TaxTMI 
TaxTMI 
2024 (6) TMI 873
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....7.2019 read with the order of the DRP-2, Bangalore dated 30.05.2019 for the above assessment year is contrary to law, facts, and in the circumstances of the case. 2. The DCIT/DRP erred in bringing to the tax the freight income of Rs. 64,17,08,105/- (gross freight income Rs. 855,61,08,066/-) on the application of section 44B of the Act in the computation of taxable total income without assigning proper reasons and justification. 3. The DCIT/DRP failed to appreciate that the assessment of freight income invoking section 44B of the Act was wrong, erroneous, unjustified, incorrect and not sustainable in law and ought to have appreciated that the provisions of section 44B of the Act had no application to the facts of the case, thereby vitiating the entire computation of taxable total income in the impugned order on various facets. 4. The DCIT/DRP failed to appreciate that the misconstruction of the treaty provisions in Article 8 read with Article 24 of India Singapore Double Taxation Avoidance Agreement would vitiate the decision to tax the freight income earned by the appellant foreign company from operating the ships from Indian Ports. 5. The DCIT/D....
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.... appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles of natural justice would be nullity in law. 12. The Appellant craves leave to file additional grounds/arguments at the time of hearing. 3. At the outset, the Ld.AR of the assessee submitted that he is not pressing Ground Nos.1 & 12, which are general in nature, so it stands dismissed. The Ld.AR also submitted that the assessee had raised an additional ground in respect of DIN, which is not being pressed, so that the additional ground also stands dismissed. 4. According to the Ld.AR, even though, the assessee has raised Ground Nos.2 to 10, there are basically on one issue i.e. whether the assessee's income from freight income of Rs. 64,17,08,105/- was taxable u/s. 44B of the Income Tax Act, 1961 (hereinafter 'the Act') in view of Treaty [Double Taxation Avoidance Agreement (DTAA)] between India and Singapore. Brief facts of the case as noted by the AO are that the assessee is a foreign company incorporated in Singapore which plies its ships globally including through Indian Ports and earns freight and other charges that arise ....
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.... resident state viz. Singapore and therefore, according to assessee, India is precluded from taxing the shipping income, even if it is sourced from India. In other words, an enterprise which is tax resident of Singapore is liable for taxation on its shipping income only in Singapore and not in India. Hence, according to assessee, India does not have any taxation right on shipping income of non-resident/Singaporean entity, which is exclusive domain of the resident state. However, AO did not agree, according to him, in a situation where both India & Singapore are laying claim of taxation rights on the shipping income of a company, then in that case, the country of residence, will have exclusive right of taxation. But, in a situation where the country of residence is not taxing the income in question, then according to AO, the question of double taxation does not arise in the first place and the other country i.e. the source country very much gets the right of taxation. According to AO, the word 'only' in Article 8 merely signifies it as a tie-breaker when multiple parties are taxing the same income and when only one party remain as the contender, then the term 'only' loses all signif....
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....y the aforesaid decision of the AO, the assessee is before us. 6. Assailing the action of the AO/the Ld.DRP, the Ld.AR made his oral submission which we will refer to (infra) and also submitted the written submissions which are as following: 01. The taxability of shipping income earned by the Appellant foreign companies admittedly incorporated in Singapore is the core issue for adjudication and the assessment of the shipping / freight income in terms of Section 44B of the Act at the rate of 7.5% of the unremitted difference is vehemently objected to in the present batch of appeals. 02. The taxability of detention charges from the operation of the ships by the Appellant foreign companies was initially treated as "Income from Other Sources" in the draft assessment order(s) and on objections filed before the DRP along with the main issue, the DRP directed the Assessing Officer to treat the detention charges as part of Freight income / shipping income, which directions was incorporated in the final assessment order(s) under challenge before this Hon'ble Bench. 03. The taxability of the shipping income was also challenged before the DRP by the appellant....
