2013 (4) TMI 821 - AT - Income Tax

Summary

Issues involved: Interpretation of Double Taxation Avoidance Agreement (DTAA) between India and UK, applicability of section 172 of the Income Tax Act, ownership and operation of a ship, tax liability on freight income.

Summary:

Interpretation of DTAA:
The appeal was filed by the Revenue against the order of the CIT (A) regarding the interpretation of the UK-India DTAA in relation to freight income. The CIT (A) allowed the claim of the assessee, a UK company, stating that the conditions of the DTAA were fulfilled, and the freight income was taxable in the UK only. The Tribunal confirmed the CIT (A) order as the Revenue failed to point out any deficiencies or errors.

Applicability of Section 172:
The case involved the applicability of section 172 of the Income Tax Act to a foreign shipping company, B. P. Shipping Ltd., operating in India. The company claimed relief under the DTAA for the tax payable on the freight income. The AO denied the relief, but the CIT (A) allowed the claim after considering evidence that the company was a resident of the UK and the ship was operated by the UK company.

Ownership and Operation of Ship:
The ownership and operation of the ship, MT TORM THAMES, by B. P. Shipping Ltd., a UK company, were crucial aspects of the case. The ship was chartered to a Swiss company for carrying its own cargo, and the freight beneficiary was determined to be the UK company. The Tribunal upheld that the UK company was the owner of the ship, and the freight income belonged to it, making it eligible for DTAA benefits.

Tax Liability on Freight Income:
The dispute also revolved around the tax liability on the freight income earned by the UK company through the operation of the ship in international traffic. The Tribunal concluded that the freight income was taxable in the UK only, as per the provisions of the DTAA between India and the UK.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming the order of the CIT (A) in favor of the UK company. It was clarified that the order would not set a precedent due to the Revenue's failure to identify any errors, allowing the Revenue to present its case in future proceedings.