Shipping receipts and treaty relief: slot fees and ancillary charges fell within section 44B and were not covered by Article 9

Slot fee and ancillary charges received by a non-resident shipping enterprise were held not to be profits derived from the operation of ships in international traffic under Article 9 of the India-Denmark DTAA. As the treaty did not protect those receipts, the Income-tax Act, 1961 applied, and section 44B covered them as amounts of a similar nature to demurrage and handling charges under its Explanation. By applying ejusdem generis, the receipts were brought within section 44B and taxed accordingly.

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Issues: Whether slot fee and ancillary charges received by a non-resident shipping enterprise were taxable under section 44B of the Income-tax Act, 1961, or excluded by Article 9 of the India-Denmark Double Taxation Avoidance Convention.

Analysis: Article 9 applies only to profits derived from the operation of ships in international traffic. The expression "derived from" was given its ordinary meaning, and the slot fee and ancillary charges were held not to be profits arising from the operation of ships. Since the Convention contained a specific provision for shipping income, Article 7 could not be invoked to cover such receipts. In the absence of treaty protection for these receipts, the Income-tax Act, 1961 applied. Section 44B deems a percentage of specified shipping receipts to be profits and gains of business, and its Explanation extends the provision to demurrage, handling charges, and other amounts of similar nature. Slot fee and ancillary charges were treated as amounts of like nature and brought within the Explanation by applying ejusdem generis.

Conclusion: Slot fee and ancillary charges were taxable under section 44B of the Income-tax Act, 1961, and the assessee's reliance on Article 9 failed.

Ratio Decidendi: Where receipts of a non-resident shipping enterprise are not profits derived from the operation of ships under the applicable treaty, and they are of a nature similar to demurrage or handling charges, they fall within section 44B of the Income-tax Act, 1961.

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