2016 (12) TMI 1192 - HC - Income Tax

Income by way of slot chartering - whether would from a part of income from operations of ships exempt under Article 9 of the DTAA - Held that - Revenue has not disputed the fact that the activity carried out with regard to the four cases has nexus with the operation of ships in international traffic. The Revenue also does not dispute that the receipt attributable to the four cases is less than 0.5% of total receipts. Thus it would undisputedly satisfy the nexus test laid down by this Court in Balaji Shipping (2012 (8) TMI 681 - BOMBAY HIGH COURT). Therefore the assessee would be entitled to the benefit of Article 9 of IndiaDenmark DTAA. In any case the grievance of the Revenue is not sustainable as the impugned order on appreciation of evidence has held that particulars of receipts in respect of the four cases were filed with the return of income. Therefore the view taken by the Tribunal is a possible view. Nothing has been shown to us which would indicate that the view taken by the Tribunal is not covered by the nexus test laid down by this Court in Balaji Shipping (supra).

Summary

Issues Involved:
1. Whether the Tribunal was right in holding that the income of the assessee from slot chartering forms part of income from operations of ships exempt under Article 9 of the DTAA?
2. Whether the income from the use of "Maersknet" can be classified as income arising out of the shipping business?
3. Whether the Tribunal was correct in allowing the appeal by following a specific judgment of the Bombay High Court?

Analysis:

Issue 1:
The respondent assessee, a tax resident of Denmark, operates ships carrying containers on its own ships or on slot hire in international waters, covered by India-Denmark DTAA. The Assessing Officer taxed income from 4 cases not satisfying him, while the Tribunal found that the earnings were attributable to the operation of ships in international traffic. The Tribunal held that the income was related to the shipping business and fell within the DTAA provisions, as the receipts were less than 0.5% of total receipts. The Revenue's grievance was dismissed as the evidence showed a nexus with shipping operations, and the Tribunal's decision was based on filed income details.

Issue 2:
The Revenue conceded that a similar issue was decided against them in a previous case involving the same respondent assessee for a different assessment year. The Court had ruled that the question did not raise any substantial legal issue. Therefore, the current issue was also not entertained by the Court.

Issue 3:
The Tribunal allowed the appeal based on a previous decision of the Bombay High Court, which the Revenue also accepted. As there were no distinguishing features in the present case from the previous judgment, the Court found no fault with the Tribunal's decision. Consequently, the question did not give rise to any substantial legal issue and was not entertained.

In conclusion, the appeal was dismissed, and no costs were awarded. The Court upheld the Tribunal's decision regarding the issues raised in the appeal, finding no substantial legal questions to be addressed.