TaxTMI 
TaxTMI 
2017 (4) TMI 102
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..... 2. Brief facts of the case are that the assessee is tax resident of Singapore and registered as Foreign Institutional Investor (FII) in Debt segment, with Security and Exchange Board of India (SEBI). The assessee filed return of income on 30.09.2009 declaring total income of Rs. 33,99,75,350/-. In the return the assessee declared a Capital Gain of Rs. 86,62,63,158/- on sale of debt instruments and claimed exemption under Article 13(4) of India-Singapore Double Taxation Avoidance Agreement (DTAA or Treaty). During the assessment the assessing officer asked the assessee to explain as to how the provision of Article 24 stand complied in order to claim Capital Gain as exempt in India. The assessee filed its submission before the AO contending therein that assessee is liable to tax in Singapore of its worldwide income. The Singapore's Revenue authority has confirmed the taxation on assessee in Singapore. The Article 13(4) provides for taxation of Capital Gain in Singapore. The intention of entering into DTAA to avoid double taxation. If the assessee is offering is worldwide income for taxation in Singapore then remittance of such income to Singapore has no relevance for purpose of ....
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.... 13(4) of Treaty. The said provision will only apply to the income which is either 'exempt' from tax in India or 'tax as reduced' rate in India. The income earned by assessee being FII is liable to tax in Singapore on its worldwide income. The Singapore tax authority has given a certificate certifying that assessee is buying and selling Indian Debt Securities from Foreign Exchange Transaction in India. Under Singapore tax law the income accrued or derived from Singapore on such income would be brought to tax in Singapore without reference to the amount remitted or received in Singapore. In support of his submission, the ld. Counsel for the assessee relied upon the decisions of Mumbai Tribunal in case of SET Satellite (Singapore) Pte Ltd. vs. ADIT in M.A. No. 520/M/2010 dated 11.02.2010 and further a latest decision in APL Company Pte Ltd. vs. ADIT (ITA No. 4435/Mum/13) dated 16.02.2017. On the other hand, ld. DR for the Revenue supported the orders of authorities below. 5. We have considered the rival contention of the parties and gone through the order of authorities below. For appreciation of the fact, we may first refer Article 13 & 24 of the India-Singapore Tax Treaty which ....
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.... issued by Singapore Tax Authority certifying that selling of India debt securities from foreign exchange transaction in India, the income accrued or derived by assessee is taxable in Singapore. The contents of the certificate issued by Singapore Tax Authorities are reproduced below; "Dear Sir/Madam" CITICORP INVESTMENT BANK (SINGAPORE) LIMITED ("CIBSL") TAX REFERENCE NO. 197200204M We refer to your letter dated 4 April 2012 As requested, we confirm that income derived by CIBSL from the buying and selling of India debt securities and from foreign exchange transactions in India would be considered under Singapore tax law as accruing in or derived from Singapore ("i.e. Singapore-sourced income"). Such income would be brought to tax in Singapore without reference to the amounts remitted or received in Singapore. The tax treatment would be based on the FRS 39 accounting treatment of the relevant financial instruments on revenue account without further adjustments. Yours faithfully TAY AND SIM SENIOR TAX SPECIALIST CORPORATE TAX DIVISION For COMPTROLLER OF INCOME TAX" The AO while framing draft assessment order d....
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....t an error apparent on record 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 or reduction of tax to be allowed under this Agreement in the first-mentioned Contracting State shall apply to so much of the income as is remitted to or received in that other Contracting State" 21.1 Article 24(1) contains a form of limitation of benefit provision used by countries such as Singapore which impose tax on certain taxpayers on a "remittance basis". These limitations of benefit provisions operate in conju....
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.... Further, the Co-ordinate Bench of Mumbai Tribunal in APL Company Pte Ltd. vs. ADIT (supra), again considered the scope of limitation prescribed under Article 24 of Treaty. Wherein, almost similar certificate related with freight income as provided under Article 8 of Treaty, issued by Singapore Revenue Authority (as given in the present case related with buying and selling of debt security) was also relied by assessee (in that case) and the bench held as under: "If we analyse the relevant phrases used in Article 24, it is quite apparent that two conditions have been envisaged that needs to be fulfilled; firstly, income earned from the source state (here in this case, India) is exempt from tax or is taxed at a reduced rate in the source state (India) as per the DTAA; and secondly, under the laws in force of the resident state (Singapore), such income is subject to tax by reference to the amount thereof which is remitted to or received in the resident state and not by reference to the full amount thereof. If both the conditions are satisfied, then only the exemption is allowed or the reduced rate of tax is levied on the amount so remitted. The key phrases which need to be ....
