9911796707
TMI Blog2022 (12) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... we take ITA No. 17/Rjt/2022 as the lead case and pass this common order. 2. The brief facts of the case is the assessee M/s. Maersk Tanker Pte. Ltd. (hereinafter referred to as 'MTS') is a company incorporated in Singapore and is engaged in the business of ship owning & operating, chartering and related business. During the Financial Year 2016-17 the assessee engaged in the business of operation of ships in international traffic and has earned freight income from such shipping operations with India. The assessee being a Singapore resident entitled to claim beneficial provision of Double Taxation Avoidance Agreement (in short 'DTAA') between India and Singapore with respect to taxability of it shipping income from Indian operations. M/s. Inchcape Shipping Services India Pvt. Ltd. is the Indian agent of the assessee and filed provisional Return under Section 172(3) of the Act, in respect of two voyages undertaken by the assessee's Master Vessels during the F.Y. 2016-17. The Indian agent declared freight income for both the vessels totaling to US $ 5,65,000/-. Accordingly, no objection certificate under Section 172(6) of the Act was granted in respect the two vessels. Thereafter the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide order dated 29.08.2018 on the ground of applicability of Section 44B and 144C of the Act and thereby dismiss the assessee's appeal. 5. Aggrieved against the same the assessee filed further appeal before this Tribunal. Coordinate Bench of this Tribunal in ITA No. 429 & 430/Rjt/2018 vide order dated 21.11.2019 set-aside the matter back to the Assessing Officer after following other decisions of Coordinate Bench of the Tribunal, held that draft assessment order under Section 144C was required to be issued for enabling the Assessing Officer for following the provisions of Section 144C which is applicable in the case of the assessee and directed the Assessing Officer to frame fresh assessment order under Section 172(4) after following the provisions envisaged in Section 144C of the Act. 6. Pursuant to the direction of the Hon'ble ITAT the Assessing Officer granted sufficient opportunity to the assessee. The assessee also filed its reply on various dates. After detailed discussion the Assessing Officer held that the shipping income for voyages performed by the vessels do not qualify for tax exemption in India under the provisions of DTAA between India and Singapore, because freight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iteral approach. The primary purpose of the double tax treaty is to eliminate double tax and prevent the avoidance of tax, the purpose is not therefore to enable the double non taxation of income. The case therefore centered around the meaning of the phrase "subject to tax" and the difference in international tax treaties between this phrase and the phrase "liable to tax". The first tier tribunal decided the case in favour of HM Revenue and Customs such that relief was not available under the UK-Israel tax treaty to exempt the pension from UK tax because the pension was not subjected to tax in Israel. (5) The second term used in condition referred at (v)(b) above is "by reference to the amount remitted/received and not by reference to full amount". On plain reading it is clear that the amount should be subjected to tax by reference to amount remitted/received and not by reference to full amount. First, we take the case where the amount is subject to tax with reference to the full amount. In Singapore shipping income is exempt from tax under the provisions of sections 13A and 13F (refer para 7(xiv) above). (6) Hence, it is clear that the amount cannot be claimed to have been sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Authority that the income is to be taxed on accrual basis in Singapore is an anomaly due to the fact that the income is actually deemed to accrue or arise in India as per the Income Tax Act of India. The only redeeming factor is the DTAA between the two countries to avoid double taxation of Income, but not double avoidance as is be made out here. 12.16 In this case it is clear that the shipping business is handled by M/s Maersk Tankers Singapore Pte Ltd.. Singapore, an entity that is tax resident of Singapore. 12.17 The confirmation letter of the IRAS dated 6th August. 