2011 (2) TMI 1513

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....he application of Article 24 of the Treaty (Limitation of Relief) article, GCC was to be denied the benefit of the Treaty? b) Whether payment to GCC was in the nature of Royalty? c) Whether the CIT(A) erred in holding that the Royalty did not arise in India having regard to the provisions of Article 12(7) of the Treaty As regards the first issue, the only contention raised by the DR was that since the payments to GCC were made to a bank account in Jersey and not in Singapore Article 24 of the Treaty was applicable and GCC was not eligible to tax Treaty benefit. The Applicant pointed out that GCC had confirmed in a letter to the applicant that it had offered the payment to tax in Singapore (pg 69 of paperbook) and ....

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.... has crept into the order of the Tribunal dated 25th June, 2010. We, therefore, rectify the same by deleting para 21 of the said order and substituting the same with the following: 21. "Article 24 of the India-Singapore Treaty reads as follows: Limitation of Relief 1. Where this Agreement provides (with or without other conditions) that income from sources in a Contracting state shall be exempt from tax, or taxed at a reduced rate in that Contracting State and under the laws in force in the other Contracting State the said income is subject to tax by reference to the amount thereof which is remitted to or received in the other Contracting State and not by reference to the full amount therefore, then the exemption ....

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.... the OECD Commentary to Article 11 states: "This paragraph lays down the principle that the state of source of the royalties is the state of which the payer of royalties is resident". In this case, the state of source of royalties is Singapore as the payer is a resident of Singapore. The royalties are not therefore "income from sources in India which under the laws in force in Singapore are subject to tax by reference to the amount therefore which is remitted to ..... Singapore". 21.4 Furthermore, as the Learned Counsel pointed out the Treaty specifically mentions cases where an income is exempt from tax in a Contracting state. There is a distinction between income 'exempt from tax' and income which is 'not taxable'....