TaxTMI 
TaxTMI 
2025 (8) TMI 440
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....gapore DTAA. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The Assessing Officer (AO) was of the view that the assessee's income is not subject to tax in Singapore by virtue of section 13F of Singapore Income Tax Act and therefore as per Article-24 of India-Singapore DTAA, the benefit under Article 8 should be restricted to the extent of amounts actually remitted to Singapore. In this regard the AO issued a show cause notice to the assessee. The assessee submitted that the provisions of Article-24 cannot be invoked in assessee's case for the reason that the income earned by the assessee is neither exempt nor taxed at lower rate as stated in Article-24 of India-Singapore DTAA. The assessee further submitted that as per the DTAA India has given up the right of taxation and therefore no income of the assessee with respect to profits derived from the operation of Ships can be brought to tax in India. The assessee relied on various judicial pronouncements in this regard. The AO however did not accept the submissions of the assessee. The AO held that the purpose of DTAA is to prevent a situation where the same income does not get taxed....
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....Relief under Article-24 of India-Singapore DTAA is applicable to those cases where the assessee has availed the benefit under Article-8 has been considered by various judicial pronouncements as listed below: (i) M.E. Maersk Mikege vs. DIT (IT) [2016] 72 taxmann.com 359 (Guj.) (ii) APL CO. Pte. Ltd. vs. ADIT (IT) [2017] taxmann.com 240 (Mum. Trib.) as confirmed by the Hon'ble Bombay High Court [2023] 156 taxmann.com 530 (Bom.) (iii) Bengal Tiger Line Pte. Ltd. vs. DCIT (IT) [2020] 121 taxmann.com 165 (Chennai Trib.) (iv) Pacific International Lines Pvt. Ltd. vs. DCIT [IT(TP) A No. 59/Chny/2019 dated 29.05.2024] (v) CIT vs. Lakshmi Textile Exporters Ltd. [2001] 115 taxman 572 (Madras) 5. During the course of hearing the ld. AR took the Bench through the relevant findings in the above judicial precedents to submit that the coordinate benches and the Hon'ble High Courts have been consistently holding that Article-24 cannot be invoked to cases where the income is not taxable in India by virtue of Article-8 of India-Singapore DTAA. The ld AR further submitted that the AO is not correct in invoking Article 24 for the reason that the ....
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....2013 "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 income of non-resident entity, which is exclusive domain of the resident state, there is no question of any kind of exemption or reduced rate of taxation in the source state. It only envisages territorial and jurisdictional rights for taxing the income and India has no jurisdiction for any taxing right which are governed by Article 8. There is no stipulation about exemption under Article 8 of the shipping income which as pointed out by Id. Senior Counsel has been specifically provided in some of the Articles like Article 20, 21 & 22. Hence, it cannot be reckoned that shipping income earned from India is to be treated as exempt from tax or taxed at reduced rate, which is a condition precedent for applicability of Article 24, albeit India at the threshold does not have the jurisdiction to tax the shipping income of the non-residen....
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....rticle does is grant exclusive rights of taxation to the Resident country. Now if we see Article 8, it states that "Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State." So we see that even though Article 8 does not expressly use the word "exempt", in effect it does the same thing which, Article 20, 21, and 22 does and that is to grant exclusive rights of taxation to the Resident country and exempt this income from taxation in the Source State. 5.9. Another example of this lies in the Income Tax Act itself. One knows that agricultural income is "Exempt from taxation as per the Income Tax Act. But when one reads the section allowing this exemption, one sees that the word "exempt" is not actually mentioned. The relevant portion from the Act is reproduced below: 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- (1) agricultural income....." The word "exempt" in not used while exempting agricultural income from taxation. So if the Hon&....
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....Singapore DTAA and offered Nil income in India. The AO invoked Article 24 of India-Singapore DTAA to state that only the actual amount received in Singapore is eligible for benefit under Article 8 of India-Singapore DTAA. Therefore before proceeding further we will look at the relevant Articles of India-Singapore DTAA. ARTICLE 8 SHIPPING AND AIR TRANSPORT 1. Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State 2. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency engaged in the operation of ships or aircraft. 3. Interest on funds connected with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft, and the provisions of Article 11 shall not apply in relation to such interest. 4. For the purposes of this Article, profits from the operation of ships or aircraft in international traffic shall mean profits derived from the transportation by sea or air of passenge....