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....inesses and it receives freight payments for its services. During calendar years 2007 and 2008, the company derived freight income from third parties including freight income from Indian operations, that is, income from the carriage of goods/cargo to and from Indian ports. The company has reported the freight income in its Singapore tax returns for the YAs 2008 and 2009. 3. You wish to seek our clarification to the effect that Article 24(1) of the India-Singapore double taxation agreement (DTA) is not applicable to the freight income derived from Indian operations. 4. The freight income derived by the company from Indian operations was accrued in or derived from a business carried on in Singapore. As such, it was regarded as Singapore sourced income and assessed to tax in Singapore on accrual basis (i.e. not remittance basis) in the YAs 2008 and 2009. 5. In this regard, the physical flow of funds is not relevant and Article 24(1), which seeks to limit relief under the DTA where the relevant income is subject to tax in Singapore on a remittance basis, would not be applicable to the freight income from Indian operations. 6. We hope that this is suf....
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...., India) shall be exempt from tax or tax at a reduced rate and under the laws in force in other contracting states (i.e. Singapore), such income is subject to tax by reference to the amount thereof which is remitted or received in that State and not by reference to the full amount thereof then the exemption or reduction of tax under the agreement would be limited to so much of the income as is remitted to or received in that contracting State. In plain terms therefore, if the income in question was taxable in Singapore on the basis of receipt or remission and not by reference to the full amount of income accruing, clause-1 of Article 24would apply and dependent on the facts of the case, exemption as per Article 8 either in whole or in part would be excluded. 17. It is, in this context, that the certificate dated 09.01.2013 issued by the Inland Revenue Authority of Singapore assumes significance. In the said certificate, as noted, it was certified that the income in question derived by ST Shipping would be considered as income accruing in or derived from the business carried on in Singapore and such income therefore, would be assessable in Singapore on accrual basis. It was....
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....ot be accepted. The Revenue does not question genuineness of the certificate. It cannot dispute the contention on the ground that the same are opposed to the statutory provision. 19. By way of a reference, we may notice that the Tribunal also in case of this very assessee in case of Alabra Shipping Pte Ltd. v. Income-tax Officer - International Taxation, Gandhidham, reported in 62 Taxmann.com 185 has taken a somewhat similar view by observing as under: "6. As a plain reading of Article 24(1) would show, this LOB clauses comes into play when (i) income sourced in a contracting state is exempt from tax in that source state or is subject to tax at a reduced rate in that source state, (ii) the said income (i.e. income sourced in the contracting state) is subject to tax by reference to the amount remitted to, or received in, the other contracting state, rather than with reference to full amount of such income; and (iii) in such a situation, the treaty protection will be restricted to the amount which is taxed in that other contracting state. In simple words, the benefit of treaty protection is restricted to the amount of income which is eventually subject matter of tax....
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....he enterprise once it is found that the ship belongs to a resident of the other contracting country and such position has also been clarified by the Circulars issued by the Board as indicated above." 22. In the present case, however, we are not inclined to conclude this issue since this was not even a ground on which either the Assessing Officer or the Commissioner has refused to grant the benefit to the petitioner. It is not a ground sought to be raised for the first time before us by the Revenue, for which, full factual evidence, nor legal foundation is laid. We leave such an issue open to be decided in the appropriate case." The aforesaid judgment of Hon'ble Gujarat High Court clearly clinches the issue in favour of the assessee, wherein the Hon'ble High Court has categorically held that the shipping income is not taxable in Singapore on the basis of remittance, but on accrual basis and, therefore, para 1 of Article 24 would not be applicable. Here, in this case also, the Hon'ble Court has heavily relied upon the confirmation letter/Certificate issued by IRAS which confirmed the taxability of global shipping income in Singapore on accrual basis. Their Lords....