Inland haulage charges linked to shipping contracts fall within treaty protection as ship-operation income under Article 8.

Inland haulage charges earned for transporting cargo from inland container depots to the port were treated as part of income from the operation of ships in international traffic under Article 8 of the India-Belgium tax treaty. The Court applied its earlier principle that treaty coverage is not limited to carriage performed only on ships owned or chartered by the enterprise; ancillary, complementary, and integrally connected activities within the shipping business also fall within the provision. On that basis, the haulage receipts were treated as income derived from ship operations and not as separately taxable business profits in India.

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Issues: Whether inland haulage charges earned from transporting cargo from inland container depots to the port formed part of income from the operation of ships in international traffic and were therefore covered by Article 8 of the India-Belgium tax treaty.

Analysis: The charge in question was directly linked to the carriage of cargo destined for international traffic and was collected as part of the shipping contract. The Court followed its earlier decision that income need not arise only from carriage on ships owned or chartered by the enterprise; activities that are ancillary to, complementary to, and integrally connected with the business of operating ships in international traffic fall within the treaty provision. On that basis, the inland haulage receipts were treated as part of the income derived from ship operations and not as separately taxable business profits in India.

Conclusion: The issue was decided in favour of the assessee. The inland haulage charges were held to be covered by Article 8 of the India-Belgium tax treaty and were not taxable in India as business profits.

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