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....is in Singapore. The assessee is further contending that when India has given up the taxing right of shipping income, the question invoking Article 24 does not arise. The assessee is also contending that as per the Singapore Income Tax Act, the income from operation of ship is not taxable subject to certain conditions and therefore the AO is not correct in stating the impugned income is not taxed in either of the countries. The argument of the revenue is that when the impugned income is exempt from getting taxed in India then testing the same under Article 24 would automatically arise. The next argument of the revenue is that the impugned income is not getting taxed in Singapore as per the provisions of Singapore Income Tax Act, there by the impugned income is not taxed in either of the countries which is not true intention of entering into DTAA. 10. We notice that that the coordinate bench of the Tribunal in the case of Bengal Tiger Line Pte. Ltd. (supra) has considered the applicability of Article 24 in the context of income getting taxed only in Singapore under Article 8 and held that "13. As regards the main issue before us, we have considered arguments of counsels ....
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....per Article 8 of India-Singapore tax treaty, it was clearly specified that only the resident country has the right of taxation of freight income earned from operation of ships in international traffic. As may be seen from the provisions of Article 8(1), we are of the considered view that it is not an exemption provision but an enabling provision which provides an exclusive right of taxation of income to the residence country. Further, by entering into treaty with Singapore, India has given up its right to tax shipping income of a non-resident in India. Therefore, any income of a non-resident shipping company which is a tax resident of Singapore is liable to tax only in Singapore but not in India. 14. The provision of Article 24 of India-Singapore DTAA is applicable for income which is exempt from tax as per the tax treaty. As has been clarified above, it may be noted that Article 8 is unambiguously not an exemption provision but only a provision which provides a taxation right to the country of residence. Therefore, the international shipping income earned by the assessee is not exempted in India, whereas it is taxable only in the country of residence i.e., Singapore. From....
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....t reduced rate as per Article 8 of DTAA which is a condition precedent for applicability of Article 24. This fact has been clarified by the IRAS vide its letter dated 17-9-2018, where it was specifically stated that provisions of Article 24 of India-Singapore DTAA would not be applicable to the shipping income. The second condition that is required to be looked into before applying Article 24 of DTAA is income of the non-resident should be taxable i "receipt" basis in Singapore. As we have already noted in earlier para of this order, under Article it of lodia Singapore DTAA, global shipping income of a tax resident of Singapore is only taxable in the country of residence. Once the income is taxable in the country of residence on "accrual" basis, the second condition prescribed under Article 24 of India-Singapore DTAA is not satisfied. This fact is further strengthened by the letter of the Inland Revenue Authority Singapore (IRAS) letter 17-9-2018, where it was clarified that the income of a Singaporean company from the operation of ships in international traffic is taxable in Singapore on "accrual" basis. Thus, both the conditions of Article 24 is not satisfied in the present case.....
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....uch income is subject to tax by reference to amount thereof which is remitted to or received in resident State and not by reference to full amount thereof. The Tribunal further noted that 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". A similar view has been expressed by the Hyderabad Bench of the Tribunal in the case of For Shipping (Singapore) Pte Ltd. (supra). Further, the Mumbai Bench of the Tribunal in the case of D.B. International (Asia) Ltd. (supra) has dealt with the interplay between the Articles 13 and 24 and after considering relevant clauses categorically held that income derived by a resident of a Contracting State shall be taxable only in that state in view of the clear and unambiguous terms of DTAA. Therefore, we are of the considered view t....
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....upreme Court in the case of Azadi Bachao Andolan (supra) where the Hon'ble Supreme Court in para 79 of the order has states that "merely because exemption has been granted in respect of taxability of a particular source of income, it cannot be postulated that the entity is not able to tax' as contended by the respondents." The ITAT, Mumbai Bench in the case of Bhagwan T. Shivioni (supra) has considered an identical issue and by following the decision of Hon'ble Supreme Court in the case of Union of India v. Azadi Bachao Andolan (supra) has held that the expression liable to tax' in Contracting State as used in Article 4(1) of Indo-UAE DTAA does not necessarily imply that person should actually be liable to tax in that contracting State. It is enough if other contracting State has right to tax such person, whether or not such a right is exercised. This fact is further strengthened by Article 31(1) of Vienna Convention where it was stated that as per the general rule of interpretation, ordinary meaning is to be given to the terms of the treaty in the context and in the light of its object and purpose. The object and purpose of having Article 8 in the India-Singapore D....
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....ry) can levy tax on such income without understanding the true meaning of Article 8 of India- Singapore DTAA. 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 25-6-2014 and 14-8-2014 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 violation of Doctrine of Promissory Estoppel. No doubt, the fundamental principles of res judicata will not be applicable to income tax proceedings, but the rule of consistency needs to be followed unless there is change in fact or law while taking a different view. This view is supported by the decision of the Ho....