TaxTMI 
TaxTMI 
2025 (11) TMI 417
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....bunal). Both the Tax Appeals are admitted on the following substantial question of law: "Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal has erred in law and in facts in holding that the benefit of Article 8 of India-Singapore DTAA to the profits derived from operation of ships in international traffic is subject to the limitation in Article 24?" 3. The appellants are Indian Companies engaged in business of Shipping Agency Services. The appellants provide shipping agency services to its principals including M/s. ST Shipping and Transport Pte. LTD (for short 'the ST Shipping'). M/s. ST Shipping is incorporated in Singapore and is engaged in the business of operation of owned/chartered ships in international waters and is also a tax resident of Singapore. 3.1 During the Financial Year 2011- 12, the ships owned/chartered by the ST Shipping performed various voyages from Indian Ports including Sikka Port and earned income from shippers/public exporters. 3.2 The ST Shipping through its agents- appellants herein filed vessel voyage return under section 172(3) of the Act for various vessels operating in Indian Territorial Waters and ....
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....o details were furnished before the Assessing Officer. Accordingly, CIT (A) dismissed the appeal filed by the appellants-assessee holding that the exemption as per Article 8 of DTAA was not available in view of expressed language of Article 24 of the DTAA. The appellants, therefore, preferred an appeal before the Tribunal contending that the assessee had earned freight income by shipping goods to ports in India and therefore, the benefit of Article 8 of the DTAA is available vis- à-vis Article 24 which contains two conditions to be fulfilled so as to apply the same. It was also contended that both the conditions of Article 24 have not been satisfied in the facts of the case and therefore, the said Article would not be applicable. 3.7 The Tribunal, after considering the submissions made by appellants- assesses and the departmental representative, held as under: "9. We observe that some of the case laws on which reliance is sought to be placed are not related to shipping companies and hence does not involve applicability of Article 8 in relation to taxation of shipping companies. Accordingly, in our considered view, reliance cannot be placed on those decisions sinc....
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....reaty (Shipping and Air Transport) provides that profit derived by enterprise of Singapore shall be taxable only in Singapore. Further, in our view, Article 24 (Limitation of Relief), while it states that "this agreement provides that income from sources in a Contracting State shall be exempted from tax". should be read in a manner that such income is exempted from "source taxation" or "exempted from tax in the source country" as this would be a harmonious interpretation of Article 8 read with Article 24 of the India- Singapore Tax Treaty. Notably, even OECD commentary speaks of exemption from "source taxation" especially when discussing about permanent establishment being "exempted from tax in the source DTAA speaks of those incomes, which are exempted from "source taxation", as well. This is for the reason that profits derived from operation of ships in international traffic, should be normally subject to tax in the country of residence under Article 8. However, this is subject to the limitation in Article 24 that such profits are remitted to Singapore, which follows a territorial system of taxation wherein offshore income is taxed in Singapore on part that only which has been re....
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....out the very basis of applicability of Article 24(1) of the DTAA. 20. However, for the impugned assessment years, the factual situation is different from the preceding assessment year which were before Hon'ble Gujarat High Court, since the Ld. D.R. has challenged the veracity of the very certificate which was produced by the assessee for the first time during the course of appellate proceedings before Ld. CIT(A). Therefore, in view of the observations made by Gujarat High Court, and the challenge by the Ld. D.R. as to contents of the certificate issued by Singapore Tax Authority, it would be pertinent to take a closer look at the certificate issued by the Singapore Tax Authorities and it's applicability to the instant facts. 21. As stated by us earlier, Singapore follows a territorial tax system so that only income sourced in Singapore is taxed. Taxation of foreign source income (income earned offshore) by a Singapore resident company is not subject to tax, unless the income is received in Singapore deemed remitted to Singapore. The Counsel for the assessee has submitted a certificate which firstly states that the charter income has been derived by the ass....
