TaxTMI 
TaxTMI 
2017 (5) TMI 114
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Article 24 (limitation of relief) of the Tax Treaty without appreciating that Article 24 of the Tax Treaty has no applicability in the present case. 1.2. The Hon'ble DRP and learned DCIT erred in not appreciating that Article 24 of the Tax Treaty does not apply to the Appellant as the Appellant's freight income is taxable in Singapore on accrual basis and not on remittance or receipt basis (i.e. entire freight income is taxable in Singapore irrespective of remittance of freight to Singapore). The Appellant prays that the benefit of Article 8 of Tax Treaty should be accordingly allowed in the present case. 2. Ground No. 2 2.1. On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in not accepting the letter dated 7 September 2016 issued by the Inland Revenue Authority of Singapore wherein it has been confirmed that freight income of the Appellant is assessed to tax in Singapore on accrual basis (i.e. not on remittance basis) and therefore Article 24 would not be applicable. 2.2. On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in not accepting the global audited financial statements, comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....substitute all or any of the Grounds of Appeal or add a new ground or Grounds of Appeal and to submit such statements, documents and papers as may be considered necessary at or before the appeals hearing. 3. Apropos ground number 1 and 2 In this case assessee is a Pvt. Ltd. Company and a tax resident of Singapore. The assessee is engaged in the business of operation of ship of international traffic. The assessing officer has observed that in the return of income, the assessee has claimed that the gross freight earnings including detention collection of Rs. 15,82,56,80,977/- is not taxable as per Article 8 of the Agreement for Avoidance of Double Taxation between India and Singapore as the profits derived from the operation of ships international traffic by an enterprises of Singapore are taxable only in Singapore. During the course of the assessment proceedings vide order sheet noting dated 18.12.2016, the assessee was asked to explain whether they have complied with the provisions of Limitation of Relief as per Article 24 of the Double Taxation Avoidance Agreement between India and Singapore. The provisions of this Article are as under: 1. Where this Agreement provides (w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the submissions of the assessee are considered. That however, the facts of the case and the arguments presented by the assessee are not in variance to the ones in AY 2008-09. That nn the case of the assessee for this assessment year, the CIT (A) had examined the issue in detail and in its order dt. 28.03.2013 has held that the assessee is not eligible for exemption as per Article 8 of the DTAA in view of Article 24 of the said DTAA. 5. Thereafter the assessing officer reproduced the aforesaid portion of the Ld. CIT (A) order and held as under: "In view of the above, it is held that benefits of exemption of profits from operation of ships under Article 8 of the DTAA between Indian and Singapore is not available to the assessee due to the non-fulfilment of requirements of Article 24 as regards limitation of benefits. As it has been held that assessee has not fulfilled the conditions of Article 24, its entire freight income becomes taxable in India, and its income is covered by section 44B and hence, the total income of the assessee is determined at 7.5% of the total freight earned from India of Rs. 15,82,28,60,475/-, which amounts to Rs. 118,67,,14,536/-. This is the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his case are same as assessment year 2008-09 and that the assessing officer has also mentioned and followed the Ld. CIT (A) order for that year. That the DRP has also mentioned and followed the same order of Ld. CIT (A). 10. Ld. Counsel of the assessee submitted that in identical case for the proceeding assessment year in assessee's own case the tribunal had adjudicated the issue as under: "We have heard the rival submissions, perused the relevant findings given in the impugned order as well as the material referred to before us. Before we dwell upon the issue as to whether the limitation clause as appearing in Article 24 of India-Singapore DTAA is applicable to the facts of present case or not, it would be relevant to peruse the relevant Article itself, which for the sake of ready reference is reproduced hereunder :- Article 24: 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 amo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mount 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 borne in mind while understanding Article 24 is "under the laws in force in other contracting state"(Singapore). Here, in this case, the income of assessee-company from shipping operations is not taxable on remittance basis under the laws of Singapore, albeit is liable to be taxed in-principle on accrual basis by virtue of the fact that this income under the income tax laws of Singapore is regarded as "accruing in or derived from Singapore". The shipping income from overseas is not treated as foreign income because it is accrued in and derived from Singapore. From the plain reading of Sec.10(1) of Singapore Income Tax Act it can be inferred that Firstly, the tax is on income accruing in or derived from Singapore and it is completely irrelevant whether the income is received in Singapore or not and; secondly, where the income is accrued or is derived from outside Singapore, the liability to tax arises on such foreign income only if the foreign income is received in Singapore. It has already been broug....