TaxTMI 
TaxTMI 
2013 (11) TMI 1325
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....hips/vessels, which the AO allowed and disallowed the claim on 98 ships/vessels. 5. The assessee took this disallowance of 98 ships before the CIT(A), who allowed 25, disallowed one vessel for which there were no evidence and gave direction to the AO for allowance on the remaining, after verification. The AO, in the appeal effect order, allowed 59 vessels, after verifying all the relevant documents. 6. In effect, the factual position is: Allowed by AO in the assessment order 27 Allowed by AO in the appeal effect 59 Allowed by CIT(A) 25 No evidence submitted before CIT(A) 1 Evidence submitted before ITAT 6 Still without any evidence 7 125 7. By way of present appeals, the department in ITA no. 1702/Mum/2010 is disputing the allowance of claim of 25 vessels under article 8 of India Singapore DTAA and assessee is disputing the disallowance of claim of 1 vessel and 13 other vessels out of which, the assessee has submitted evidence before the ITAT as additional evidence with regard to 6 vessels and 7 vessels are still without any evidence. 8. The facts emanating from the assessment order are that the assessee, APL & Company Pt....
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....ase by arguing that the facts emerging from the documents submitted till date point to the direction, that the assessee is neither the owner, nor the charter but only a slot charterer. The DR submitted that by slot chartering, what the assessee is doing is, that from its feeder vessel it takes the cargo to its hub, where the cargo is loaded to the mother vessel, as per the slot area booked, to be taken to its final destination. 15. The DR to prove his point of distinction referred to the Wikipedia meaning, as down loaded from internet and the Glossary of maritime definitions wherein the meanings of charter, lease, slot charter & Bare boat charter had been given, according to the DR slot charter can be only a part of the charter of the ship, but it can never be the charterer of the ship/vessel, wherein the control is with the charterer. The DR to demonstrate the meaning of charter of a vessel, explained the distinctions of owner, lessee, charter and slot charter. The distinctions drawn by the DR on the words, the DR referred to the agreements entered into by the assessee, wherein, the DR referred to the APB wherein there was a ship validation, according to which risks and rewards....
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....e ships operated by it from India. Despite various opportunities given the assessee could not file the same. However, the assessee vide letter dt. 17th Feb., 2004 stated - (1) that none of the ships owned/chartered it called at Indian ports, and (2) that all the vessels shown in the freight statement were feeder vessels, which were owned by other shipping lines with whom the assessee had slot arrangements. In view of the above reply, the AO asked the assessee to link the feeder vessels with the mother vessels in respect of the voyages to establish that the particular feeder vessel was linked with particular mother vessel. The assessee was also asked to file copies of the ship registration certificate and charter party agreements of all the mother vessels. In response to the same, a list of feeder vessels and mother vessels was furnished before the AO. It was noted by the AO that the assessee had shown 73 voyages from Mumbai port but it had not filed the ship registration certificates in respect of any vessel which it claimed to have operated. Accordingly, it was held by him that the assessee had failed to link and establish the voyage-wise that its feeder vessels were actually load....
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....defined in Indo-UK treaty, this Bench in the case of Balaji Shipping (UK) Ltd. (supra), following the judgment of the Hon'ble Supreme Court in the case of Union of India & Anr. v. Azadi Bachao Andolan & [2003] 184 CTR (SC) 450 [2003] 263 ITR 706 (SC) and the decision of the Tribunal in the case of Metchem Canada Inc. v. Dy. CIT [2006] 99 TTJ (Mumbai) 702 [2006] 100 ITD 251 (Mumbai), held that such expression should be construed in the manner in which the contracting parties understood at the time of execution of the treaty, i.e., in the light of the commentaries of international law available at the time of execution of the agreement. On the other hand, the Tribunal while disposing the appeal of Delta Airlines Inc. (supra), following the decision of the Supreme Court in the case of CIT v. P.V.A.L. Kulandagan Chettiar (supra), held that the expression "profits from operation of ships or aircrafts in the international traffic" must be understood in the sense in which it has been defined in para 2 of art. 8. Thus, in our opinion, there is no conflict between these two decisions. Therefore, following the decision of the Bench in the case of Delta Airlines Inc. (supra), it is to be held....