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....n the said case, the revenue maintained the same theory as could be seen from para 37 (Page No. 167 of the Case Laws Paper book) and rejecting the said stand, the Rajkot Bench concluded that the provisions in Article 8(1) should apply without any limitation. 11. There is another decision of Hyderabad Bench Refer Page No. 104 of the Case Laws Paper book), which is considered / presumed by the revenue as the decision rendered in their favour. However, in Page No. 126 of the Case Laws Paper book, the Hyderabad Bench decided the issue by invoking Article 24 because of the failure of the said assessee in not discharging its onus by not filing any document for establishing the reporting of the shipping income earned in India in the Singapore Tax return on accrual basis. 12. However, in the present case, the income earned from Indian source is also included as part of the Shipping Income earned by the Appellant on accrual basis by filing periodical tax returns and the returns covering the Assessment Years under consideration were also placed on record from the original Stage onwards. 13. In the discharge of initial burden by reporting the shipping income includi....
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....43 of the Case Laws Paper book) by confirming the independent nature of Article 8 of India - Singapore DTAA, thereby fortifying the application of consistent decision to be rendered in the Appellant's case by excluding the freight income earned from Indian Ports from the purview of Indian taxation. 19. Apart from the above decisions, there are 6 judgments of various High Courts on the said issue and the taxability of Income sourced from India under similar circumstances is considered in favour of those companies and the said decisions are placed in the Case Laws Paper book (Refer Page No. 1 to 63 of the Case Laws Paper book). 20. The decisions cited herein before have given due weightage to the opinion expressed by the Singapore Income Tax authorities and holding the opinion given in the present case as self serving statement in the final assessment order(s) is legally not correct. 21. The impact of certificate issued by the Indian authorities, namely DITR, which are placed on record in Volume 1 of the paper book filed, reading along with Section 172 of the Act, needs to be considered inasmuch as having conceded initially on the non taxability of the ....
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....Moreover, the accrual based taxation based on Section 10 r.w.s 13F of the said Act being established by the Appellant(s) herein, the other scenario referred to by the Assessing Officer (captured in the preceding paragraphs) has no relevance to the facts of the present case. 28. In such circumstances, the shipping income including the detention charges which are directed to be reckoned as part of the shipping income may be excluded from the purview of Section 44B of the Indian Tax Regime and thus render justice. 7. Per contra, the Ld.DR's written submissions are as under: The appellants in the above cases have sought to rest their case on the decision of this tribunal in the case of M/s.Bengal Tiger Lines Pte Ltd [in ITTPA No.11/CHNY/2020]. With due regards to the said decision of the Hon'ble members, the submission of the revenue is that the said decision does not espouses the correct position of law, for the elaborate reasons as stated below: With respect to each of the major observations/conclusions drawn by the tribunal, the submission of the revenue is as under 1. Enabling provision vs Exemption provision In para 13 & 14 of th....
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.... for the income under dispute is India and hence India should have the rightful claim to tax that income. But as per Article 8 of India Singapore DTAA, on the profits derived from operation of ships in International traffic the source country India has given away its rightful claim to tax that income. At this juncture it is to be noted that the provisions of Article 8 is universal in respect of India's treaties with all the countries in the world based on OECD model tax convention and also in respect of treaties of all the nations with other nations, but for few exceptions. It is a fact that OECD model based tax treaties accord pre-eminence to the state of residence and hence modelled along the lines of taxability of income in the resident state as a primary case and that in source state as a residuary case. The view expressed in the order of the Hon'ble Tribunal referred supra is that, the Article 8 is only an enabling provision and not an exemption provision. Now to quote the Article 8 as per India Singapore treaty, the same reads as follows: ARTICLE 8 SHIPPING AND AIR TRANSPORT "1. Profits derived by an enterprise of a Contractin....
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....om sources within the other Contracting State may be taxed only in the first-mentioned State. While the above provisions enables the resident state to solely tax said incomes on the contrary at the same time in the source state exempts such incomes from its rightful claim to taxation. Hence the conclusion is that Article 8 along with all the above provisions are both enabling provisions (in respect of resident state) as well exemption provisions (in respect of source state). A plain reading of all the above articles goes on to prove that even though it is "shall be taxable only in that state" it can still come with certain riders thereby providing taxation rights to the source state as well. A classic instance of such case is the clause 4 of Article 13 Capital Gains, while the said clause provides for taxation of Gains derived by resident of Singapore from the alienation of shares held in an Indian company shall be taxable only in Singapore, even though sources for said income are in India, also vide 1. A resident of a Contracting State shall not be entitled to the benefits of paragraph 4A or paragraph 4C of Article 13 of this Agreement if its affairs wer....
