Treaty protection for shipping income under India-Singapore DTAA overrides domestic taxation where Article 8 applies.

Shipping income of a Singapore tax resident from operations in India was treated as falling within Article 8 of the India-Singapore DTAA, which allocates taxing rights over profits from ships operated in international traffic to the State of residence. Because the assessee had no permanent establishment in India, the income remained protected by the treaty and could not be taxed in India under domestic law. Article 24 was held inapplicable since it applies only in specific exemption or reduced-rate situations and did not convert Article 8 income into India-taxable income on remittance basis. The addition under section 44B was therefore unsustainable.

---

---

Issues: Whether the shipping income earned by a Singapore tax resident from operations in India was taxable in India under domestic law and Article 24 of the India-Singapore DTAA, or was protected by Article 8 of the DTAA as taxable only in Singapore.

Analysis: Article 8 of the India-Singapore DTAA allocates exclusive taxing rights over profits from ships operated in international traffic to the State of residence. On the facts, the assessee was a Singapore resident with no permanent establishment in India, and the income arose from shipping operations covered by Article 8. Article 24 was held to be inapplicable because it operates only where income is exempt from tax or taxed at a reduced rate in one Contracting State and, under the other State's law, is taxable only on remittance or receipt basis. The shipping income here was treated as taxable in Singapore on an accrual basis, and the Singapore exemption under domestic law did not convert Article 8 income into income falling within Article 24. The treaty could not be used to create a taxing right in India where Article 8 had already allocated that income exclusively to Singapore.

Conclusion: The shipping income was not taxable in India under Article 24 or section 44B, and the addition made by the Assessing Officer was unsustainable.

---