Inland haulage charges in through-transport arrangements can fall within shipping income exemption under the Indo-Belgium treaty.

Inland haulage charges earned by a non-resident shipping enterprise for moving cargo from an inland point to the port, as part of a combined through-transport arrangement, were treated as income from the operation of ships in international traffic under Article 8 of the Indo-Belgium DTAA. Article 8(2)(b)(ii) was construed broadly to cover activities directly connected with transportation, and the presence of through bills of lading and a single composite movement supported that reading. Article 8(2)(c) on containers and related equipment was also read consistently with that approach. The receipts were therefore not regarded as a separate inland business and were not taxable in India.

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Issues: Whether inland haulage charges received by a non-resident shipping enterprise for transport of cargo from an inland place to the port, as part of a combined through-transport arrangement, fall within the exemption for income from the operation of ships in international traffic under Article 8 of the Indo-Belgium DTAA and therefore are not taxable in India.

Analysis: Section 44B of the Income-tax Act, 1961 was considered for the limited purpose of computing shipping income, but the decisive question was the scope of Article 8 of the treaty. The expression "any other activity directly connected with such transportation" in Article 8(2)(b)(ii) was construed broadly in the context of the full transport arrangement. The inland haulage was found to be part of a single composite movement from the place of origin to the foreign destination, supported by through bills of lading and the fact that the same enterprise undertook both the inland movement and the ocean carriage. The treaty language was also read with Article 8(2)(c), which extends to income from the use of containers and related equipment in connection with international traffic. On that reading, the inland haulage receipts were not treated as a separate inland business divorced from shipping operations.

Conclusion: The inland haulage charges were held to fall within Article 8 of the Indo-Belgium DTAA and were not liable to tax in India.

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