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.... ought to have appreciated that the AO has already issued a DIT relief certificate under section 172 of the Act for the subject AY wherein the Appellant was granted relief under Article 8 of the India Singapore treaty and as such the AO is precluded from subjecting to tax the same income under section 44B of the Act for the same AY. The Hon'ble ITAT in para 18 of the order held as under ......The AO has also ignored the arguments taken by the assessee in the light of DIT relief certificate issued by the Department for the subject assessment year, where the AO after considering the TRC and supporting documents issued DIT Relief Certificate dated 25.06.2014 and 14.08.2014 by holding that Article 8 of India Singapore DTAA is applicable to the assessee and income from operation in international traffic will not be taxable in India. No doubt, the certificate is issued for the purpose of non-deduction of tax at source as argued by the Ld.DR, but fact remains is that unless the AO has bring on record any change in fact or law which was prevalent at the time of issuing DIT Relief Certificate and at the time of framing assessment, no contrary view can be taken in viola....
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....he aforesaid Section clearly takes care of the situation where no return has been filed. On a conjoint reading of Sections 195 and 197 of the Act, we are of the view that if any opinion is expressed at the time of grant of certificate it is tentative or provisional or interim in nature and the same would not debar the assessing officer from initiating a proceeding under Section 147 of the Act on the ground that there has been a change of opinion...... Reliance in this regard is also placed on the decision of the Hon'ble Delhi HC in the case of Writ Petition(civil) No.9780/2009 Emirates Shipping Line, FZE vs Assistant Director of Income- .....The High Court pointed out the difference between an assessment under Section 172(4) of the Act which was classified and regarded as provisional, adhoc or for special purpose assessment and observed that this does not preclude the Assessing Officer from resorting to Section 448 of the Act in regular assessment proceedings, which could be resorted to and enforced by the Assessing Officer. It was observed that even when an ad-hoc assessment is made under Section 172(4), the assessee can exercise option under Section 172(7) o....
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....m outside Singapore in respect of- (a) gains or profits from any trade, business, profession or vocation, for whatever period of time such trade, business, profession or vocation may have been carried on or exercised; (b) gains or profits from any employment; (c) [Deleted by Act 29 of 65] (d) dividends, interest or discounts; (e) any pension, charge or annuity; (f) rents, royalties, premiums and any other profits arising from property, and (g) any gains or profits of an income nature not falling within any of the preceding paragraphs." So as per the Singapore Income Tax Act, there are three scenarios when income will be taxable in Singapore: i. When income accrues in Singapore ii. When income is derived in Singapore iii. When Income received in Singapore from Outside Singapore From the above it is evident that Singapore adopts a territorial basis of taxation. Under section 10(1), income tax is levied only on income "accruing in or derived from Singapore or received in Singapore from outside Singapore". In other words, the source of the income must be in Singapore before it ca....
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....e anterior to the point of time when the income becomes receivable and connote a character of the income which is more or less inchoate." Under this definition accepted by this Court, an income accrues or arises when the assessee acquires a right to receive the same........ * It is well to remember that the problem in this case is not so much when the commission accrued as where it accrued, though the question as to where and when may be interlinked. We think that normally, the commission-payable to the managing agents of a company accrues at the place where the services are performed by the managing agents. It was so held by this Court in K. R. M. T. T. Thiagaraja Chetty and Company v. Commissioner of Income-tax, Madras, No. 2(1) * In Re: The Aurangabad, Mills Ltd.(") where a reference was made to Commissioner of Taxation v. Kirk, (1900) Appeal Cases, page 588 and it was pointed out that the circumstance that the affairs of the company were directed from Bombay was not the determining test was the test was where the processes (1) [1921] I.L.R. 45 Bom. 1286, which yielded the income were carried out. From the above jurisprudence, the broad principles emer....
