TaxTMI 
TaxTMI 
2017 (8) TMI 406
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....nce of the agent to file the returns within thirty days. Assessee is represented by M/s. Samsara Shipping (P) Ltd., Mumbai, who filed separate returns for each of the voyages u/s. 172(3) of the Income Tax Act [Act], seeking benefit of Article 8 of the Double Taxation Treaty between India and Singapore. The Assessing Officer (AO) invoked the provisions of Article 24(1) i.e., limitation of benefits clause of the DTAA, on the reason that assessee has not substantiated the remittance of money to Singapore in all the voyages. Accordingly, he demanded tax on the amount received for each voyage u/s. 172(4) of the Act. Aggrieved by the separate orders of the AO, assessee preferred appeals before the CIT(A) and furnished the additional evidence in the form of certificate from the Inland Revenue Authority of Singapore that the amount has been considered for tax on accrual basis. Assessee also furnished various details of bank accounts and remittances and also certificate from the auditor of assessee-company that the amounts/invoices pertaining to the voyages have been taken into account. The AO however, in the remand proceedings did not accept stating that assessee has not furnished voyage w....
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....the income as is remitted to or received in that other Contracting State. 2. However, this limitation does not apply to income derived by the Government of a Contracting State or any person approved by the competent authority of that State for the purpose of this paragraph. The term "Government" includes its agencies and statutory bodies." 5.1. The aforesaid Article provides a limitation of relief relating to remittance basis of taxation which is in few countries like Singapore and United Kingdom. However, whether this limitation clause will apply to the DTAA, so as to oust the provisions of Article 8 has been considered by the Hon'ble Gujarat High Court analysing India - Singapore DTAA and that too, in the case of a shipping company M.T. Maersk Mikage & Ors. Vs. DIT(IT) reported in 291 CTR 184 (Guj). The relevant observation of the Hon'ble High Court is reproduced as under: "15. This brings us to the core issue strenuously debated by both sides viz. that of applicability of Article 8 vis-a-vis Article 24 of DTAA. We may quickly refresh the facts. ST Shipping is a company based in Singapore. Through the shipping business carried out at Indian ports, ST ....
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....uided 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 considering 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 this certificate were not doubted. If that be so, what emerges from the record is that the income in question would be assessable to tax at Singapore on the basis of accrual and not remittance. This would knock out the very basis of the Assessing Officer and Commissioner for invoking clause-1 of Article 24 of DTAA. Both the authorities considered the question of remittance of income as the sole requirement for invoking Article 24.1 of DTAA an interpretation which according to us does not flow from the language used. As noted the essence of Article 24.1 is....
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.... 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." 20. 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 the ground that such income is exempt from payment of tax, the Revenue desired to impose tax in India. In this context, the petitioner has relied on the decision of Delhi High Court in case of Emirates Shipping Line, FZE (supra), in which it was held that the assessee, a UAE based shipping company, whose income from such business was exempt from tax in such country, would still not be liable to pay tax in India by virtue of Article 8 of the DTAA between the said two countries. It was held that a person does not have to actually pay taxes i....
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....ein vide para 12, the issue has been analysed as under: "12. There is another angle to interpret Article 24, which is that, the said Article purports to exclude tax exemption in India if the income is not remitted or received in Singapore for taxation purpose on the premise that this is a foreign income to Singapore. First of all, it has to be seen whether shipping income is exempt from tax in India and; secondly, whether the shipping income is foreign income to Singapore which would then be taxable upon receipt or remittance to Singapore. The shipping income is dealt with under Article 8, which states that "profits derived by an enterprise of a contracting state from the operation of ships ......................................in international traffic shall be taxable only in that state, i.e., resident state." The word "only" debars the other contracting state to tax the shipping income, that is, India is precluded from taxing the shipping income even if it is sourced from India. An enterprise which is tax-resident of Singapore is liable for taxation on its shipping income only in Singapore and not in India. Whence India does not have any taxation right on a shipping inco....