TaxTMI 
TaxTMI 
2025 (9) TMI 713
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.... Singapore. Since, the assessee is a tax resident of Singapore as per Article 1 read with Article 4 of the Double Tax Avoidance Agreement entered between India and Singapore ('India- Singapore DTAA'), it is eligible to claim benefits under the India-Singapore DTAA. Accordingly, for the AY 2022-23, the assessee filed its return of income ('ROI) declaring a total income of NIL, as per the India Singapore DTAA. The return filed by the assessee was selected for scrutiny proceedings under section 143(2) of the Act. The Assessing Officer proposed draft assessment order under section 144C(1) of the Act dated 19.02.2024 for making an addition of Rs.. 86,66,228/- treating the shipping income as taxable in India under section 44B of the Act, and by not providing the benefit of India Singapore DTAA by invoking Limitation of Benefit clause. The assessee filed objections before the Dispute Resolution Panel ('DRP'), which was disposed vide directions dated 29.11.2024 upholding the order of the Assessing Officer. Subsequently, the final assessment order dated 16.12.2024 was completed under section 143(3) r.w.s. 144C(13) of the Act against which the assessee is in appeal before the Tri....
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....dismissed as not pressed. 4. In Grounds 3 to 6, the assessee challenged the taxability of international shipping income from freight operation as an income taxable in India under section 44B of the Act. 5. The assessee company plies its ships globally, including through Indian ports and earns freight and other charges that arise from this activity. It also provides customized end to end logistics services. The revenue from shipping business of the company from its customers in India generally promises of (i) freight for transportation of goods; and (ii) demurrage charges for delay in loading/unloading of the goods as per the agree time slot. The assessee claimed the income earned as exempt by virtue of Article 8 of the India-Singapore Double Taxation Avoidance Agreement. The assessee filed detailed written submissions before the TPO and placed reliance on the decision of this Tribunal in the case of M/s. Bengal Tiger Line Pte. Ltd. V. DCIT in IT(TP)A No. 11/Chny/2020 dated 06.11.2020. After considering the same and by observing that the Revenue has preferred an appeal before the Hon'ble High Court against the decision of the Tribunal in the case M/s. Bengal Tiger Line Pte. Lt....
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....ion, the Appellant relies upon the ruling of the Hon'ble Jurisdictional High Court in the case of Anand Transport (P.) Ltd. (370 ITR 524) (refer Page 157 of case law compilation) wherein it was held that the income of the Appellant from shipping operations in India are not taxable by virtue of Article 8 of the India- Singapore DTAA. • Further, it has also been held by the Learned Commissioner of Income Tax (Appeals) in the case of Bothra Shipping Services Private Limited (refer Page 151 of paper book) that the freight income is not taxable in India in terms of Article 8 of the India- Singapore DTAA. • Based on the above, it is humbly submitted that the income earned by the Appellant from shipping operations in India is not taxable by virtue of Article 8 of the India- Singapore DTAA. B. Non-applicability of Article 24 (Limitation of Relief clause) of the India - Singapore DTAA to freight income earned by the Appellant • • Article 24 of India - Singapore DTAA contemplates twin conditions for its applicability, which are as follows: - income is sourced in a Contracting State (in the Appellant's case, in Indi....
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....se law compilation - Pacific International Lines Pvt. Ltd. (2024 (6) TMI 873) - Page 72 of Case law compilation - Mariana Express Lines Pte. Ltd. (ITA No. 557/CHNY/2025) Page 188 of Case law compilation. • • It may also be pertinent to note that Hon'ble Jurisdictional High Court has not admitted any question of law on this issue in the appeal filed by the Revenue against the decision of this Hon'ble Jurisdictional Tribunal in the case of Bengal Tiger Pte. Ltd. (150 taxmann.com 199), and hence, this issue has reached finality (Refer page 10 of Case law compilation). • The above issue has also been dealt with by High Courts and Coordinate Benches of this Hon'ble Tribunal in the following cases: Name of the case Forum Citation Page No. M.T. Maersk Mikage Gujarat HC 390 ITR 427 1 APL Co. Pte. Ltd. Bombay HC 156 taxmann.com 530 101 APL Co. Pte. Ltd. Mumbai ITAT 185 TTJ 305 106 Alabra Shipping Pte Ltd. Rajkot ITAT 175 TTJ 359 123 Maersk Tankers Singapore Pte. Ltd. Rajkot ITAT 199 ITD 284 127 Far Shipping (Singapore) Pte. Ltd. Hyderabad ITAT ....
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.... ships or aircraft used in such transportation; (c) the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) in connection with such transportation, and (d) any other activity directly connected with such transportation. 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 amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the exemption or reduction of tax to be allowed under this Agreement in the first-mentioned Contracting State shall apply to so much of 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 ....