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....lity of Article 24 to the shipping income, the appellant had submitted a letter from the Singapore tax authorities which stated that the shipping Income of the Singapore company is taxed on accrual basis and not on receipt, the Hon'ble Court itself expressed its reservations about the applicability of such letters. The relevant portion from the judgment is reproduced below: "...16. The fact, that the income in question which arises out of shipping operations by virtue of Clause-1 of Article 8 of the DTAA would be taxable only in Singapore, is not in serious dispute. The moot question therefore, is whether operation of Article 8 is ousted by virtue of Clause-1 of Article 24. As noted, Article 24 of DTAA pertains to limitation of relief Under Clause-1 thereof where the agreement provides that the Income from sources in contracting states (in the present case, 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 reducti....
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....#39;s claim. But unlike in the above case, the veracity of the certificate in the case at hand is in doubt since it hasn't come through the competent authorities. It is also being questioned on merits since it is in contradiction to the Income Tax laws of Singapore as well as the DTAA. And on the issue of double non taxation the court had declined to comment on the issue as when the issue regarding non-taxability of the income in Singapore was raised before Hon'ble jurisdictional High Court. Their Lordships declined to deal with this aspect of the matter as it was being raised before Their Lordships for the first time but then Their Lordships specifically left this issue open to be decided in an appropriate case by observing as follows: 21. .......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 appellant 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.............. 22. In the present case, however, we are not inclined to conclude this issue since this was not even a ground on which....
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....ax by reference to the sum actually remitted to Singapore by virtue of Section 10 of the Singapore Income Tax Act. However, such Income was exempted by virtue of Section 13F of Singapore Income Tax Act, India has exclusive right to tax such income under domestic tax laws by virtue of Article 24 of the India Singapore DTAA. India Singapore DTAA is unique for the reason that the said DTAA has an Article 24 Limitation of Benefits which insists on subject to tax as against other DTAAs wherein the mandate is only on 'liable to tax and therefore there is a clear distinction between liable to tax and subject to tax. Since the income of the assessee is not subject to tax in Singapore, the AO has rightly taxed said income in India under domestic tax laws by virtue of Article 24 of India Singapore DTAA. So, if this income had actually been subjected to tax in Singapore, the amount that was actually remitted to Singapore would be exempt in India i.e, the source state and the rest would not. However, since none of the income in question has been subjected to tax in Singapore, the exemption cannot be extended to any portion of this income. Reference is invited to the United Nations....
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....in a specified period of time from the time the income arises in the first-mentioned State. Without prejudice to the above arguments, even if benefit of Article 8 is given to the appellant, it will be limited to the amount actually remitted as is set forth by Article 24 of the DTAA and the charging section of the Singapore Income Tax Act. 8. We have heard both the sides and perused the records. We note that the sole issue raised in the grounds of appeal is regarding taxability of shipping income of the non-resident, assessee company which is incorporated in Singapore. At this juncture, it would be gainful to recapitulate the fundamental principles of international taxation. There are two fundamental systems of taxation, one is based on residency of the taxpayer and the other is based on the source of the income. In the international arena, most of the countries follow the residency based taxation system. According to this system, a country can tax its residents on the global income of the taxpayer while the non-residents are taxed only on the income sourced inside the country. And India has such a system of Taxation, which is discernable in Section 5 of Income-tax Act, ....
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...., the amount of tax that may be imposed in the State of source is limited. Second, insofar as these provisions confer on the State of source or situs a full or limited right to tax, the State of residence must allow relief so as to avoid double taxation; this is the purpose of Articles 23 A and 23 B. The Convention leaves it to the Contracting States to choose between two methods of relief, i.e. the exemption method and the credit method." The taxation law in India follows the credit method for relieving the burden of double taxation. Under the Distributive Rules, the taxing rights are distributed between the contracting states. Exclusive rights to taxation in respect of certain incomes are given to one state and thus other state is precluded from taxing those incomes and therefore the double taxation is avoided. As a rule, such exclusive rights are given to state of residence. In respect of the other types of income, the right to tax is not exclusive one. The other state may also tax that income and depending upon taxing rights of the source state, income are classified into three categories and such classification are provided in para 20 to 23 of the OECD Commentary whic....
