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TMI Blog2017 (8) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... non- resident entity, which is exclusive domain of the resident state, there is no question of any kind of exemption or reduced rate of taxation in the source state. It only envisages territorial and jurisdictional rights for taxing the income and India has no jurisdiction for any taxing right which are governed by Article 8. There is no stipulation about exemption under Article 8 of the shipping income AO/ Ld.CIT(A) was not justified in denying the benefit of Article 8 by invoking the limitation clause of Article 24 of India – Singapore DTAA. The exercise undertaken by the AO and CIT(A) in correlating the remittances and denying the certificate issued by the Government authority of Singapore is not proper and can further hold that they have no jurisdiction to enquire into those matters, once Article 8 is invoked. The shipping income is to be exclusively taxed by the other contracting state once the residence of the ship is established. Since there is no dispute with reference to residence of the ship being that of Singapore, the jurisdiction to tax the remittances specified therein under Article 8 lies exclusively with Singapore. In view of that, the orders of the AO and C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantiated the remittance of the money. Ld.CIT(A) not only rejected the certificate of the Inland Revenue Authority of Singapore on the reason that assessee did not substantiate the remittances but also rejected the additional evidence and confirmed the orders of the AO. Assessee is aggrieved. 3. Ld. Counsel for assessee relied on the certificate issued by the Inland Revenue Authority of Singapore, placed at pg. 31 of the Paper Book, along with the decisions of Hon'ble Gujarat High Court and Delhi High Court on the issue whether Article 24 will apply when Article 8 of the DTAA empowers the other contracting state to tax the relevant income. He also relied on the Co-ordinate Bench decisions which are discussed later on in the body of the order. He also placed on record the judgment of the Hon'ble Madras High Court in the case of CIT Vs. Lakshmi Textile Exporters Ltd., [245 ITR 521] to submit that certificate issued by the other contracting state s authority should not be disbelieved without any valid reason. 4. Ld.DR, however, referred to the orders of the AO and CIT(A) to submit that assessee has not substantiated the remittance of the amounts to Singapore and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such accrued income not having taken place at Singapore, Article 24 will apply and consequently Article 8 providing for avoidance of table taxation would not apply. 16. The fact, that the income in question which arises out of shipping operations by virtue of Clause- 1 of Article 8 of the DTAA would be taxable only in Singapore, is not in serious dispute. The moot question therefore is whether operation of Article 8 is ousted by virtue of Clause-1 of Article 24. As noted, Article-24 of DTAA pertains to limitation of relief. Under clause-1 thereof where the agreement provides that the income from sources in contracting states (in the present case, India) shall be exempt from tax or tax at a reduced rate and under the laws in force in other contracting 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility of Article 8 would be ousted to the extent such income is not remitted. This clause does not provide that in every case of non-remittance of income to the contracting state, Article 8 would not apply irrespective of tax treatment such income is given. When in the present case, we hold that the income in question was not taxable at Singapore on the basis of remittance but on the basis of accrual, the very basis for applying clause-1 of Article 24 would not survive. The contention of Shri Mehta for revenue that the certificate of the Singapore revenue authorities is opposed to provisions of section 10 of the Singapore Income Tax Act also cannot be accepted. The Revenue does not question genuineness of the certificate. It cannot dispute the contention on the 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Director of Income-Tax (International Taxation) v. Venkatesh Karrier Ltd. reported in 349 ITR 124, in which the Court observed as under: 10. After taking into consideration the above circulars issued by the Board and also the provisions contained in Article 8 of the DTAA, we find that both the Tribunal below and the CIT [Appeals] rightly held that in such a situation, the owner of the ship being admittedly a resident of UAE, there was no scope of taxing the income of the ship in any of the ports in India. The agreement between the two countries has ousted the jurisdiction of the taxing officers in India to tax the profits derived by the enterprise once it is found that the ship belongs to a resident of the other contracting country and such position has also been clarified by the Circulars issued by the Board as indicated above. 5.2. The aforesaid judgment of the Gujarat High Court clearly clinches the issue in favour of assessee, as the Hon'ble High Court has categorically held that the shipping company is not taxable in Singapore on the basis of remittance, but on accrual basis and therefore, para-1 of Article 24 would not be applicable. Hon'ble Court ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xation in the source state. It only envisages territorial and jurisdictional rights for taxing the income and India has no jurisdiction for any taxing right which are governed by Article 8. There is no stipulation about exemption under Article 8 of the shipping income which as pointed out by ld. Senior Counsel has been specifically provided in some of the Articles like Article 20, 21 22. Hence, it cannot be reckoned that shipping income earned from India is to be treated as exempt from tax or taxed at reduced rate, which is a condition precedent for applicability of Article 24, albeit India at the threshold does not have the jurisdiction to tax the shipping income of the non-resident entity. Thus, the condition of Article 24 is not satisfied in the present case from this angle also. In conclusion, we hold that the ld. CIT (A) was not justified in denying the benefit of Article 8 by invoking the limitation clause of Article 24 of India- Singapore DTAA as per our discussion above and most important, now this issue stands squarely covered by the decision of Hon'ble Gujarat High Court as referred above. In the light of our aforesaid finding, we do not deem fit to enter into the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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