Agreements on cooperation in Merchant shipping. - Income Tax - 1384/CBDT

INSTRUCTION NO. 1384/CBDT Dated: February 23, 1981 It is stated that the Government of India have entered into agreements on cooperation in Merchant Shipping with the German Democratic Republic and the Government of Czechoslovak Socialist Republic. Copies of the notifications issued in this respect are enclosed herewith. The agreement with German Democratic Republic have been notified in the gazette of India on 1-5-79 and has come into force w.e.f 19th July 1979. The Agreement with Czechoslovakia was notified in the gazette of India on 3rd June 1980 and has come into force w.e.f 19-12-79. Relevant provisions of the two agreements are reproduced below:- AGREEMENT WITH GERMAN DEMOCRATIC REPUBLIC ARTICLE 9:-No Income-tax/or turnover tax shall be levied or collected by the Government of the German Democratic Republic on the freight earnings and/or profits on national cargo carried by the Indian vessels including those under time-charter between ports of the two states, and similarly no income tax and/or turnover tax shall be levied or collected by the government of the Republic of India on the foreign earnings and/or profits on national cargo carried by the vessels of the German democratic republic including those under time-charter between ports of the two states. AGREEMENT WITH CZECHOSLOVAKIA ARTICLE 1-2:-The provisions of this Agreement shall be applicable to bilateral shipping between the two tracting parties. ARTICEL 12 :-No Indian Income Tax shall be levied or collected by Indian authorities on freight-earnings of Czechoslovak vessels on the basis of reciprocity. 3. Both the agreements provide that no income-tax shall be levied or collected by the Indian authorities on the earnings of the German Democratic Republic and the Czechoslovakian vessels in respect of bilateral shipping between the contracting countries. It will, therefore be seen that the exemption from income-tax on the freight earnings of the GDR and Czecho vessels shall be available only to those vessels carrying cargo for ports in GDR or Czechoslovakia respectively; in other words, full taxes would be levied in respect of the freight earnings arising from cargos meant for third countries. 4. It may also be mentioned that shipping agreements were also concluded with Bulgaria and the Soviet Union. Those Agreements too have an Article relating to the taxation of shipping profits. Necessary instructions in this regard were issued vide boards Instruction No.10739F.NO.501/1/73-FTD dated 6-7-77 and Instruction NO.1213(F.No.45/25/77-FTD) dated 16-10-78. 5. The above instructions may please be brought to the notice of all officers in your charge.