DTAA benefits - availment of exemption

[ASHISH DESAI]

we are making payment to a Non-resident shipping company of UK towards export freight,which is governed by S.172 of the Act. under DTAA between India & UK it is exempted & hence no withholding Tax liability on the part of Indian company. If we use the same services for domestic freight payments on regular basis & remit the freight charges to the same non-resident company for using their ships for domestic movements( say from Gujarat Port to Vizag Port), what will be the tax liability? are we governed by S.44B or still S.172? can DTAA benefits be availed & exemption can be claimed? if at all there will be the TDS liability, then whether export freight is exempted & only domestic freight is covered u/s 44B? pl. explain our tax liability under all three circumstances.

[Ravi Chopra]

since it is very technical query, beyond the scope of general discussion, I personally believe that once you pay for domestic movement of goods, once it is established that the income is accrued or arisen in India, there is no question of extension the benefit of exemption under DTAA. Obviously the provisions of section 44B would come into picture and make the transaction taxable accordingly.

[Anuj Gupta]

Well if for the rate purpose for domestic movements the rates under sec 44B and section 172 are same at 7.5%.DTAA doesnot cover any domestic movements hence the same shall be taxable at 7.5%. Kindly explain your query in detail for having a complete answer.

AI Summary

DTAA exemption for export freight: domestic shipping income is taxable under source rules and section 44B. Export freight paid to a non-resident shipping company may be exempt from Indian withholding under the India-UK DTAA, whereas payments for domestic carriage between Indian ports constitute income sourced in India and are taxable under the domestic shipping tax provisions, requiring withholding under Indian law rather than DTAA relief.