Computation of profits in case of non-resident shipping companies. - Income Tax - 915/CBDT

INSTRUCTION NO. 915/CBDT Dated : January 30, 1976 Section(s) Referred: 172 Statute: Income - Tax Act, 1961 It has been represented to the Board that after the amendments made by the Finance Act, 1975, to the provisions relating to computation of profits in the case of non-resident shipping companies, Income-tax Officers are not allowing relief due to such companies under the relevant D.T.A. Agreements existing between India and other countries. 2. Our D.T.A Agreements with Federal Republic of Germany, Finland, France, Greece and Japan provide that the tax to be charged in India on the profits derived by operating ships in international traffic (as distinct from coastal traffic) by an enterprise or a resident of these countries shall be reduced, on the basis of reciprocity, by an amount equal to 50% (55% in the case of Japan) of the tax so charged. However, there is a specific provision in these Agreements that this reduction of the specified percentage of tax shall not affect the provisions of section 172(1) to section 172(6) of the Income-tax Act, 1961, (or the corresponding section 44A to 44B of the Income-tax Act, 1922) in relation to the ad-hoc assessment of profits from occasional shipping or tramp steamers but will be allowed when an adjustment is to be made u/s 172(7) of the Income-tax Act, 1961 (or section 44C of the 1922 Act). In our D.T.A. Agreements with Denmark, Norway, Romania and Sweden, there is no such restriction even in the case of occasional shipping or tramp steamers. 3. Thus, it will be observed that in the case of the regular shipping lines belonging to the countries with which we have D.T.A. Agreements covering shipping profits, the reduction in tax by the specified percentage would be available even at the stage of ad-hoc assessment u/s 172(4) of the Act before the departure of ships belonging to these countries from the Indian ships because the restriction in the D.T.A. Agreements relates only to occasional shipping or tramp steamers. 4. The above clarification may please be brought immediately to the notice of the Income-tax Officers in your charge.