Treaty relief for feeder vessel freight upheld, while TDS credit was sent back for verification and recomputation.

Income from slot hire and feeder vessel arrangements was treated as integrally connected with the operation of ships in international traffic, so relief under Article 8 of the India-Germany DTAA was available and the corresponding addition under section 44B was deleted. The Tribunal followed binding jurisdictional precedents and held that the character of the receipts did not change merely because the main vessels could not directly call at Indian ports. The claim for TDS credit, however, depended on verification of the TDS statements and matching with assessed income, so that issue was remitted to the Assessing Officer for examination and recomputation.

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Issues: (i) Whether freight income from transportation of cargo through feeder vessels qualified for relief under Article 8 of the India-Germany DTAA and could not be brought to tax under section 44B of the Income-tax Act, 1961; (ii) Whether the claim for TDS credit required restoration for verification and recomputation.

Issue (i): Whether freight income from transportation of cargo through feeder vessels qualified for relief under Article 8 of the India-Germany DTAA and could not be brought to tax under section 44B of the Income-tax Act, 1961.

Analysis: The dispute was recurring and materially identical to earlier assessment years in the assessee's own case. The Tribunal followed the consistent jurisdictional precedents holding that income from slot hire and feeder vessel arrangements is integrally connected with the business of operating ships in international traffic. The fact that the feeder vessels were used because the main vessels could not directly call at Indian ports did not alter the character of the receipts. The pending challenge before the Supreme Court did not justify departure from binding High Court and Tribunal rulings.

Conclusion: The freight income from feeder vessels was held eligible for relief under Article 8 of the India-Germany DTAA and the corresponding tax addition under section 44B was not sustained. This issue was decided in favour of the assessee.

Issue (ii): Whether the claim for TDS credit required restoration for verification and recomputation.

Analysis: The credit issue depended on verification of the TDS reflected in the relevant statements and its correlation with the income assessed in the assessee's hands. The Tribunal therefore directed the jurisdictional Assessing Officer to examine the claim in accordance with law and grant credit after necessary verification.

Conclusion: The TDS credit issue was remitted for verification and consequential relief, with the ground allowed for statistical purposes.

Final Conclusion: The principal addition relating to feeder vessel freight was deleted, while the TDS credit claim was sent back for verification, leaving the appeal disposed of with substantive relief to the assessee and limited remand for recomputation.

Ratio Decidendi: Income from feeder or slot vessel arrangements, when integral to the operation of ships in international traffic, falls within the protective scope of the shipping article of the applicable treaty and cannot be denied merely because the main vessels do not directly call at the port.

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