International shipping profits under the India-Singapore DTAA may be taxable only in Singapore when voyage conditions are met.

Freight earned from a vessel voyage was analysed under the India-Singapore DTAA to determine whether it formed part of international traffic and was taxable only in Singapore. On the charter party, port clearance records, residency material and the Singapore assessment record, the freight beneficiary was treated as a Singapore resident and the voyage income had been offered to tax there. The contention that the movement was only a coastal run was rejected because the voyage formed part of a broader international journey through Indian ports. Accordingly, treaty protection applied and the addition under section 172(4) was unsustainable.

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Issues: Whether the freight earned from the vessel's voyage was part of international traffic and therefore eligible for treaty relief under the India-Singapore DTAA, with the result that the freight income could not be brought to tax in India under section 172(4).

Analysis: The vessel's voyage was examined on the basis of the charter party, port clearance documents, tax residency material, and the Singapore assessment record. The record showed that the freight beneficiary was a Singapore resident and that the income from the voyage had been offered to tax in Singapore. The contention that the movement was merely a coastal run was not accepted, as the voyage formed part of a larger international journey and included movement through Indian ports within the foreign run. In these circumstances, the treaty provisions governing shipping profits applied, and the objection based on absence of tax payment in Singapore was rejected.

Conclusion: The freight income was held to be covered by the India-Singapore DTAA and taxable only in Singapore, not in India; the addition made under section 172(4) was unsustainable.

Ratio Decidendi: Where shipping profits arise from an international voyage and the treaty conditions for resident-based taxation are satisfied, India cannot tax the same freight income merely because the vessel touched Indian ports during the voyage.

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