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TMI Blog2016 (9) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... laration is that the income would be charged at Singapore considering it as an income accruing or derived from business carried on in Singapore. In other words, the full income would be assessable to tax on the basis of accrual and not on the basis of remittance. This certificate was before the Commissioner while he passed the impugned order. The contents of this certificate were not doubted. If that be so, what emerges from the record is that the income in question would be assessable to tax at Singapore on the basis of accrual and not remittance. This would knock out the very basis of the Assessing Officer and Commissioner for invoking clause1 of Article 24 of DTAA. Both the authorities considered the question of remittance of income as the sole requirement for invoking Article 24.1 of DTAA an interpretation which according to us does not flow from the language used. As noted the essence of Article 24.1 is that in case certain income is taxed by a contracting State not on the basis of accrual, but on the basis of remittance, applicability of Article 8 would be ousted to the extent such income is not remitted. This clause does not provide that in every case of nonremittance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to ST Shipping, such income was taxable only in Singapore and therefore, exempt from tax regime under the Indian Income Tax Act. 5. The Assessing Officer processed the returns for five separate vessels, through which, such freight movement had been undertaken and passed a consolidated order dated 26.12.2011, in which he held that the ST Shipping was not entitled to benefit of Article 8 of DTAA by virtue of the provisions contained in Article 24 therein. He noted that the fright receipts were remitted to London and not to Singapore. In his opinion, as per Article 24 of DTAA, the funds have to be remitted where the residents of the country is claiming benefit of the agreement which conditions in the present case was not satisfied. He held as under: 6. It is therefore amply clear that the funds were remitted to London and not in Singapore. The Article 24 of the DTA Agreement between India and Singapore very specifically states that the funds have to be remitted to the country where the resident is claiming the benefit of the DTA Agreement. In the instant case, the freight beneficiary was ST Shipping and Transport Pte Limited of Singapore and hence the funds ought to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on accrual basis. This was in response to the petitioner's letter to the said Revenue authority of Singapore concerning the applicability of Article 24 of the DTAA. The contents of the letter dated 09.01.2013 of the authority may be reproduced. We refer to your letter dated 2 January 2013. 2. You have stated that ST Shipping and Transport Pte Ltd's principal business activity revolved around the shipping line and it received charter payments for such services. During the calender years 2011 and 2012, the company derived such charter income from the following parties in India: (1) related companies in the form of intercompany charges; and (2) third parties where the money was remitted to London or Switzerland bank accounts. 3. You have raised the concern that the benefits accorded under Article 8 of the SingaporeIndia DTA to the profits of your company were limited by the provisions of Article 24.1 of the said DTA which state that any reliefs provided by the DTA would only apply to the amount of income remitted into Singapore. As such, the Indian tax authorities were likely to impose a tax on your company's charter income. 4. Based o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well. 5. It is further noted that the order for AY 201213 passed by the ITO(IT), Gandhidham in the assessee's own case has been made a subject matter of appeal before CIT(A), Gandhinagar. All the above three issued were raised before CIT(A) and the documents furnished before this office have also been furnished before CIT(A), Gandhinagar. The CIT(A) has discussed all the above evidences before arriving at a conclusion that the claim of the assessee on all these three issues is liable to be rejected. 10. Before recording the rival contentions, we may reproduce relevant provisions of the DTAA. Article 1 PERSONAL SCOPE This Agreement shall apply to persons who are residents of one or both of the Contracting States. Article 2 TAXES COVERED 1. The taxes to which this Agreement shall apply are: a. In India: Income-tax including any surcharge thereon (hereinafter referred to as Indian tax ) b. In Singapore: The Income-tax (hereinafter referred to as Singapore tax ). 2. The Agreement shall also apply to any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the firstmentioned Contracting State shall apply to so much of the income as is remitted to or received in that other Contracting State. 2. However, this limitation does not apply to income derived by the Government of a Contracting State or any person approved by the competent authority of that State for the purpose of this paragraph. The term Government includes its agencies and statutory bodies. 11. In the background of such facts and the DTAA, learned counsel Shri Bandish Soparkar for the petitioner raised following contentions: I. The ST Shipping is a company liable to be taxed in Singapore according to the local laws. The income earned by the company in its shipping operations in India would also be accordingly taxed. In terms of Article 8 of the DTAA therefore, the same could not be taxed in India. II. The interpretation adopted by the Revenue authorities to Article 24 of DTAA is wholly erroneous. Clause1 of Article 24 would apply only in a case where such income is to be taxed in Singapore only on remittance basis, a condition not fulfilled in the present case. In this context, counsel placed heavy reliance on the certificate dated 09.01.2013 issued by the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 264 in case of any order other than an order to which section 263 applies, which is passed by an authority subordinate to the Commissioner, he may either on his own motion or on application by assessee, call for the record of any proceedings in which, such an order has been passed and may make inquiry and subject to the provisions of the Act, pass such order thereon not being an order prejudicial to the assessee, as he thinks fit. Thus, under subsection (1) of section 264, the Commissioner has power either on his own motion or on the petition filed by the assessee to revise an order passed by a subordinate officer subject to the provisions of the Act. Subsections (2) and (3) of section 264 lay down the period of limitation within which, such revisional powers could be exercised. Subsection (4) of section 264 lists the cases where the Commissioner cannot exercise such revisional power and reads as under: 264(4) The [ Principal Commissioner or ] Commissioner shall not revise any order under this section in the following cases- ( a ) where an appeal against the order lies to the [Deputy Commissioner (Appeals)] [or to the Commissioner (Appeals)] or to the Appellate Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racting states (i.e. Singapore), such income is subject to tax by reference to the amount thereof which is remitted or received in that State and not by reference to the full amount thereof then the exemption or reduction of tax under the agreement would be limited to so much of the income as is remitted to or received in that contracting State. In plain terms therefore, if the income in question was taxable in Singapore on the basis of receipt or remission and not by reference to the full amount of income accruing, clause1 of Article 24 would apply and dependent on the facts of the case, exemption as per Article 8 either in whole or in part would be excluded. 17. It is, in this context, that the certificate dated 09.01.2013 issued by the Inland Revenue Authority of Singapore assumes significance. In the said certificate, as noted, it was certified that the income in question derived by ST Shipping would be considered as income accruing in or derived from the business carried on in Singapore and such income therefore, would be assessable in Singapore on accrual basis. It was elaborated that the full amount of income would be assessable to tax in Singapore not by reference to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that the same are opposed to the statutory provision. 19. By way of a reference, we may notice that the Tribunal also in case of this very assessee in case of Alabra Shipping Pte Ltd. v. Income-tax Officer International Taxation, Gandhidham , reported in 62 Taxmann.com 185 has taken a somewhat similar view by observing as under: 6. As a plain reading of Article 24(1) would show, this LOB clauses comes into play when (i) income sourced in a contracting state is exempt from tax in that source state or is subject to tax at a reduced rate in that source state, (ii) the said income (i.e. income sourced in the contracting state) is subject to tax by reference to the amount remitted to, or received in, the other contracting state, rather than with reference to full amount of such income; and (iii) in such a situation, the treaty protection will be restricted to the amount which is taxed in that other contracting state. In simple words, the benefit of treaty protection is restricted to the amount of income which is eventually subject matter of taxation in the source country. This is all the more relevant for the reason that in a situation in which territorial met ..... X X X X Extracts X X X X X X X X Extracts X X X X
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