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....come which is taxed in Singapore on remittance / receipt basis and has no applicability on income taxable in Singapore on "accrual basis", this certificate has the effect of ousting the applicability of the limitation of relief clause in the India-Singapore Tax Treaty. However, as noted above, the language of the certificate, as also observed by Hon'ble Gujarat High Court, is in the form of an opinion, specifically aimed at eclipsing the limitation of relief clause, by stating that the aforesaid income, which has been derived by the assessee from "business carried on in Singapore" is assessable to tax in Singapore on "accrual basis". However, the certificate does not specify the factual basis on which the Singapore tax authority has come to the conclusion that income from shipping business have been derived by the assessee from "business carried on in Singapore", when admittedly the aforesaid income has been earned by the assessee from transportation activities carried out at India ports. Secondly, there is no specific statutory provisions which has been mentioned in the letter which would lead to the conclusion that such shipping company derived from carrying out operations in....
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....IRAS does not refer to any statutory provisions under the Singapore Tax Laws and is more in the form of a unilateral opinion/ declaration that since the income has been earned by the assessee on "accrual basis", Article 24 of the DTAA (Limitation of Relief Clause) will have no applicability to the assessee's set of facts. Since the entire case of the assessee for various assessment years under consideration hinges on the statement issued by the Singapore Tax Authority and as noted by the Gujarat High Court, the certificate is merely in the form of an opinion, in our considered view, it is a fit case where the basis of issuance of this certificate needs to be looked into in more detail, especially in the absence of any statutory provisions being cited in the aforesaid certificate of as to how the assessee is taxable in Singapore on "accrual basis" (especially when Singapore follows a territorial tax system where offshore income is taxable on receipts / deemed remittance basis) and on what basis the Singapore Tax Authority has come to the unequivocal conclusion that income has been derived from "business carried on in Singapore" by the assessee. 23. In the result, the ma....
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....rned Advocate Mr. B.S. Soparkar invited the attention of the Court to the observation made by the learned Assessing Officer in para 8.1 in Rebuttal to Point No. 5, wherein, it is averred that "Further, the Hon'ble ITAT has not accepted or guaranteed the TRC issued by the IRAS. The observation of the ITAT granting relief as per Assessee's own case decision of Hon'ble Gujarat High Court. Corresponding to this claim, the Hon'ble ITAT ought to have given the Vessel name and AY of such orders. As far as the Hon'ble High Court decision is applicable only for M.T. Mearsk, not for others. The assessee/agent case has not yet been decided by the Hon'ble High Court. The ITAT had erred in making such comments, i.e., assessee's own case, nothing more." It was submitted that the Assessing Officer could not have made such an observation as the order passed by the ITAT is binding upon the Respondent. 5. Learned Senior Standing Counsel Mr. Varun Patel for the Respondent Authority, under instructions, submitted that the contention raised by the Petitioner is true and the appropriate affidavit shall be filed on behalf of the Respondent if time is granted for the same. ....
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....rcraft used in such transportation; (c) the use, maintenance or rental or 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 paragr....
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.... 8.4 Learned advocate Mr. Soparkar referred to the letter dated 09.01.2013 addressed to ST Shipping issued by the IRAS wherein it is stated that charter income derived by the ST Shipping to be income accruing in or derived from business carried on in Singapore. It was submitted that this Court after taking into consideration such certificate/letter issued by the IRAS in case of M.T. Maersk Mikage (supra) held that Article 8 of DTAA would be applicable in the facts of the said case. It was submitted that facts of the appellants are similar and therefore, the Tribunal could not have restored the matter to the Assessing Officer to verify the veracity of the certificate as the Department failed to bring on record any other document to dislodge the veracity of the certificate issued by IRAS. 8.5 It was therefore, submitted that the Tribunal ought to have followed the decision of this Court instead of remanding the matter to the Assessing Officer. 8.6 Learned advocate Mr. Soparkar also referred to and relied upon the decision of the Hon'ble Bombay High Court in case of Commissioner of Income Tax IT-(2) vs. Citicorp Investment Bank (Singapore) Ltd reported in [2023] 151 taxmann.com....