2013 is inconclusive to the extent that the taxability of such income has not been explained in detail with respect to the provisions of Article 24 of the DTAA between India and Singapore. In another case of ST Shipping vide correspondence dated 09/01/2013 the Singapore Tax Authority i.e. IRAS has opined that in view of the facts in that case, Article 24.1 of the DTAA would not be applicable and consequently Article 8 would apply. Hence, it is clear that the letter issued by the IRAS is to be treated as an opinion rather than a mandate, which is binding to the particular beneficiary for that tax year. 12.18 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .26% on taxable income Rs. 12,04,715 To sum-up, based on the direction of the Hon'ble ITAT-Rajkot, vide order No.429 & 430/2018 dated 21.11.2019, the draft assessment order is being passed, following the path envisage in section 144C of the Act. Accordingly, this draft assessment order framed u/s 172(4) rws 254(1) of the act is hereby forwarded to the assessee for file their acceptance or objections within 30 days of the receipts of the same. I am satisfied that by claiming exemption under Article 8 of DTAA between India and Singapore, the assessee has under reported the income within the meaning of section 270A of the Income-tax Act, 1961. I am also satisfied that this is a fit case for initiation of penal proceedings u/s 270A of the Act for under reporting of Income which is in consequence to misreporting of income." 7. Aggrieved against the Draft Assessment Order, the assessee filed its objection before Dispute Resolution Panel (in short "DRP"), Mumbai. The assessee has filed its written submission, explanation and Paper Book with relevant documents, evidences in support of its objections raised before the DRP. After detailed discussion the Ld. DRP vide its order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness is neither exempt from tax nor it is subjected to tax at a reduced rate. Therefore, the A.O has stated that non-taxation of the shipping income in India also, shall result into a situation of double non-taxation and that, it can never be the intention of any DTAA including that of Article 8. According to the A.O, the treaty of DTAA is to save any assessee from double taxation of the same income. Obviously, article 8 also aims on that only. However, the DTAA can and never should lead to a situation where any interpretation of any article therein leads to an occurrence of double non-taxation. 8. Now, here, there are many ponderables. Firstly, if some income is taxable in resident state but is not taxed due to any reason, can it be said that it cannot be taxed in other country also? Secondly, if some income is exempt in a resident state expressely as per law, can it be said that still, the other state does not have any rights to tax it? Can it be said that an exempt income has still accrued and therefore, has been deemed taxed in the resident state, thereby, precluding the other state not to tax it as it would tantamount to double taxation? Thirdly, if some income is to be taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xes were paid. Only now, it is learnt that actually, it is not so. No taxes have been paid in Singapore. The Tribunal found that the TRCs etc. and other evidence produced were misleading and aimed at creating wrong impression about Singaporean taxability of income in question. The Tribunal observed that the so-called TRCs give an impression that the freight income received from India has been subjected to tax in Singapore. The Hon'ble Tribunal at para 8 of the order (refer page 35 of draft assessment order) has observed that "clearly, therefore, the relief granted in the judicial precedents in question may have been based on an erroneous impression of the fact regarding actual taxability, in Singapore, of the income embedded in the freight receipts from India, particularly as the income was actually exempt from tax in Singapore as well. As a matter of fact, when the issue regarding non-taxability of this income in Singapore was raised before Hon'ble jurisdictional High Court in the case of MT MersekMikage (supra), their Lordships declined to deal with this aspect of the matter as it was being raised before their Lordships for the first time but then, their Lordships specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor taxable at a reduced rate in India, so, one of the condition is not fulfilled and therefore, provisions of section 24 cannot be invoked. On the other hand, the A.O says that because of article 24 of DTAA, the exemption or reduction of tax is to be allowed only to so much of income as is actually received in Singapore and further, subjected to tax. So, we find that the interpretation given to Article 24 by the assessee s starkly different from that of AO. According to AO, since the shipping income is taxable in India at full rate but not taxed in Singapore, so, article 24 comes into picture. According to the assessee, since the shipping income is taxable in India at full rate but not taxed in Singapore, so, article 24 does not come into picture. Now, this is very tricky. Both assertions cannot be correct at the same time. However, a common sense approach would tilt in favour of AO's interpretation, as, in that case, the income gets taxed and only once and thereby, the spirit and purpose of DTAA also get served. 13. The AO has also mentioned at page 30 of the draft assessment order that the freight income has been remitted to Denmark and not to Singapore and therefore, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 first- mentioned Contracting State shall apply to so much of the income as is remitted to or received in that other Contracting State.' 