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TMI Blog2024 (3) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... by Commissioner of Income Tax (Appeals), Gandhinagar, Ahmedabad & Commissioner of Income Tax (Appeals)-13, Ahmedabad (in short "CIT(A)"), vide orders dated 11.11.2013, 31.07.2019 & 29.08.2019 for A.Ys. 2012-13 and 2015-16. Since common facts and issues for consideration are before us for all the years under consideration, all the appeals are being disposed of by way of a common order. Assessment Year 2012-13 2. The assessee has taken the following grounds of appeals:- "1. On the facts and in the peculiar circumstances of the case and in law, the Hon'ble Commissioner of Income-tax (Appeals) ['CIT(A)'] erred in not adjudicating Ground No. 1 raised by the appellant-agent i.e. the learned Income-tax Officer ('ITO') erred in assessing the income of the Principal, ST Shipping & Transport Pte. Ltd., Singapore ('ST Shipping') in the hands of the appellant-agent under section 172(4) of the IT Act without first issuing a draft of the proposed order as required under section 144C of the Income-tax Act, 1961 ('IT Act') 2. Without prejudice to Ground No. 1 above, on the facts and in the peculiar circumstances of the case and in law, the Hon'ble CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act i.e. the freight income cannot be regarded as Singapore sourced income under the provisions of Singapore Income Tax Act. * Upholding the observations of the learned ITO that ST Shipping has filed incorrect / incomplete tax returns in Singapore although these were duly accepted by the IRAS. The Appellant craves leave to add, later, amend or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing." 3. The brief facts relating to this case are that M/s. Atlantic Shippling Company Pvt. Ltd. (the assessee) filed return of income under Section 172(3) of the Act for various vessels operating in Indian territorial waters, during the impugned year under consideration. The Assessing Officer observed that the freight beneficiary in respect of various vessels was M/s. S. T. Shipping and Transport Pte. Ltd., a company based out of Singapore. The Assessing Officer called for certain details like copy of freight invoices and proof of remittances of the freight to the bank account of the beneficiary in Singapore. On perusal of the details filed by the assessee, the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue by the concerned Assessing Officer and the assessee's rejoinder to the same, the Ld. CIT(A) refused to admit the additional evidence with the following observations:- "Admissibility of additional evidences It is observed from the records that the time limit under section 172(4) was getting expired on December 31, 2012, arid the show cause notice was issued on December 10, 2012. I am of the view that sufficient opportunity was afforded to the appellant to substantiate the claim and submit all the information called upon by the AO. However the appellant company has failed to prove before me circumstances which prevented him to furnish all the information before the AO, It is also not the case of the appellant that the AO had refused to admit evidences submitted before him. The appellant's application for admission of additional evidences is also silent on the circumstances which led him to file additional evidences for the first time before me. Accordingly the evidences filed by the appellant cannot be admitted under Rule 46A of the Income Tax Rules, 1962." 5. On merits, Ld. CIT(A) observed that that language of Article 24 of the India-Singapore Treaty is categorical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisite for claiming benefit of Article 8 of the India-Singapore Tax Treaty. 7. We shall discuss the specific arguments of the Ld. Counsel for the assessee and our views / decision on the same. Before us, the Ld. Counsel for the assessee firstly argued that since the assessee has earned freight income by shipping goods to ports in India, the benefit of Article 8 of India-Singapore Treaty is available to the assessee. With regard to applicability of Article 24, the Counsel for the assessee submitted that there are two conditions which are required to be fulfilled for Article 24 of India-Singapore Tax Treaty to be applicable. It was submitted that since both the conditions have not been satisfied, in the instant facts, the restriction imposed by Article 24 of the India-Singapore Tax Treaty would not be applicable to the instant facts. 8. The first argument of the Counsel for the assessee is that the first condition for Article 24 of India-Singapore Treaty to be applicable is that "income from sources in a Contracting State shall be exempt from tax or taxed at a reduced rate in that Contracting State". Accordingly, the Counsel for the assessee submitted that Article 24 limits the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicability. This would effectively render Article 24 of the India Tax Treaty otiose / redundant. The limitation of relief clause has been introduced primarily with a view to ensure that the tax treaty benefits are not abused / misused and no benefit is derived which was not intended to be granted to a Contracting State under the Tax Treaty. Singapore has a territorial tax system so that only income sourced in Singapore is subject to tax. Taxation of on foreign sourced income (income earned off-shore) by a Singapore resident company is not subject to tax unless the income is received in Singapore or deemed remitted to Singapore. The term "received" in Singapore includes remitted to, transmitted to or brought into Singapore, used to satisfy any debt incurred in respect of a trade or business carried on in Singapore or used to purchase any movable property (such as equipment, raw material etc.) that is then brought into Singapore. Therefore, the limitation of relief clause has been introduced with the objective that in case "exemption from taxation in source country" has been claimed by the resident Singapore Company under the relevant Article under the India-Singapore Treaty DTAA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant facts cannot be accepted, for this would lead to Article 24 of the India-Singapore DTAA as being redundant / otiose and the non-resident taxpayer getting benefit of double non-taxation of India sourced income, which is clearly not intended under the India-Singapore Tax Treaty. 