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.... dated 09.01.2013 issued by IRAS, has observed in Para 18 that in the facts of the case, Revenue did not question the genuineness of the certificate and therefore, it cannot dispute the contention on the ground the same are opposed to the statutory provision. 9.4 It was pointed out that before the Tribunal, the departmental representative questioned the genuineness of the certificate and therefore, Tribunal has restored the matter to the file of the Assessing Officer for verification of the certificate issued by the IRAS. 9.5 It was therefore, submitted that the distinguishing feature in the facts of the present case and the case before this Court that correctness of the certificate issued by IRAS is questioned before the Tribunal by the Revenue whereas, the same was not questioned before this Court. It was therefore, submitted that certificate issued by IRAS was required to be verified and therefore, the Tribunal was justified in remanding the matter to the Assessing Officer. Reference was also made to the observation of the Tribunal in Para 22 in regard to the certificate that the letter issued by IRAS does not refer to any statutory provision under the Singapore Tax Laws a....
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....ct, a return is required to be filed before the departure from any port in India of any such ship, by the master of such ship regarding the amount paid or payable to the owner, a return of the full amount paid or payable to the owner or charterer or any person on his behalf, on account of operation of such ships at that port since the last arrival of such ship thereat. Sub-section (4) of section 172 of the Act stipulates the processing of such return by the Assessing Officer to assess the income referred to in sub- section (2) and determine the sum payable as tax thereon at the rate or rates in force applicable to the total income of any company. 12. Accordingly, the appellants filed return of income being agents of the ST Shipping showing 'Nil' income in view of the provision of Article 8 of DTAA. The appellants relied upon the certificate issued by the IRAS dated 09.01.2013 which reads as under: "3. You have raised the concern that the benefits accorded under Article 8 of the Singapore-India DTA to the profits of your company were limited by the provisions of Article 24.1 of the said DTA which state that any reliefs provided by the DTA would only apply to the amount o....
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....at 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 reduction of tax under the agreement would be limited to so much of the income as is remitted to or received in that contracting State. In plain terms therefore, if the income in question was taxable in Singapore on the basis of receipt or remission and not by reference to the full amount of income accruing, clause1 of Article 24 would apply and dependent on the facts of the case, exemption as per Article 8 either in whole or in part would be excluded. 17. It is, in this context, that the certificate dated 09.01.2013 issued by the Inland Revenue Authority of Singapore assumes significance. In the said certificate, as noted, it was certified that the income in question derived by ST Shipping would be considered as income accruing in or derived from the business carried on in Singapore and such income....
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....provisions of section 10 of the Singapore Income Tax Act also cannot be accepted. The Revenue does not question genuineness of the certificate. It cannot dispute the contention on the ground that the same are opposed to the statutory provision." 14. The Tribunal has referred to and relied upon the above findings of this Court in relation to applicability of Article 8 of the DTAA. However, the Tribunal has ventured to distinguish the decision of this Court on the question of the veracity of the certificate dated 09.01.2013 on the ground that the genuineness of the said certificate was not questioned by the Revenue before this Court and hence, the Tribunal has thought is fit to restore the matter to the Assessing Officer to verify the contents of the said certificate with a rider that in case the Assessing Officer is not able to obtain any specific material to rebut the contents of the certificate issued by the Singapore Tax Authority, then respectfully following the decision of this Court, relief was to be granted to the appellants. 15. When this Court has already considered the certificate dated 09.01.2013 and during the pendency of the appeal before the Tribunal for the year....
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....e particularly in Para 22 of the order in absence of any material on record. On perusal of Para 22 of the impugned order it is clear that the Tribunal has made the observation with regard to the language of the certificate more particularly, when this Court has accepted the part of the certificate which certified that the income earned by the ST Shipping from the operations carried out in ports at India was liable to be taxed at Singapore on accrual basis and as per Article 8 of DTAA, when the income accrues in Singapore and was taxed as such, the same would be exempt from tax in India. This Court has further clarified that reference to Article 24 of DTAA in the certificate is nothing but an opinion of the IRAS. 18. Hence, the Tribunal ought not to have further deliberated upon contents of the certificate which is already held to be applicable in the facts of the case in absence of any other material on record to demonstrate that the veracity of the certificate issued by IRAS is doubtful and merely because the Tribunal is of the opinion that the language of the certificate is not conducive to the opinion of the Tribunal, the matter could not have been restored to the Assessing O....