16. The purpose of including Article 24, Limitation of Benefit clause, should first be considered to understand the context in right perspective. With the introduction of DTAAs, many corporations started exploiting treaty laws to evade tax liability completely. Therefore, in order to prevent abuse of treaty benefits and treaty shopping, countries revised their tax treaties to include an anti-abuse provision called the limitation of benefit clause, referred to as LOB clause. 17. The Appellant has admitted that no tax has been paid in Singapore, the Resident State, on the freight income earned by the Principal, Maersk Tankers Singapore Pte. Ltd. (MTS) from the voyages performed in India, the Source State, and there is an attempt to not pay tax in India also, the source state, by invoking provisions of Article 8 of the Tax treaty. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question. He points out that it is for the first time, and as a result of specific questions by the bench, that the fact of this income being exempt from tax in Singapore has come to the light now "9. To us, it appears that the view expressed by the coordinate bench is so much out of context that even the IRAS certificate from the residence country, which has been reproduced in the order itself, does not envisage treaty benefit in a situation in which the shipping profits in India are taxed on remittance basis in Singapore and the remittances to Singapore have not been made, but then, going by the analysis of the coordinate bench, the taxation in Singapore in such a situation is wholly irrelevant That's clearly an incongruity and is going much beyond what is even imagined by Singapore." 20. Further, in the case of MT Maersk Mikage vs. DIT(International Taxation) [2016] 72 taxmann.com 359 (Gujarat), the Honorable Gujarat High Court left the issue open on the issue of exemption of freight income on the basis of payment of taxes in Singapore by observing as under:... "Before closing, we may briefly touch on one more aspect sought to be raised by the Revenue viz. of the actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the letter of the IRAS dated 8th November, 2017, relied upon by the appellant, is inconclusive to the extent that it does not mention that the shipping income is not subjected to tax in Singapore because of the exemption granted to shipping companies under sections 13A or 13F of the Singapore Income Tax Act. 25. Further, if the shipping income is liable to tax on accrual basis in Singapore, then the same cannot be said to have accrued or arising from the source state, which is India. However, as per Section 9(1 )(i) of the Income Tax Act in India "all income accruing or arising whether directly or indirectly through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India" shall be deemed to accrue or arise in India". Similarly, as per Section 172(2) of the Income Tax Act in India "amount paid or payable on account of such carriage to the owner or the charterer or to any person on his behalf, whether that amount is paid or payable in or out of India, shall be deemed to be income accruing in India to the owner or charterer on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... everting back again to the fundamental question in this case as to whether there can be a situation of double non-taxation of income and if there cannot be any double non-taxation of income, whether the provisions of article 24 can be invoked to deny the benefit of article 8 to the appellant. The DRP here is of the considered opinion that the DTAA between two countries is essentially meant to avoid double taxation. Indeed, that is the touchstone. Therefore, it cannot be permitted to interpret any DTAA in such a manner which shall result in double nontaxation of income. Reference is also made to the unflattering observations of the Hon'ble Rajkot Tribunal in the case cited above where they have frowned upon the relief having been claimed on the basis of granting of incorrect facts or on the basis of omission of material facts. Taking into account the same, objection no. 3 & 4 are also found to be devoid of merits and are, therefore, also dismissed. 17.4 Directions of DRP with reference to Ground no 5: The AO is directed to compute taxable income with reference to freight receipts at Rs. 3,55,18,450/- in place of Rs 3,71,31,000/-, after verifying the facts and figures once ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd taxable income under Section 172(4) at 7.5% of Rs. 26,63,884/- on which determined tax of Rs.11,52,396/-. 9. Aggrieved against the Final Assessment Orders the assessee is in appeal before us raising the following grounds of appeal: "1. On the facts and in the circumstances of the case and in law, the learned ACIT/DRP has erred in holding that the freight income earned from the voyage performed is taxable in India. The order of the learned DCIT is bad in law and merits to be set aside. 