2016 (1) TMI 1169 - HC - Income Tax

Income arising by way of slot chartering - whether would form a part of the income from operations of ships, exempt under Article 8 of the India Singapore DTAA ? - Tribunal held that the 7 1 ships / vessels, for which there are no supporting documents, should be considered under Section 44B of the IT Act, 1961, i.e. a special provision for shipping business - Held that - Question formulated stands concluded against the Revenue by the decision of this Court in Director of Income Tax (International Taxation) vs. Balajai Shipping UK Ltd. 2012 (8) TMI 681 - BOMBAY HIGH COURT wherein held Article 9 of the Indo-U.K. DTAA includes slot charters/slot hire agreements as availed of and utilized in these cases - Decided in favour of the assessee

Summary

Issues Involved:
1. Interpretation of income from slot chartering under Article 8 of India Singapore DTAA.
2. Application of Section 44B of the IT Act to ships/vessels without supporting documents.

Analysis:

Issue 1: Interpretation of income from slot chartering under Article 8 of India Singapore DTAA
The appeal questioned whether the income of the assessee from slot chartering should be considered as part of the income from ship operations exempt under Article 8 of the India Singapore DTAA. The Court noted that this issue was similar to a previous decision in Director of Income Tax vs. Balajai Shipping UK Ltd. The Counsel for the Revenue acknowledged that this question had been settled against the Revenue in the aforementioned case. Consequently, the Court concluded that this particular question did not raise any substantial legal issue and, therefore, did not entertain it.

Issue 2: Application of Section 44B of the IT Act to ships/vessels without supporting documents
The Court admitted the appeal on the substantial question related to whether the 7+1 ships/vessels, for which there were no supporting documents, should be considered under Section 44B of the IT Act, a special provision for shipping businesses. The Tribunal had not found these ships to be covered under Article 8 of the India Singapore DTAA. This issue remained open for further consideration and was directed to be communicated to the Tribunal for necessary action.

In summary, the High Court of Bombay dismissed the appeal concerning the interpretation of income from slot chartering under Article 8 of the India Singapore DTAA based on a previous decision. However, the Court admitted the appeal on the question of applying Section 44B of the IT Act to ships/vessels without supporting documents, directing the Tribunal to keep the relevant papers and proceedings available for future reference.