TaxTMI 
TaxTMI 
2023 (10) TMI 17
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....under section 143(3) 144C(13) of the Act, being barred by limitation, is bad in law and void-ab- initio. 3. The Ld AO and Ld DRP erred on facts and in law to bring to tax the amount of INR 926,69,08,621 as income from royalty alleging that: (a) there was no commercial rationale for incorporation of the appellant company in Singapore; (b) the appellant company was used as a conduit with the intent of availing treaty benefits under DTAA: (c) income of the appellant from shipping activity being exempt from tax in Singapore as per Singapore domestic tax laws, the appellant was not liable to tax in Singapore and hence could not be regarded as tax resident of Singapore entitled to benefit of DTAA; 3.2 That on the facts and in the circumstances of the case, the Ld AO and Ld DRP grossly erred in treating the receipts from international traffic pertaining to voyage charter as Royalty income. 3.3 That on the facts and circumstances of the case, the Ld DRP erred in not appreciating that the appellant being a non- resident had offered its income to tax on gross basis and therefore the question of substantiating chartering expenses incurred outside India does not arise. 3.4....
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....tion of learned CIT is 75% of assessee's receipts from shipping business is centered around India. Further, the assessee is a JV of Indian company and a Netherlands based company, which is a subsidiary of Japanese company. Therefore, there was no commercial rationale for incorporating Assessee Company in Singapore. Learned CIT has alleged that only for the purpose of availing the benefits under India-Singapore Treaty the assessee has been set up in Singapore as similar benefit could not have been availed by the assessee either under India-Netherlands DTAA or India-Japan DTAA. Having regard to the aforesaid allegation of learned CIT, we must observe that the assessee company was incorporated in Singapore in the year 2007 and continued its business since then. It is also a fact that the assessee holds substantial fixed assets in Singapore amounting to Rs. 1728 crores, out of which, an amount of Rs. 1324 crores pertains to vessels. It is also a fact that Singapore has grown into a large shipping hub in the world. Therefore, there is valid reason for setting up of the assessee company in Singapore for shipping business. 22. In any case of the matter, the Revenue certainly cannot con....
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....letely ignored the fact that unlike India-Mauritius Treaty, there is no such condition that a person liable to tax can only be a resident as per definition of resident under Article 4 of India-Singapore DTAA. In any case, whether a particular person is a resident of a particular country or not is a highly debatable issue requiring interpretation of treaty provisions. It is more so in a case where the assessee is holder of valid TRC as TRC is recognized to carry proof of residency. 24. As could be seen, holding the assessee not to be a tax resident of Singapore, learned CIT has observed that the assessee is liable to be taxed under the domestic law. Having held so, he has held that the receipts from shipping business in international traffic cannot be treated as business profit to be taxed under section 44B of the Act. He has held, since, the assessee leases vessels and earns lease rentals, such receipts are to be treated as royalty under section 9(1)(vi) read with explanation (2)(iva), as, it amounts to equipment royalty. While coming to such conclusion, learned CIT has observed that the assessee does not own any ships/vessels but has taken them on lease from NYK Japan through i....
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....n the nature lease rental, hence royalty, appears to be contrary to facts on record. At this stage, we must observe, the assessee had three types of shipping income in the year under consideration, viz., income from coastal shipping, income from inward freight and income from outward freight. Insofar as, income from coastal shipping is concerned, the assessee has offered it to tax under section 44B of the Act. Whereas, income from inward freight and outward freight was claimed as exempt under Article 8 of the treaty. Interestingly, learned CIT has held the inward freight income as royalty and has directed the Assessing Officer to tax such income amounting to Rs. 903,54,20,929/- by applying the rate of 10% on gross basis. However, in respect of income from coastal shipping and outward freight, learned CIT has accepted the claim of the assessee as his specific direction is only with regard to the income from inward freight. Further, though, in the show cause notice issued under section 263 of the Act learned CIT has observed assessee's receipts are in the nature of FTS, however, ultimately he has treated a part of the receipts as royalty. Thus, there are gross inconsistencies in the ....