12. Accordingly, this argument of the Counsel for the assessee is hereby rejected for the aforesaid reasons cited above. 13. The second argument of the Counsel for the assessee was that Article 24 provides that this Article is applicable when the said income is subject to tax in country at residence i.e. Singapore by reference to the amount "which is remitted to or received in Singapore". The Counsel for the assessee submitted that Article 24 is not applicable to the instant facts because under the laws in force in Singapore, the said income is subject to tax on "accrual basis" and not by reference to the amount which is "remitted to or received in" Singapore. The Counsel for the assessee made two contentions in support of this argument. 14. Firstly, the Counsel for the assessee placed reliance on a certificate from the Inland Revenue Authority of Singapore (IRAS) which certified that the income in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 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 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 certificate was before the Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Treaty. Therefore, effectively, the Gujarat High Court has made the following observations:. Firstly, the certificate is in the form of an opinion, which is in the realm of interpretation of relevant clauses of DTAA, and the High Court cannot be guided by such interpretation. Secondly, since the Revenue has not challenged or doubted the certificate issued by the Singapore Tax Authority, and had not produced any rebuttal material, the certificate has knocked out the very basis of applicability of Article 24(1) of the DTAA. 20. However, for the impugned assessment years, the factual situation is different from the preceding assessment year which were before Hon'ble Gujarat High Court, since the Ld. D.R. has challenged the veracity of the very certificate which was produced by the assessee for the first time during the course of appellate proceedings before Ld. CIT(A). Therefore, in view of the observations made by Gujarat High Court, and the challenge by the Ld. D.R. as to contents of the certificate issued by Singapore Tax Authority, it would be pertinent to take a closer look at the certificate issued by the Singapore Tax Authorities and it's applicability to the inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is". Apparently, the assessee is deriving substantial income from carrying out substantial shipping activities within the territorial waters of India and is seeking to override the limitation of relief provided under the Treaty on the ground that as per certificate, the assessee is carrying out operations in Singapore and hence is taxable in Singapore on "accrual basis". Therefore, since Article 24(1) limits the relief only with respect to income which is taxed in Singapore on remittance / receipt basis and has no applicability on income taxable in Singapore on "accrual basis", this certificate has the effect of ousting the applicability of the limitation of relief clause in the India-Singapore Tax Treaty. However, as noted above, the language of the certificate, as also observed by Hon'ble Gujarat High Court, is in the form of an opinion, specifically aimed at eclipsing the limitation of relief clause, by stating that the aforesaid income, which has been derived by the assessee from "business carried on in Singapore" is assessable to tax in Singapore on "accrual basis". However, the certificate does not specify the factual basis on which the Singapore tax authority has come to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, as noted above, from a reading of the letter issued by the Singapore Tax Authorities, it is unclear to us as to how the income in question has been earned from a "business carried out in Singapore" and hence taxable on "accrual basis" in Singapore. This question has been raised by the Department both as part of the order of CIT(A) (in the remand report) and also before us by the Ld. D.R. We also observe that the letter issued by IRAS does not refer to any statutory provisions under the Singapore Tax Laws and is more in the form of a unilateral opinion / declaration that since the income has been earned by the assessee on "accrual basis", Article 24 of the DTAA (Limitation of Relief Clause) will have no applicability to the assessee's set of facts. Since the entire case of the assessee for various assessment years under consideration hinges on the statement issued by the Singapore Tax Authority and as noted by the Gujarat High Court, the certificate is merely in the form of an opinion, in our considered view, it is a fit case where the basis of issuance of this certificate needs to be looked into in more detail, especially in the absence of any statutory provisions being cited ..... X X X X Extracts X X X X X X X X Extracts X X X X
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