply and dependent on the facts .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. It was elaborated that the full amount of income would be assessable to tax in Singapore not by reference to the amount remitted to or received in Singapore. In fact, the certifying authority went on to opine that in view of such facts, Article 24.1 of the DTAA would not be applicable and consequently, Article 8 would apply. 18. To this later opinion of the Revenue authority of Singapore, we may not be fully guided since it falls within the realm of interpretation of the relevant clauses of DT .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r while he passed the impugned order. The contents of this certificate were not doubted. If that be so, what emerges from the record is that the income in question would be assessable to tax at Singapore on the basis of accrual and not remittance. This would knock out the very basis of the Assessing Officer and Commissioner for invoking clause-1 of Article 24 of DTAA. Both the authorities considered the question of remittance of income as the sole requirement for invoking Article 24.1 of DTAA an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n. When in the present case, we hold that the income in question was not taxable at Singapore on the basis of remittance but on the basis of accrual, the very basis for applying clause-1 of Article 24 would not survive. The contention of Shri Mehta for revenue that the certificate of the Singapore revenue authorities is opposed to provisions of section 10 of the Singapore Income Tax Act also cannot be accepted. The Revenue does not question genuineness of the certificate. It cannot dispute the 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

m tax in that source state or is subject to tax at a reduced rate in that source state, (ii) the said income (i.e. income sourced in the contracting state) is subject to tax by reference to the amount remitted to, or received in, the other contracting state, rather than with reference to full amount of such income; and (iii) in such a situation, the treaty protection will be restricted to the amount which is taxed in that other contracting state. In simple words, the benefit of treaty protection .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ually subjected to tax. Any other approach could result in a situation in which an income, which is not subject matter of taxation in the residence jurisdiction, will anyway be available for treaty protection in the source country. It is in this background that the scope of LOB provision in Article 24 needs to be appreciated. 20. Under the circumstances, in our opinion, Assessing Officer and the Commissioner committed serious error in passing the impugned orders. Before closing, we may briefly t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

country, would still not be liable to pay tax in India by virtue of Article 8 of the DTAA between the said two countries. It was held that a person does not have to actually pay taxes in other country to be entitled to benefit of DTAA. 21. We may notice that a somewhat similar issue came up before this Court in case of Director of Income-Tax (International Taxation) v. Venkatesh Karrier Ltd. reported in 349 ITR 124, in which the Court observed as under: 10. After taking into consideration the a .....

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 ship belongs to a resident of the other contracting country and such position has also been clarified by the Circulars issued by the Board as indicated above." 5.2. The aforesaid judgment of the Gujarat High Court clearly clinches the issue in favour of assessee, as the Hon'ble High Court has categorically held that the shipping company is not taxable in Singapore on the basis of remittance, but on accrual basis and therefore, para-1 of Article 24 would not be applicable. Hon'bl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n'ble High Court, reliance on the decision of the DIT(IT) Vs. Thoresen Chartering Singapore (Pte.) Ltd., by the AO and CIT(A) is not correct, as the principles laid down there in no longer holds good. 6. The issue also can be looked into in another angle. Whether the provisions of Article 24 will apply when the shipping income is taxed in the other contracting state exclusively by Article 8. This issue is analysed and considered by the Co-ordinate Bench in the case of APL Co. Pte Ltd., Vs. A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing income is foreign income to Singapore which would then be taxable upon receipt or remittance to Singapore. The shipping income is dealt with under Article 8, which states that "profits derived by an enterprise of a contracting state from the operation of ships ......................................in international traffic shall be taxable only in that state, i.e., resident state." The word "only" debars the other contracting state to tax the shipping income, that is, Indi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hts for taxing the income and India has no jurisdiction for any taxing right which are governed by Article 8. 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 A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| 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