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....e assessee is a tax resident and does not have a PE in India. Undisputedly, the activities carried out by the assessee in India are covered under Article 8 of India-Singapore DTAA As per Article 8 of India-Singapore DTAA, the 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. Therefore, by virtue of Article 8 of India-Singapore DTAA, the international shipping income of a resident of a Contracting State is taxable only in that State Le, the shipping income of a Singaporean resident by the operations of ships in international waters is taxable only in Singapore on accrual basis. Similarly, Article 24 of India-Singapore DTAA limits the relief on the basis of income from sources in a Contracting State is 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 amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the exemption or reduction of tax to be allowed under this agreem....
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.... profits derived by an enterprise of a Contracting State by operation of ships in international traffic shall be taxable only in the State of residence. The word 'only debars the other Contracting State to tax the shipping income; ie. India is precluded from taxing the shipping income even if it is sourced from India. When India does not have any taxation right on a shipping income of non-resident entity, exemption or reduced rate of taxation in the source state is of no relevance because once the taxing right has been given off, the other conditions like exemption of reduced rate of tax has no bearing on the taxability of particular income in other Contracting State. From the reading of Article 8, which clearly envisages derivable or jurisdictional rights for taxing the income and as per which India has no jurisdiction for taxing any income which are covered by Article 8. Therefore, we are of the considered view that international shipping income of a non-resident of a Contracting State is taxable only in that state and in this case, the assessee being tax resident of Singapore, shipping income earned from India on international waters is taxable only at Singapore on accrual b....
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....d 24 of India-Singapore DTAA has been considered by various Tribunals and Courts. As per the settled position of law, the Article 24 Limitation of Benefit is not applicable once shipping income of a non-resident is taxable on "accrual" basis in the country of residence. This principle is well settled by the decision of the Hon'ble Gujarat High Court in the case of M.T. Maersk Mikage (supra), where the Hon'ble court clearly held that where income earned by Singapore based shipping company through shipping business carried out at Indian Ports, was not taxable at Singapore on basis of remittance but on basis of accrual, clause (1) of Article 24 of Indo-Singapore DTAA would not apply to deny benefit of Article 8 of Indo-Singapore DTAA to said company. The Hon'ble High Court while considering the issue has analyzed the provisions of Article 8 vis-a-vis Article 24 of DTAA and after considering relevant facts, the court held that in case certain income is taxed by a Contracting State not on the basis of accrual but on the basis of remittance, applicability of Article 8 would be ousted to the extent such income is not remitted. The court further held that this clause does not p....
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....icle 24 of India-Singapore DTAA cannot be invoked to deny the benefit of exemption merely for the simple reason that the said income was not taxed in Singapore by virtue of separate exemptions provided under Singapore Income Tax Act. 17. In this case, the Assessing Officer has attempted to deny the exemption claimed by the assessee under Article 8 by invoking Article 24 of India-Singapore tax treaty on a misconception of two clauses of India-Singapore DTAA by referring to the provisions of Section 13F of the Singapore Income Tax Act, ignoring the fact that Section 13F of the Singapore Income Tax Act was already in existence since 1-4-1991 and as such the articles provided in India-Singapore DTAA which was came into existence from 27-5-1994 was inserted by the Competent Authorities of both the Contracting States after thoroughly considering the provisions of Section 13F of Singapore Income Tax Act and further choose not to alter the taxation right of shipping income which is generally available to the country of residence. We further noted that two sovereign nations have entered into a bilateral agreement and specifically agreed on the taxing rights of particular streams of....
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....xt' for the purpose of interpretation of a treaty would primarily include the text, preamble and annexure to the treaty. Therefore, in order to give the ordinary meanings to the terms in their 'context' the whole treaty should be read as it is without giving any meaning which is not the purpose intended by the Articles. In this case, the AO has stated that the preamble should be read to understand the object and purpose. However it may be noted that Article 31(2) of Vienna Convention does not cover object and purpose. Therefore, we are of the considered view that AO has misunderstood the general rules of interpretation in the Vienna Convention. Even assuming without conceding that the preamble should be referred to understand the object and purpose, the stated objective of the treaty is "avoidance of double taxation". This object can be achieved in two ways, which one way by credit mechanism when both the countries tax the same income and the second way is providing '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 t....
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....iting the relief granted under Article 8 of the India Singapore DTAA - (i) Article 24 gets invoked in cases of exemption and in the given case the income from shipping business is not exempt but is taxed in the residence country (ii) Article 8 is not an exemption provision but is an enabling provision granting exclusive taxing right to the resident country i.e. Singapore and not source country i.e. India (iii) Under Article 8 India has given up the right to tax and therefore the income can be taxed ONLY in Singapore. (iv) The test of whether the income is exempt or taxed at lower rate is of no relevance once the right to tax is given up (v) In Singapore when the shipping is taxed on accrual basis, Article 24 cannot be applied since the said Article can be invoked only when the income is taxed on receipt basis in the country of residence i.e. Singapore (vi) 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....