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TMI Blog2017 (11) TMI 1924X X X X Extracts X X X X X X X X Extracts X X X X ..... Clearly, therefore, the relief granted in the judicial precedents in question may have been based on an erroneous impression of the fact regarding actual taxability, in Singapore, of the income embedded in the freight receipts from India, particularly as the income was actually exempt from tax in Singapore as well. As regards the plea that assessee s income embedded in freight receipts from India is not exempt from tax in India, such a plea is contrary to the scheme of thee India Singapore tax treaty. While assigning meaning to a term employed in the tax treaty, one must not lose sight of article 3(2) which gives primacy to the context in which the term is used.The context in which expression exempt from tax is set out in article 24, it essentially implies that the treaty benefit of non-taxation of an income, or its being taxed at a lower rate, in a contracting state depends on the status of taxability in another contracting state. In such a situation, to hold that only income covered by article 20, 21 and 22 can be said to be exempt in the source state because the expression exempt from tax is used therein, is plainly contrary to the context in which expression exempt fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r evasive and not so transparent conduct. Let all the relevant aspects be examined afresh in this light and the perspectives of both the parties be taken to the record and be analysed properly, particularly as this issue concerns a large number of Singaporean companies operating India. Appeal allowed for statistical purposes. - ITA No. 409/Rjt/2016 - - - Dated:- 28-11-2017 - Pramod Kumar AM and Rajpal Yadav JM Neeraj Agarwal for the appellant. Har Govind Singh for the respondent. ORDER Pramod Kumar, AM: 1. By way of this appeal, the assessee appellant has challenged correctness of the order dated 12th August 2016 passed by the learned Commissioner (Appeals) upholding the assessment under section 172(4) of the Income Tax Act, 1961, in respect of m.v. Pacific Rainbow for the assessment year 2015-16. 2. Grievances raised by the assessee are as follows: 1. The Commissioner of Income Tax (Appeals), Ahmedabad [hereinafter referred to as the CIT (A) ] erred in confirming the order of the Income Tax Officer (International Taxation), Gandhidham (hereinafter referred to as the ITO ) denying Appellant the benefit of the Agreement for Avoidance of Doubl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The CIT (A) erred in discarding the submissions and case law relied upon by the Appellant. The CIT (A) failed to appreciate that the facts in present case and the facts in the case of ITA No. 392/RJT/2014 are identical and the said decision squarely applies in present case. 8. The CIT(A) erred in holding that the documents relied upon by the Appellant are the nature of additional evidence which cannot be considered in absence of formal Application and being certificates from private parties cannot override the facts highlighted by the AO or that the remittance of freight to Singapore has not been still evident and hence conclusion drawn by AO in denying the benefit would be justified. 9. The Appellant submits that matter arising out of interpretation of DTAA cannot lead to initiation of penalty proceedings u/s 271(1 (c) of the Act. 10. The Appellant craves leave to add, alter, delete, modify or rescind any of the grounds as and when necessary. 3. The short issue that we are really required to adjudicate is whether or not, on the facts and in the circumstances of the case, the assessee was indeed wrongly declined the benefit of Article 8 of the Indo Singapore Double ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 issued by the Inland Revenue Authority of Singapore which, inter alia, certifies that the freight income from India had been brought to tax in Singapore . He submits that once this piece of additional evidence is admitted, which goes to the root of the matter, it will be clear that the freight receipts, taxability of which is impugned in appeal before us, has already suffered tax in Singapore and cannot thus be denied treaty protection in India. 2. Having heard the learned Departmental Representative, we deem it fit and proper to admit the additional evidence. Ordered, accordingly. 3. Learned counsel was then asked whether the freight receipts in question were actually subjected to tax in Singapore. He replies in affirmative. Our question was followed up by an even more specific question i.e. whether the assessee availed the exemption under section 13F of Singapore Income Tax Act, and, as such, the freight receipts were not actually subjected to tax in Singapore. He admits that the exemption under section 13 F was indeed availed by the assessee in Singapore, and that, to that extent, his earlier submission was giving an incorrect impression and was rather technically worde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... students and trainee, and teachers and researchers. We are urged to compare the expression employed in these three articles with the expression employed in article 8 which merely says that the profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State . Essentially, therefore, this income cannot be treated as exempt from tax in India, as India does not have the right to tax it at all, and since it is not an income exempt from tax in India, Article 24 of India Singapore tax treaty cannot at all be invoked. Learned counsel then relies upon an order passed by the Tribunal in the case of APL Co Pte Ltd Vs CIT [(2017) 78 taxmann.com 240 (Mum)] in support of this proposition. Learned counsel then submits that the income in question is taxable on accrual basis, and not on receipts basis, and, for this short reason alone, article 24 of Indo Singapore tax treaty does not come into play at all. He then submits that based on the certificate issued by the Inland Revenue Authority of Singapore, regarding shipping income being brought to tax on accrual basis, this very bench of the Tribunal, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from tax in Singapore, it cannot be said to be have been subjected to tax in Singapore. These evidences, at the minimum, were misleading and aimed at creating a wrong impression about the Singaporean taxability of income in question. He points out that it is for the first time, and as a result of specific questions by the bench, that the fact of this income being exempt from tax in Singapore has come to the light now. He submits that looking to the scheme of the Indo Singapore tax treaty, which specifically states that only such income can be given treaty benefit in India which has suffered tax in Singapore- as evident from article 