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 sufficient to address your query. If you require any further clarifications, please do not hesitate to contact us. Yours faithfully LAU KIAT PENG (MS) SENIOR TAX OFFICER CORPORATE TAX DIVISION for COMPTROLLER OF INCOME TAX" [Emphasis added is ours] From the aforesaid Certificate/Confirmation given by IRAS, it is ostensibly clear that the freight income derived by the assessee-company from the Indian operations was accrued in or derived from business carried on in Singapore. As such, it is regarded as Singapore sourced income and assessed to tax in Singapore on accrual basis and not on remittance basis. In light of this Certificate, there cannot remain any iota of doubt that the freight income derived by assessee-company from Indian operations in terms of Singapore Income Tax Act is to be reckoned as accrued in or derived from business carried in Singapore and not some kind of foreign income which is to be taxed on remittance basis. The authenticity of the aforesaid Certificate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uing in or derived from the business carried on in Singapore and such income therefore, would be assessable in Singapore on accrual basis. It was elaborated that the full amount of income would be assessable to tax in Singapore not by reference to the amount remitted to or received in Singapore. In fact, the certifying authority went on to opine that in view of such facts, Article 24.1of the DTAA would not be applicable and consequently, Article 8 would apply. 18.To this later opinion of the Revenue authority of Singapore, we may not be fully guided since it falls within the realm of interpretation of the relevant clauses of DTAA. However, in absence of any rebuttal material produced by the Revenue, we would certainly be guided by the factual declaration made by the said authority in the said certificate and this declaration is that the income would be charged at Singapore consider in it as an income accruing or derived from business carried on in Singapore. In other words, the full income would be assessable to tax on the basis of accrual and not on the basis of remittance. This certificate was before the Commissioner while he passed the impugned order. The contents of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing state. In simple words, the benefit of treaty protection is restricted to the amount of income which is eventually subject matter of taxation in the source country. This is all the more relevant for the reason that in a situation in which territorial method of taxation is followed by a tax jurisdiction and the taxability for income from activities carried out outside the home jurisdiction is restricted to the income repatriated to such tax jurisdiction, as in the case of Singapore, the treaty protection must remain confined to the amount which is actually subjected to tax. Any other approach could result in a situation in which an income, which is not subject matter of taxation in the residence jurisdiction, will anyway be available for treaty protection in the source country. It is in this background that the scope of LOB provision in Article 24 needs to be appreciated." Under the circumstances, in our opinion, Assessing Officer and the Commissioner committed serious error in passing the impugned orders. Before closing, we may briefly touch on one more aspect sought to be raised by the Revenue viz. of the actual tax being paid by the assessee on such income at Singapore. On....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on letter/Certificate issued by IRAS which confirmed the taxability of global shipping income in Singapore on accrual basis. Their Lordships have also referred to the Rajkot Bench of the Tribunal in the case of Alabra Shipping Pte Ltd., (supra), which also lays down the same proposition. Thus, the conclusion and finding of Ld. CIT (A) stands negated by these decisions and same is rejected. Further in light of the Hon‟ble High Court judgment, the reliance on the decision in DIT(IT) vs. Thoresen Chartering Singapore (Pte.) Ltd.(supra) as heavily relied upon by ld. CIT (A) and Ld. CIT DR, no longer holds good." 11. Referring to the above Ld. Counsel of the assessee submitted that the basis of addition in this case is the CIT (A) order against the assessee for assessment year 2008-09 which has been reversed by the tribunal as above. Hence Ld. Counsel pleaded that the same should be followed and the issue should be decided in favour of the assessee. 12. Per contra Ld. DR did not dispute the proposition that facts in the present case are identical to the one dealt with by this tribunal assessment year 2008-09 and that the same issue was decided in favour of the assessee by th....