2. Without prejudice to the above, the learned ACIT/DRP has erred in denying the benefit of Article 8 of the India-Singapore Double Taxation Avoidance Agreement ('Tax Treaty') to the freight income earned by the Appellant by invoking the provisions of Article 24 (limitation of relief) without appreciating that Article 24 of the Tax Treaty has no applicability in the present case. 2.1 The learned ACIT has erred in alleging that the letter of Inland Revenue Authority of Singapore dated 8 November 2017 is misleading and has further erred in not appreciating that the said letter provides the view of the State of Singapore regarding the taxability of freight income under the Income-tax La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident state herein namely Singapore) from the operation of ships or aircrafts in international traffic shall be taxable only in that state. This Article gives exclusive right to tax the shipping profits to the country of residence. Here, the assessee being a resident of Singapore, hence, India does not have the right to tax the shipping profits. There is no exemption of income from shipping income as is contemplated under Article 24 DTAA. He drawn our attention to the difference between income being exempt from tax and income taxable only in one state. By way of illustration, he pointed out that Articles 20, 21 and 22 of India-Singapore DTAA specifically provides the incomes which are exempt from tax in a contracting state. 11. Similarly, the DTAA also provides genres of income which are taxed at reduced rate, e.g., Article 11 dealing with interest and Article 12 dealing with Royalty and Fees for Technical Services. In support of his contention, the Ld Senior Counsel submitted that the issue is covered in favour of the assessee by the binding judgement of the jurisdictional Hon'ble Gujarat High Court in M.T. Maersk Mikage v. DIT (International Taxation) [2016] 72 taxmann.com 359 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Singapore), but foreign-sourced income is taxed only when received in Singapore, unless exemption applies. Section 10(1) of the SITA is the charging Section, it has two limbs namely [a] Income accruing in or derived from Singapore, and [b] Income received in Singapore from outside Singapore. In practice, the Inland Revenue Authorities of Singapore IRAS applies the 'operations test'. This is also acknowledged by the IRAS in their 'Income Tax Guide to E-Commerce' published on 23 February 2001 (copy enclosed at page nos. 109 to 119 of the factual paper book - volume II): 16. Under the domestic tax law of Singapore, the entire freight income earned by the assessee is treated as sourced in Singapore and liable to tax/assessable on accrual basis in Singapore. In other words, as per the domestic tax law of Singapore, the income earned by the assessee from operation of Singapore registered vessel accrues, arises and derived from business carried out of Singapore itself. 17. The above position is also confirmed by the IRAS in the letter dated 8 November 2017, wherein the IRAS has certified that freight income earned by MTS is Singapore sourced income, physical flow of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld non-applicability of Article 24 in case of shipping companies resident in Singapore. The relevant portion of the decision is as follows: "13. As regards the main issue before us, we have considered arguments of counsels for both sides and perused materials on record along with relevant case laws cited before us. There is no dispute to the fact that the assessee is a tax resident of Singapore. Even the factual finding recorded by the Ld.DRP was that the assessee is a tax resident and does not have a PE in India. Undisputedly, the activities carried out by the assessee in India are covered under Article 8 of India Singapore DTAA. As per Article 8 of India Singapore DTAA, the profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State. Therefore, by virtue of Article 8 of India Singapore DTAA, the international shipping income of a resident of a Contracting State is taxable only in that State i.e., the shipping income of a Singaporean resident by the operations of ships in international waters is taxable only in Singapore on accrual basis. Similarly, Article 24 of India Singapore DTAA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides a taxation right to the country of residence. Therefore, the international shipping income earned by the assessee is not exempted in India, whereas it is taxable only in the country of residence i.e., Singapore. From the above, it is very clear that exclusive right of taxation in one Contracting State is not the same as the specific exemption being available in other Contracting State. Further, shipping income dealt with in Article 8 states that profits derived by an enterprise of a Contracting State by operation of ships in international traffic shall be taxable only in the State of residence. The