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....with the income from that property, the treaties generally provide that tax may be imposed by the State of source in respect of such property and shall be allowed as a credit in the State of residence; that it needs to be emphasised that there is no bar under the international law for the State of residence to impose tax on income from property situated in another State and whether there is such a bar under the treaty depends upon the correct interpretation of its provisions." 34. The crux of the above observations is that wherever any expression is not defined in the /treaty then the expression defined in the domestic law could be applied. This means that meaning of such expression can be ascertained with reference to the other materials which may be by way of domestic law or the commentaries available at the time of execution of the agreement by the contracting parties as held by the apex Court in the case c. Azadi Bachao Andolan (supra). Impliedly, it means that where any expression or term is defined then it would be unnecessary to refer to the commentaries or decisions of foreign jurisdiction as held by the apex Court in the case of P.V.A.L. Kulanda....
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....sions of the Supreme Court mentioned in para 18 of this order is also without force. Those judgments are authorities for the proposition that the principles of international taxation can be considered while adjudicating the issue with reference to the domestic law. But nowhere it is said by the apex court that such course of action can be adopted even where any term or expression has been specifically defined in the domestic law. Reference can be made to the judgment of the Hon'ble Supreme Court in the case People's Union for Civil Liberties v. Union of India (supra) wherein it has been held that international treaties and instructions have been relied upon by the Supreme Court for statutory interpretation where the terms of any legislation are not clear or are reasonably capable of more than one meaning. It was also observed that in the absence of any law to the contrary, there is prima facie presumption that Parliament did not intend to act in breach of international law including the State treaty obligations. Similarly, in the case of T.N. Godavarman Thirumalpad (supra) it was observed that in the absence of any inconsistency regard must be had to, even in construing the domesti....
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....ty, the exemption has to be allowed only in accordance with provisions of para 2 of art. 8 and, therefore, cannot be extended beyond the scope of such definition unless the case of the assessee falls under the provisions of paras 3 to 6 of art. 8. Hence, neither the OECD Commentary nor the US Technical Explanation can be looked into while considering the scope of para 2 of art. 8 of the Indo-US treaty - Furniss Withy & Co. v. MNR [1968] CTC 35". The DR also placed reliance on the case of DDIT(IT) vs United Parcel Service Co., ITAs no. 2808 & 2809/Mum/2006 and 3611/Mum/2005. The DR finally referred to the case of DIT(IT) vs Balaji Shipping UK Ltd. in ITA no. 3024 & 3215 of 2009, wherein the Hon'ble Bombay High Court were seized with: "The question whether the income attributable to a voyage undertaken from India by availing the slot hire facilities is liable to be taxed in India must, in this case, be addressed qua these two situations referred to. Firstly, where the goods are transported by an enterprise by availing of the slot hire facility obtained by it on the ship of another from a port in India upto a hub port abroad a....
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....the shipping operations of the respondent, who admittedly had also chartered two ships. A view to the contrary would affect the business of such parties merely because the ships chartered by them do not ply on certain routes such as India. 31. It is necessary to preface a reference to the commentaries with a qualification. The reference to the commentaries is only to the extent that they consider as included within the expression "operation of ships" activities that are connected therewith. Whether a particular activity is to be included or not would depend upon the terms of the convention in question and based on the facts and circumstances of the case." 21. By quoting these case laws, the DR emphasized that the treatment meted to the assessee by the CIT(A) could only be possible if and only if there was a connection between the feeder vessel, which the assessee owned with that of the mother vessel. The DR also emphasized that when the wordings of the Treaty in specifically there, there cannot be a reason for adopting the meanings from any other source, as has been held in the case of Delta Articles (supra). 22. The DR, therefore, submitted, that ....
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....sor (shipowner) places a ship in the hands of the lessee (the demise charterer) who assumes possession and control. The consideration paid by the charterer is "hire" which is payable at specified intervals during the term of the charter. A bareboat charter is a demise charter whereby the owner names the Master and sometimes the crew, who are nevertheless paid by the charter and they are under the control of the charterer. Demise Charter A contract whereby the shipowner leases his vessel to the charterer for a period of time during which the whole use and management of the vessel passes to the charterer, which involves that the charterer is to pay all expenses for the operation and maintenance of the vessel. Officers and crew will become servants of the charterer. A demise charter whereby the charterer has the right to place his own Master and crew on board of the vessel is also called bareboat charter. Demise Charterparty A charterparty under which the charterer puts own stores, fuel etc. on board and hires the crew. This type of charterparty is also known as a bareboat charterparty. Slot charter A voyage charter whereby the shipowner agrees to place a certain num....
