India-Singapore treaty relief upheld as Article 24 did not deny benefits on royalties sourced in Singapore.

Article 24 of the India-Singapore Treaty was held inapplicable because it targets income exempt or taxed at a reduced rate in one Contracting State and taxed on a remittance basis in the other. The payment was treated as not arising in India under Article 12(7) since the payer was a Singapore resident, making Singapore the source state for royalties. As the income was therefore not income from sources in India, the limitation-of-relief provision did not operate. The amount was also taxed in Singapore under domestic law, which further supported treaty eligibility. The assessee was entitled to treaty benefit.

---

---

Issues: Whether Article 24 of the India-Singapore Treaty denied treaty benefit to the recipient and whether, on the facts, the assessee was entitled to the benefit of the treaty despite the Revenue's objection.

Analysis: Article 24 applies only where income from a source in one Contracting State is exempt from tax or taxed at a reduced rate there and, under the laws of the other Contracting State, is taxed on a remittance basis. The payment in question was held not to arise in India under Article 12(7) because the payer was a resident of Singapore, making Singapore the source state for royalties. The income was therefore not income from sources in India for the purposes of Article 24. The order also noted that the amount had in fact been subject to tax in Singapore under domestic law, which further negatived application of the limitation-of-relief provision.

Conclusion: Article 24 did not apply and the assessee was entitled to the benefit of the India-Singapore Treaty. The Revenue's first ground was dismissed.

---