word 'only' debars the other Contracting State to tax the shipping income; i.e. India is precluded from taxing the shipping income even if it is sourced from India. When India does not have any taxation right on a shipping income of non-resident entity, exemption or reduced rate of taxation in the source state is of no relevance because once the taxing right has been given off, the other conditions like exemption or reduced rate of tax has no bearing on the taxability of particular income in other Contracting State. From the reading of Article 8, which clearly envisages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarified that the income of a Singaporean company from the operation of ships in international traffic is taxable in Singapore on "accrual" basis. Thus, both the conditions ofArticle 24 is not satisfied in the present case. We, therefore are of the considered view that the AO was erred in invoking Article 24 of India Singapore DTAA to tax the income earned by the assessee from shipping operations in India. 16. The interplay between Article 8 and 24 of India Singapore DTAA has been considered by various Tribunals and Courts. As per the settled position of law, the Article 24 Limitation of Benefit is not applicable once shipping income of a non-resident is taxable on "accrual" basis in the country of residence. This principle is well settled by the decision of the Hon'ble Gujarat High Court in the case of M.T. Maersk Mikage vs. DIT(International Taxation) supra, where the Hon'ble court clearly held that where income earned by Singapore based shipping company through shipping business carried out at Indian Ports, was not taxable at Singapore on basis of remittance but on basis of accrual, clause (1) of Article 24 of Indo-Singapore DTAA would not apply to deny benefit of Art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .com 75 has dealt with the interplay between the Article 13 and 24 and after considering relevant clauses categorically held that income derived by a resident of a Contracting State shall be taxable only in that state in view of the clear and unambiguous terms of DTAA. Therefore, we are of the considered view that in terms of Article 8 of India Singapore DTAA, global income of a tax resident of Singapore from shipping operations, even though which is earned outside Singapore is taxable only in Singapore on accrual basis and consequently Article 24 of India Singapore DTAA cannot be invoked to deny the benefit of exemption merely for the simple reason that the said income was not taxed in Singapore by virtue of separate exemptions provided under Singapore Income Tax Act. 17. In this case, the Assessing Officer has attempted to deny the exemption claimed by the assessee under Article 8 by invoking Article 24 of India Singapore tax treaty on a misconception of two clauses of India Singapore DTAA by referring to the provisions of Section 13F of the Singapore Income Tax Act, ignoring the fact that Section 13F of the Singapore Income Tax Act was already in existence since 01.04.1991 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do-UAE DTAA does not necessarily imply that person should actually be liable to tax in that contracting State. It is enough if other contracting State has right to tax such person, whether or not such a right is exercised. This fact is further strengthened by Article 31(1) of Vienna Convention where it was stated that as per the general rule of interpretation, ordinary meaning is to be given to the terms of the treaty in the context and in the light of its object and purpose. The object and purpose of having Article 8 in the India Singapore DTAA is to clearly allocate the taxing rights of international shipping income to the residence country i.e., Singapore in the present assessee case. Therefore, as per sub-clause (2) of Article 31 of the Vienna Convention, the 'context' for the purpose of interpretation of a treaty would primarily include the text, preamble and annexure to the treaty. Therefore, in order to give the ordinary meanings to the terms in their 'context' the whole treaty should be read as it is without giving any meaning which is not the purpose intended by the Articles. In this case, the AO has stated that the preamble should be read to understand the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR, but fact remains is that unless the AO has bring on record any change in fact or law which was prevalent at the time of issuing DIT Relief Certificate and at the time of framing assessment, no contrary view can be taken in violation of Doctrine of Promissory Estoppel. No doubt, the fundamental principles of res-judicata will not be applicable to income tax proceedings, but the rule of consistency needs to be followed unless there is change in fact or law while taking a different view. This view is supported by the decision of the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT, 193 ITR 321. ....................................................... 