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....the holding in respect of which the dividends are paid is not effectively connected with a permanent establishment in the State of source, that State must limit its tax to 5 per cent of the gross amount of the dividends, where the beneficial owner is a company that holds directly at least 25 per cent of the capital of the company paying the dividends, and to 15 per cent of their gross amount in other cases (Article 10); - interest: subject to the same proviso as in the case of dividends, the State of source must limit its tax to 10 per cent of the gross amount of the interest, except for any interest in excess of a normal amount (Article 11). 23. Other items of income or capital may not be taxed in the State of source or situs; as a rule they are taxable only in the State of residence of the taxpayer. This applies, for example, to royalties (Article 12), gains from the alienation of shares or securities (paragraph 5 of Article B), private sector pensions (Article 18), payments received by a student for the purposes of his education or training (Article 20), and capital represented by shares or securities (paragraph 4 of Article 22). Profits from the operation of s....
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.... in the State of residence i.e. Singapore. Article 24(1) of the Treaty is not applicable in cases where assessee was able to demonstrate that its income is taxable in Singapore on accrual basis [like in this case, assessee has adduced material in the form of Inland Revenue Authority of Singapore clarifiying that its resident's income are taxable on the basis of accrual]. And it is noted that on the basis of such a clarification of Singapore Inland Revenue Authority which was not rebutted by the Indian tax Authorities as not genuine, or in the absence of any other material to take a view that global income of Singapore resident is assessable to taxation on remittance basis, we note that the Hon'ble Gujarat High Court in similar case of M/s.M.T. Maersk Mikage by order dated 24.08.2016 (Special Civil Application No.9150/2014) held that income of Singapore resident was charged to tax on accrual basis (i.e. full amount would be assessable to tax on accrual and not on remittance) (refer Para 18 of the order). In the light of the Hon'ble High Court (supra) view and other case laws, on the facts and circumstances of the presenr appellanta/assessees, we concur with the view of the coordinat....
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....nt should be merely given effect to and as such the action of the AO to claim taxing right over the said income which is not provided in the treaty is ultra- vires the power of the AO and will amount to dishonoring the bilateral agreement between two sovereign nations. We further noted that the AO has taken support from 10(1) of Singapore Income Tax Act to argue that any income of a Singaporean resident that is accrued or received in Singapore is chargeable to tax in Singapore at the specified income tax rates. But, fact remains is that although profits derived by an international shipping enterprise is exempted from taxation as per Section 13F of Singapore Income Tax Act, but such income is always liable to tax in Singapore. The exemption provided u/s. 13F of the Singapore Income Tax Act is only on a case to case basis for a limited period of time and it is subject to certain conditions. Therefore, we are of the considered view that the liability to taxation is not dependent on whether taxes are actually paid in the said jurisdiction. This fact is strengthened by the decision of the Hon'ble Supreme Court in the case of Union of India vs. Azadi Bachao Andolan, 132 Taxman 37 whe....
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....;exclusive right of taxation' to one country and thereby double taxation can be avoided. In the present case, Article 8 provides exclusive right of taxation of shipping income to Singapore in order to avoid double taxation method where India has given up its right of taxation of international shipping income of a Singaporean resident and as such Singapore has reserved its exclusive right to tax the same. Once the country of resident is having exclusive rights to tax a particular income by way of separate Article, then limiting or denying such benefit by interpreting the other Articles which are provided for limiting the benefit in case such income is exempt or taxed at reduced rate of tax in other Contracting State is contrary to the purpose and object of DTAA. 18. In this case, the Assessing Officer has denied the benefit only on the simple ground that the income of the assessee received in India is exempt by virtue of separate provisions of Singapore Income Tax Act and on the misconception of law to come to the conclusion that once a country of residence has exempts particular income from tax, the other Contracting State (source country) can levy fax on such income w....
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....order of the Assessing Officer and the directions of the DRP and also the judgements relied on by the AR. In the present case it is not in dispute that the assessee/appellant is a foreign company and has its effective management in Cyprus. The AR has placed on record a copy of DTAA between India and Cyprus. A perusal of Article 7 of the DTAA shows that Article 7 relates to business profits of an enterprise having permanent establishment in India. Article 7 specifically states that such profits shall be taxable only in that State unless the enterprise carries on business in other contracting State through a permanent establishment situated therein. The Article 8 of DTAA deals with shipping and air-transport business. Article 8 provides that proti derived by enterprise registered and having headquarters (Le effective Pragement) in a Contracting State from the operation by that enterprise of ships or aircraft in international traffic shall be taxable only in that State Le. profits from aircraft inn er aircrafts in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated, which in the present cave is C....
