Issue of annual no-objection certificate-Section 172 of the Income-tax Act of, 1961. - Income Tax - 732

Circular No : 732 Date of Issue : 20.12.1995 Subject : Issue of annual no-objection certificate-Section 172 of the Income-tax Act of, 1961. Under the provisions of the section 172 of the Income-tax Act of, 1961, seven and half per cent. of the amount paid or payable to the owner or charterer of a ship on account of carriage of passengers, live stock, mail or goods shipped at a port in India, is deemed to be income accruing in India to the owner or the charterer. The port clearance is granted only after the return of the full amount to be paid is filed, evidence of payment of tax on such income is produced before the Customs authorities, or satisfactory arrangements are made to file the return and pay the tax within thirty days of departure of the ship. 2. In cases where such ships are owned by an enterprise belonging to a country with which India has entered into an Agreement on Avoidance of Double Taxation, which provides for taxation of shipping profits only in the country of which the enterprise is a resident, no tax is payable by such ships at the Indian ports. Under such circumstances, a "No objection certificate" is to be obtained by the master of the ship from the concerned income-tax authority. 3. It has been represented to the Board that in cases where no tax is payable in India, the procedure of obtaining a "No objection certificate" from the income-tax authorities before each voyage, should be done away with. 4. The Board have considered the matter. It has been decided that in such cases, the Assessing Officer shall be competent to issue an annual NOC, valid for a year, in respect of taxation of shipping profits under section 172 of the Income-tax Act, 1961, after carefully verifying the applicability of the relevant provisions concerning taxation of shipping profits in the DTAA with the country of which the owner or the charterer is a resident. 5. While examining the relevant articles of the DTAA, the Assessing Officer should ensure that the non-resident shipping company is engaged in "international traffic", a term which is invariably defined in the DTAA itself. An undertaking from the non-resident company that during the period of the currency of the NOC, no ship belonging to it will be in any traffic other than "international traffic" shall be obtained before the issue of the NOC. Sd/- Siddhartha Mukherjee Secretary CBDT