20. In this view of the matter and considering facts and circumstances of this case, we are of the considered view that Article 8 of India Singapore DTAA is applicable and as per which shipping income of a resident of Singapore is taxable only in Singapore but not in India. The AO has made an attempt to deny the benefit of exemption claimed by the assessee by invoking Article 24 of India Singapore DTAA, even though, the conditions stipulated under Article 24 are not satisfied. We, therefore are of the considered v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of art. 8 could not be denied to the assessee by invoking the limitation clause of art. 24." * Far Shipping (Singapore) Pte. Ltd. v. ITO [2017] 84 taxmann.com 297 (HydTrib) - Copy enclosed at page nos. 209 to 216 of the legal paper book and relevant portion as follows: "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'ble Court has relied upon the confirmation letter/certificate issued by the IRAS, which confirms the taxability of global shipping income in Singapore on accrual basis. The Court also referred to the Rajkot Bench of the Tribunal in the case of Alabra Shipping Pte Ltd., (supra) which also lays down the same proposition. Thus, the conclusion and findings of the Ld.CIT(A) stands negated by these decisions and therefore, the order of the CIT(A) is to be rejected. In the light of the judgment of the Hon'ble High Court, reliance on the decision of the DIT(IT) Vs. Thoresen Chartering Singapor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beit 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 and most important, now this issue stands squarely covered by the decision of Hon'ble Gujarat High Court as referred above. In the light of our aforesaid finding, we do not deem fit to enter into the semantics of other findings of Ld. CIT (A) like nexus between remittance of freight collected in India and finally to Singapore various and other aspects raised by her and also the various arguments as raised by ld. Sr. Counsel and ld. CIT-DR qua the issue of Article 24". 6.1. In view of the clear findings on the issue, I am to hold that the AO/ 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. Since the issue is squarely covered by the decision of the Hon'ble Gujarat High Court as referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate, 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 assessable in Singapore on accrual basis. 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 inSingapore. 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 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 ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s entered into an agreement (Tax Treaty) with the Government of any country outside India or specified territory outside India, then in relation to the assessee to whom such agreement applies, the provisions of the IT Act shall apply to the extent they are more beneficial to the assessee. In this regard, reliance is placed on the decision of the Hon'ble Gujarat High Court in the case of Arabian Express Line v. Union of India [1995] 82 Taxman 6 (Guj HC) wherein the court has held that Section 90 of the IT Act would have overriding effect and Section 172 of the IT Act would not be applicable in case where there is convention between the Government of India and foreign country. Reliance is also placed on decision of Hon'ble Supreme Court in the case of Union of India & ORS v. Arabian Express Line & ANR [Civil Appeal No. 10328 of 1995]. Similar observations have been made in the following circulars issued by CBDT: Circular No. 732 dated 20 December 1995 (Refer Annexure 2 of the written submission) Circular No. 30/2016 dated 26 August 2016 (Refer Annexure 3 of the written submission) 24. It is further submitted, to determine the applicability of Article 24 to a person resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore. Therefore, the orders passed by the Ld DRP and the Final assessment orders passed by the Assessing Officers are liable to deleted and the appeals are allowed in favour of the assessee. 27. Per contra the Ld CIT DR Mr. Shramdeep Sinha appearing for the Revenue strongly supported the orders of the Lower Authorities and submitted that the assessee claimed exemption of freight income as per Article-8 of DTAA between India and Singapore, though the assessee has remitted freight income in respect of two voyages to Denmark and sixteen voyages to Shanghai but still claimed that Article 24(1) is not applicable in its case. 28. As the remittances were not made to or received in Singapore, Article 24(1) of DTAA between India and Singapore would apply and dependent on the facts of the case, exemption as per Article 8 either in whole or in part would be excluded as per the interpretation given by the Hon'ble High Court of Gujarat at para 16 in the case of M.P. MerskMikage vs DIT (IT) (2016) - 242 taxmann 300. 