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....arterer". I accept that as an accurate definition. It can thus be seen that there is no distinction in principle between a slot charter and a voyage charter of a part of a ship. They are both in a sense charterers of space in a ship. A slot charter is simply an example of a voyage charter of part of a ship. It follows that the reasoning which leads to the conclusion that the voyage charterer of part of a ship is a charterer within s. 21(4) also leads to the conclusion that the slot charterer is such a charterer. In all the circumstances I have reached the clear conclusion that a slot charterer can properly be described as a Charterer, but can he be described as "the charterer" of the ship? Mr. Young submits that the answer is "no", because if the section is approached as it was by Sir David Cairns and Lord Justice Stephenson, by giving it a literal or natural interpretation, the charterer of part of a ship cannot fairly be described as "the charterer" of the ship'". I see the force of Mr. Young's submission but on balance I have reached the conclusion that it should not b....
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....IL 2003 TO MARCR.2004 It is mutually agreed between APL Co. Pte. Ltd. of 456 Alexandra Road #06-00 NOL Building, Singapore 119962 and Mitsui O.S.K. Lines Ltd. • This Memorandum of Understanding (MOU) is extended in direct continuation of the original with effect from April 2003 to March 2004 and beyond, and shall subject to Clause 3 of Part-I, remain in full force and effect • All other terms, conditions and exceptions of the present MOU dated 16th April 2002 are to remain the same. We also hereby certified that AP'L Co. Pte. Ltd, had operated or had exchanged slots with Mitsui O.S.K. Lines, Ltd., on the below list of ships within the stipulated period of the April 2003 to March 2004, MOL Maas APU Ningbo (ex MOL Loire) APL Chiwan (ex MOL Tyne) APL Dubai (ex MOL Rhine) , APL Qingtao / (ex MOL Mosel) 27. The AR further submitted that the arguments of the DR that the assessee through its feeder vessels were making the voyage in the Indian waters was also not logical because the assessee had entered the Joint Service Agreement with Bengal Tiger lines for using Madras Service ....
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....esent case from the existing treaty. 34. In the present set of circumstances, we find that the assessee is in the business of sea faring cargo business having base, and tax base at Singapore. The assessee operates its ships/vessels round the world. In so far as business of the assessee with India is concerned, it operates its vessels in Singapore Chennai Sector, which is known as Madras Service Route in maritime parlance. As per the submissions of the AR, the assessee entered into Joint Service Agreement with vessel operators for slot allocation in the feeder vessels for carrying the cargo to its hub either at Singapore or Sri Lanka, from where the cargo is loaded into the mother vessel for its destination port. 35. The objection raised by the department with regard to 39 vessels (25 vessels + 14 vessels) is that the assessee is neither the owner or the lessee or charterer of the vessel and being a slot charterer would not make the assessee eligible for claiming any advantage under Article 8 of the Treaty. 36. To prove its case, the department referred to a number of case laws, which according to their Treaty base, specific nomenclature were decided. The DR referred to the....
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....ive way or it does not unearth the intention of the contracting States in a candid manner". On going through this extract, nowhere do we find that the Treaty, which we are concerned which is loosely drafted or the intention of the contracting states is not coming out as it wants to be. In fact, if we once again look into the Treaty Articles 8.4(d), it is very clear, "any other activity directly connected with such transportation". We have take into consideration that the idea to include such clauses is the economy of the contracting state, i.e. Singapore, which is based primarily on tourism and cargo traffic. In fact, when we read such clauses (b) & (c) as well in unison with sub clause (d), as referred to by the AR, we find that the wording of the Article 8 in India Singapore DTAA Treaty is not only differently worded then the other DTAA Treaties with contracting states, but it is profit specific, that is earned by the enterprises, because, every word used is as per maritime parlance. 39. When we compare with the definitions of the maritime expressions, we find that the DR used Glossary of legal definitions & Wikipedia, as downloaded from the internet, but the AR has used Marit....