24, an income which is not taxed in Singapore cannot be granted tax exemption in India. Learned Departmental Representative relies upon the stand of the authorities below, and, as if taking a cue from the observations made by us from the bench, submits that article 24 at least makes it clear that what has not actually suffered tax in one country cannot at all be allowed treaty benefit in the other country, and, for this short reason alone, the assessee cannot be allowed treaty benefit in India. He seeks liberty to file the written submission on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave requested for us to confirm that the freight income received from India had been taxed in Singapore. In relation to this, we have reviewed the information provided and confirm that the freight income received from India had been brought to tax in Singapore in the Years of Assessment ( YA ) 2015 (Basis period: 1 January 2014 to 31 December 2014) and 2016 (Basis period: 1 January 2015 to 31 December 2015). We trust the above is sufficient for your requirements. 7. These certificates give an impression that the freight income received from India has been subjected to tax in Singapore. In response to assessee s request for confirming that freight income received from India has been taxed in Singapore , the IRAS has stated that, based on their review of information supplied by the assessee, the freight income received from India has been brought to tax in Singapore . Let us consider this is in the light of the factual position admitted before us to the effect that the assessee has availed exemption under section 13F of the Singapore s Income Tax Act, and, to that extent, the income embedded in these receipts has not actually been taxed in Singapore. When learned counsel is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial precedents in the cases of Azadi Bachao Andolan (supra), Venkatesh Karrier (supra) and Emirate Shipping Lines (supra), these were the cases in which the expression liable to tax , in the context of article 4(1) of India UAE Double Taxation Avoidance Agreement and India Mauritius Double Taxation Avoidance Agreement, which appeared alongwith the words 'by reason of domicile, residence, place of management, place of incorporation or any other criterion of similar nature . These DTAAs are quite different from the one that we are dealing with inasmuch as the emphasis on subject to tax in the India Singapore DTAA is clear and unambiguous, and article 24 leaves no doubt about this underlying thrust of the double taxation avoidance agreement. As to what is the scope of subject to tax , we find guidance from UK s HMRC International Manual (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm162090) which, inter alia, states that It should be noted that the term subject to tax is different from being liable to tax . Liable to tax means that the customer only needs to be within the general scope of tax in the UK .. On the other hand, subject to tax m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic tax law meaning of that term, it is also certainly not anybody s case that domestic law meaning of a term will have precedence over the contextual meaning of that term; the dispute is only with regard to whether an interpretation seeking adoption of contextual meaning, or treaty meaning as learned authors put it, has to onus to demonstrate that such a meaning must be adopted in the present context . The expression exempt from tax is an undefined term in the treaty and the context in which it is used in Article 24 is that when an income is granted an exclusion from taxable income in one of the contracting state or taxed at a lower rate in one of the contracting state, such an exclusion must depend on its status of taxability in the other contracting state. The context in which expression exempt from tax is set out in article 24, it essentially implies that the treaty benefit of non-taxation of an income, or its being taxed at a lower rate, in a contracting state depends on the status of taxability in another contracting state. In such a situation, to hold that only income covered by article 20, 21 and 22 can be said to be exempt in the source state because the expression exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely preceding period- i.e. Singapore in the present context) and as such remittance rule does not at all come into play, and in the article 22 only governmental institutions are referred, which are anyway not taxable in the residence state, remittance rule does not come into play at all. The conclusion thus arrived at by the bench leads to a situation in which article 24 is otiose but then, as is the elementary legal position, a treaty or a statute cannot be interpreted in such a manner so as to make a provision redundant, as is reflected in the legal maxim ut res magis valeat quam pereat [see Herman J s observations in Union Texas Petroleum Corporation vs. Critchley (1988) STC 69, affirming the observations of Goulding, J. in IRC vs. Exxon Corporation (1982) STC 356 at p. 359 referred in Hindalco Industries (supra)]. In any case, the interpretation of a tax treaty is not the same thing as interpretation of a statute and there are well settled ground rules for interpretation of statutes which have been laid down by several decisions of the coordinate benches, and the interpretation by the coordinate bench is clearly contrary to the law laid down by these binding judicial preceden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal. Learned Departmental Representative, who had sought liberty to file written submissions in the light of inputs from the directorate of international taxation, has also not been able to file the written submissions till now, and we do not have the benefit of departmental stand on these issues either. In any event, as additional evidence is submitted at the stage of proceedings before us and as the new facts have come to light at the stage of hearing before us, the parties also should have a full opportunity of presenting their case in the light of these facts, even though this situation has arisen due to their evasive and not so transparent conduct. Let all the relevant aspects be examined afresh in this light and the perspectives of both the parties be taken to the record and be analysed properly, particularly as this issue concerns a large number of Singaporean companies operating India. In view of these discussions and bearing in mind entirety of the case, we deem it fit and proper to remit the matter to the file of the learned CIT(A) for adjudication de novo in the light of the new facts emerging as above, in accordance with the law and by way of a speaking order. All the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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