29. The letter dated 8th November 2017 issued by the Inland Revenue Authority of Singapore to claim the benefit of Article-8, it is relevant to mention that a letter cannot ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to prevent abuse of treaty benefits and treaty shopping, countries revised their tax treaties to include an anti-abuse provision called the "limitation of benefit" clause. By ignoring this Article by placing reliance on a letter of IRAS would defeat the very purpose of Article 24 and would be case of double non-taxation. So, both the Governments will be not getting any tax. 33. In this regard reference is also invited to the provisions of section 90 of Income Tax Act by which authority for entering into the DTAA with any country is derived. As per Section 90(l)(b) of the Act DTAA is entered into or signed for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country (here Singapore) in this regard. At the same time, the DTAA should not result in creating opportunities for non taxation or reduced taxation or avoidance including through treaty shopping arrangements aimed at obtaining relief provided in the said agreement. In the case under consideration the assessee has received the income in Denmark and Shanghai but trying to take the benefit of Article -8 of DTAA for avoidance of tax payments by completely disregardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at provisions in the form of "Limitation of Benefit" has been brought in Tax Treaty, to curb abuse of tax treaty provisions, as treaties are made to avoid double taxation of an income, as well as to prevent double non-taxation of income. In view of the above, the appeals of the assessee may be rejected and the order-of the Revenue may kindly be upheld. 38. We have extensively heard the rival parties with detailed Paper Books and case laws compilations as well as written arguments filed by both the parties. In our considered view, the issue is no more res integra because of the series of judgments passed by Coordinate Benches of the Tribunal. Jurisdictional High Court in the case of M.T. Maersk Mikage v. DIT (International Taxation) (cited supra) held that the income in question arises out of shipping operations by virtue of Clause (1) of Article 8 of DTAA would be taxable only in Singapore, is not in serious dispute. The moot question, therefore, is whether the operation of Article 8 is ousted by virtue of Clause (1) of Article 24 (Limitation of Relief). Under Clause 1 of Article 24 the income from sources in contracting states (India) shall be exempted from tax at a reduce rate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear of Assessment 2016 and 2017. The physical flow of funds is therefore not relevant. As such, Article 24(1) of the Singapore-India Avoidance of Double Taxation Agreement ("DTA"), which seeks to limit the relief under the DTA where the relevant income is subject to tax in Singapore on a remittance basis, would not be applicable to the charter income derived from these export voyages from Indian ports. 5. Please note that if the background and facts remain unchanged for future Years of Assessment the tax position as stated in paragraph 4 will apply as well. 6. If you require any further clarifications, please do not hesitate to contact us. Yours faithfully WONG PI TING (MISS) TAX SPECIALIST CORPORATE TAX DIVISION For COMPTROLLER OF INCOME TAX This is a computer generated letter and requires no signature." 39. From reading of this letter, the IRAS Authority have stated that the assessee company derives shipping income (charter income) from third party from export voyages from Indian ports. The assessee company would report the chartered income in its Singapore Tax Return for the years of Assessment 2017 and 2018. It is clarified that Article 24(1) of India-Singapore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Far Shipping (Singapore) Pte. Ltd. v. ITO [2017] 84 taxmann.com 297, Mumbai Tribunal in the case of Citicorp Investment Bank (Singapore) Ltd v. DCIT(IT) [2017] 81 taxmann.com 368, SET Satellite Singapore Pte. Ltd. v. ADIT and DDIT v. M/s. MSM Satellite (Singapore) Pte. Ltd. 42. Respectfully following the above decisions, we held that the Assessing Officer and Ld. DRP was not justified in denying the benefit of Article 8 by invoking the limitation of Article 24 between India and Singapore DTAA following Jurisdictional High Court judgment in M.T. Maersk Mikage v. DIT (International Taxation) (cited Supra). We are therefore of the considered opinion that the exercise under taken by the Assessing Officer and the Ld. DRP in co-relating the remittances and denying the certificate issued by the Singapore Tax Authorities is not proper and both the Assessing Officer and the Ld. DRP has not considered the Singapore Income Tax Returns filed by the assessee. In view of the above the order of the lower authorities namely final Assessment Order passed by the Assessing Officer and directions issued by Ld. DRP are hereby set-aside and they are directed to allow the benefit of Article 8 to all the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
