DTAA shipping income taxation: Article 24 could not restrict Article 8 where Singapore taxed the income on accrual basis.

Article 8 of the India-Singapore DTAA allocates taxing rights over shipping profits from international traffic exclusively to the State of residence, and does not operate as a source-State exemption provision. Article 24 applies only where treaty relief in the source State is linked to exemption or a reduced rate and the same income is taxable in the other State on remittance or receipt basis. Because the assessee's shipping income was taxable in Singapore on accrual basis, those conditions were not met. The source State could not invoke Article 24 to curtail Article 8, and the Indian addition was liable to be deleted.

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Issues: Whether Article 24 of the India-Singapore DTAA could be invoked to restrict the benefit of Article 8 and tax the assessee's shipping income in India under section 44B of the Income-tax Act, 1961.

Analysis: Article 8 allocates the taxing right over profits from the operation of ships in international traffic exclusively to the State of residence and is not a provision granting exemption in the source State. Article 24 applies only where the treaty provides exemption or a reduced rate in the source State and, under the law of the other Contracting State, the income is taxable by reference to remittance or receipt. The assessee's shipping income was taxable in Singapore on accrual basis, and the treaty conditions for invoking Article 24 were not satisfied. The prior coordinate bench view, as supported by other judicial precedents, was followed to hold that the source State could not tax the income by limiting Article 8 through Article 24.

Conclusion: Article 24 was not applicable and the shipping income remained taxable only in Singapore; the addition made in India was liable to be deleted.

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