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....ll as the Ld.DRP were erred in coming to the conclusion that income earned by the assessee from shipping operations in India is taxable in India by virtue of Article 24 of India Singapore DTAA. Hence, we direct the Assessing Officer to delete the additions made towards shipping income of assessee earned in India. 21. In the result, the appeal of the assessee is allowed.....' 10. Further, we find that similar issue came up before the ITAT, Rajkot Bench, in the case of Maersk Tankers Singapore Pte. Ltd. v. ACIT in ITA Nos.17 & 18/Chny/2022 vide order dated 30.11.2022, wherein Rajkot Tribunal took similar view as taken by the Tribunal in the case of M/s.Bengal Tiger Lines (supra) especially after taking note of the Revenue contention at Para No.37 of that order, as under: ".....37. To sum-up, it is an admitted fact that, no tax has been paid by the assessee in Singapore (i.e. its Resident state) on the freight income earned in India from the voyages performed in India (i.e. the Source state) and now attempt is being made to justify non-payment of tax in India by invoking provisions of article 8 of DTAA. It is for this very situation that provisions in the form of ....
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....xt of interest income of the assessee and there was nothing on record to suggest that such an income was to be taxed in Singapore on accrual basis, rather than on receipt basis. The Assessing Officer thus derives no advantage from this decision. Having said that we may add that we are in complete agreement with the coordinate bench that, in order to come out of the mischief of Article 24, the onus is on the assessee is to show that the amount is remitted to, or received in Singapore, but then such an onus is confined to the cases in which income in question is taxable in Singapore on limited receipt basis rather than on comprehensive accrual basis. However, in a case in which it can be demonstrated, as has been demonstrated in the case before us, that the related income is taxable in Singapore on accrual basis and not on remittance basis, such an onus does not get triggered." In the present case, as mentioned above, the assessee has not discharged his onus as no document was filled in this regard. (Emphasized by us) 12. Therefore, according to the Ld.AR, the decision of the Hyderabad Tribunal (supra) was distinguishable, since that assessee, M/s.PACC Container Line Pvt.....
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....extent of amount remitted by the assessee. This decision does not consider any of the decision as cited before us including the cited decision of Hon'ble Gujarat High Court in M.T. Maersk Mikage (supra). As against this, we have decision of coordinate bench in assessee's own case on similar facts. In fact, the impugned additions stem from the view taken by revenue in AY 2015-16 and this view has already been negated by the coordinate bench. Therefore, this case law renders no assistance to the case of the revenue. 29. Finally, considering the facts and circumstances of the case, we would hold that reassessment proceedings, for all the years, fail on legal grounds as well as on merits. It is undisputed position that the case of all the years has been reopened on identical reasons by Ld. AO. Therefore, the assessee succeeds in all the appeals. Consequently, the connected stay applications filed by the assessee has been rendered infructuous. 14. Further, the Ld.AR brought to our notice that aforesaid decision of this Tribunal was challenged by the Department before the Hon'ble Madras High Court; and even though, the Department challenged the decision of the Tribuna....
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....Court upheld the action of the Tribunal holding that in the light of applicability of Article 8 of DTAA between India and UAE, and assessee being a resident of UAE, there was no scope of taxing the income of the ships in any port in India. And that the agreement between two countries has ousted the jurisdiction of taxing officers in India to tax the profits derived by the enterprise once it is found that the ship belongs to a resident of the other contracting state (UAE). The Ld.AR also draw our attention to the decision of the Hon'ble Gujarat High Court in the case of M.T. Maersk Mikage & 4 v. DCIT (International Taxation) in Special Civil Application No.9150 of 2014 dated 24.08.2016 (supra), wherein, the Hon'ble Gujarat High Court has taken note of all contentions raised by the Tribunal and also took note, inter alia, Article 8 and Article 24 and thereafter, taking note of all case laws held 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 po....
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....ully 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 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 2....
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....h 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." 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 tax....