Treaty relief for composite shipping receipts extended to feeder vessel freight and inland haulage linked to international traffic.

Freight receipts from shipping operations, including amounts linked to feeder vessels and pool or slot arrangements, were treated as eligible for Article 8 relief under the India-UAE DTAA because the jurisdictional High Court view bound the tribunal despite a pending SLP. Inland Haulage Charges were also held to form part of composite international shipping services, since they were directly and inextricably linked to cargo movement under a single bill of lading and were not a separate business activity. The shipping-related additions were deleted, granting partial relief to the assessee.

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Issues: (i) Whether freight receipts from shipping operations, including receipts relatable to feeder vessels and pool or slot arrangements, were entitled to the benefit of Article 8 of the India-UAE DTAA; (ii) Whether Inland Haulage Charges formed part of profits from operation of ships in international traffic and were covered by Article 8 of the India-UAE DTAA.

Issue (i): Whether freight receipts from shipping operations, including receipts relatable to feeder vessels and pool or slot arrangements, were entitled to the benefit of Article 8 of the India-UAE DTAA.

Analysis: The facts were found to be identical to the immediately preceding assessment year. The issue had already been decided in the assessee's favour by the co-ordinate Bench by following the jurisdictional High Court's view that the benefit of Article 8 cannot be denied merely because the receipts are linked to feeder vessels or arrangements forming part of the shipping business. The existence of a pending SLP did not dilute the binding nature of the High Court decision.

Conclusion: The benefit of Article 8 was held applicable to the freight receipts, including receipts from feeder vessel operations and pool or slot arrangements, in favour of the assessee.

Issue (ii): Whether Inland Haulage Charges formed part of profits from operation of ships in international traffic and were covered by Article 8 of the India-UAE DTAA.

Analysis: Inland haulage was treated as part of the composite transportation service evidenced by a single bill of lading. The receipt was held to be directly and inextricably linked with the movement of cargo in international traffic and not a separate business activity. Relying on the treaty text and judicial precedent on connected and ancillary activities, the charges were held to fall within the shipping profits protected by Article 8.

Conclusion: Inland Haulage Charges were held to be covered by Article 8 and not taxable in India as business profits, in favour of the assessee.

Final Conclusion: The additions relating to shipping freight receipts and Inland Haulage Charges were deleted, while the remaining grounds were not accepted, resulting in partial relief to the assessee.

Ratio Decidendi: Where receipts are part of a composite shipping operation and are inextricably linked with the transport of goods in international traffic, they are profits derived from the operation of ships and are protected by Article 8 of the applicable tax treaty.

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