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TMI Blog2024 (6) TMI 873X X X X Extracts X X X X X X X X Extracts X X X X ..... e, even if it is sourced from India. HELD THAT:- Article 8 of India-Singapore Treaty mandates that income of assessee enterprise from shipping business in international traffic shall be taxable only in the State of residence i.e. Singapore. Article 24(1) of the Treaty is not applicable in cases where assessee was able to demonstrate that its income is taxable in Singapore on accrual basis [like in this case, assessee has adduced material in the form of Inland Revenue Authority of Singapore clarifiying that its resident s income are taxable on the basis of accrual]. And it is noted that on the basis of such a clarification of Singapore Inland Revenue Authority which was not rebutted by the Indian tax Authorities as not genuine, or in the absence of any other material to take a view that global income of Singapore resident is assessable to taxation on remittance basis, we note that the Hon ble Gujarat High Court in similar case of M/s.M.T. Maersk Mikage [ 2016 (9) TMI 19 - GUJARAT HIGH COURT] held that income of Singapore resident was charged to tax on accrual basis (i.e. full amount would be assessable to tax on accrual and not on remittance) We concur with the view of M/s. Bengal T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reby vitiating the entire computation of taxable total income in the impugned order on various facets. 4. The DCIT/DRP failed to appreciate that the misconstruction of the treaty provisions in Article 8 read with Article 24 of India Singapore Double Taxation Avoidance Agreement would vitiate the decision to tax the freight income earned by the appellant foreign company from operating the ships from Indian Ports. 5. The DCIT/DRP failed to appreciate that the treaty benefit claimed under Article 8 of the D'TAA between India and Singapore was correct and sustainable in law especially on the consideration of true intention of granting such benefit and further in the light of assignment of taxing rights vested with Singapore under the said treaty. 6. The DCIT/DRP failed to appreciate that the Article 8 of the treaty clearly would restrict the profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic in confirming the taxation of such income only in that state while in such circumstances invoking/shifting the chargeability of the income under Article 24 is completely incorrect and not tenable in law. 7. The DCIT/DRP faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Act, 1961 (hereinafter the Act ) in view of Treaty [Double Taxation Avoidance Agreement (DTAA)] between India and Singapore. Brief facts of the case as noted by the AO are that the assessee is a foreign company incorporated in Singapore which plies its ships globally including through Indian Ports and earns freight and other charges that arise from this activity. The AO noted that assessee s Indian Agent M/s.PIL (India) Pvt. Ltd., collects these charges, debits its commissions and sundry expenses incurred for the business of assessee and remits the balance sum to Singapore. And the assessee (Singapore company) filed its return of income for AY 2015-16 on 23.12.2015 reported income accrued in India to the tune of Rs. 70,33,31,521/-, but claimed the treaty benefit viz., entire income as not taxable in India by virtue of Article 8 of DTAA between India-Singapore. According to assessee, it is a resident of Singapore and therefore, as per Article 8 of India-Singapore DTAA, profits derived from its global business of shipping is excigable to tax as per Singapore Tax Law. In other words, as per the Treaty/DTAA, Singapore has exclusive right to tax the global shipping income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of double taxation does not arise in the first place and the other country i.e. the source country very much gets the right of taxation. According to AO, the word only in Article 8 merely signifies it as a tie-breaker when multiple parties are taxing the same income and when only one party remain as the contender, then the term only loses all significance. And since, the Singapore (resident state) is not laying any claim of taxation at all on the shipping income of the assessee by virtue of Sec.13A (income derived from operation of Singapore ships) Section 13 F (income derived from foreign ships) of Income tax Act of Singapore, the word only is stripped of its meaning and Article 8 itself is redundant and paves way for the country of source to lay its claim on taxation of this shipping income. The AO further noted that, Article 7 (business profits) or Article 14 (independent service) though gives power to resident state by using the expression shall be taxable only in that state , however, provide for certain exception clauses and thus, according to AO, such an exception of Article 8 is provided for by Article 24 of DTAA of India-Singapore Treaty. Therefore, AO referred to Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer to treat the detention charges as part of Freight income / shipping income, which directions was incorporated in the final assessment order(s) under challenge before this Hon'ble Bench. 03. The taxability of the shipping income was also challenged before the DRP by the appellant(s) unsuccessfully and the said issue of taxability of shipping income is also part of the final assessment order(s) / impugned order(s) before this Hon'ble Tribunal for adjudication. 04. The Article 8 of India - Singapore DTAA should be construed as standalone and the taxability of the shipping income specifically is vested with Singapore under the treaty, there is no scope / power for taxing the said income of a Singapore resident company under the Indian Tax Regime. 05. The Article 24 of India Singapore DTAA cannot make inroads into Article 8 inasmuch as Article 24 talks about limitation of relief in the treaty under 2 scenarios, namely: Exemption of income or Income taxed at a reduced in the source country. 06. Whereas, Article 8 of India Singapore DTAA talks about / envisages the right of taxation vesting with Singapore inasmuch the 2 circumstances envisaged in Article 24 shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rns and the returns covering the Assessment Years under consideration were also placed on record from the original Stage onwards. 13. In the discharge of initial burden by reporting the shipping income including the shipping income earned from India, the decision of the Hyderabad Bench should be read so as to apply the principles laid down in para 19 (Refer Page Nos. 125 126 of the Case Laws Paper book) and for granting the relief as prayed for by applying Article 8 on standalone basis. 14. On the wrong presumption of cleavage of opinion between the decision of the Chennai Bench and the Hyderabad Bench, the revenue attempted by filing a petition in the present batch of appeals before the Hon'ble President for constitution of Special Bench and the said request is understandably rejected leading to the present proceedings of final hearing in the said batch of appeals. 15. The Chennal bench has passed the second order on the said issue (Refer Page No. 174 of the Case Laws Paper book) and the said decision was rendered both on jurisdiction as well as on merits in favour of the said assessee. The said decision was challenged on the issue of jurisdiction as well as on the correctness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , reading along with Section 172 of the Act, needs to be considered inasmuch as having conceded initially on the non taxability of the shipping income under the Act by issuing the no objection for the ships to sail out of the various ports of India, the revenue is precluded from taxing the said income at the later point in time on the wrong premise of the new theory mooted, namely double non taxation . 22. Even in the context of remittance theory invoked by the revenue by citing Article 24, the unremitted portion, which is now the subject matter of dispute, especially the taxation of such component invoking Section 44B of the Act is effectively and to be deemed as remitted in view of the incurring of the port handling expenses by the agent on behalf of the appellant, thereby negating the taxability of such presumed unremitted portion by invoking Section 44B of the Act in view of the revenue's understanding of Article 24. 23. The deemed remittance theory would oust the applicability of Article 24 even going by the stand of the revenue on the facts and in the circumstances of the present case. 24. It is not the case of venturing into various articles of DTAA and it is case of und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision In para 13 14 of the said order the Hon'ble Tribunal observed as under As may be seen from the provisions of Article 8(1), we are of the considered view that it is not an exemption provision but an enabling provision which provides an exclusive right of taxation of income to the residence country. Further, by entering in to treaty with Singapore, India has given up its right to tax shipping income of a non-resident in India. Therefore, any income of a non-resident shipping company which is a tax resident of Singapore is liable to tax only in Singapore but not in India. 14. The provision of Article 24 of India Singapore DTAA is applicable for income which is exempt from tax as per the tax treaty. As has been clarified above, it may be noted that Article 8 is unambiguously not an exemption provision but only a provision which provides a taxation right to the country of residence. Therefore, the international shipping income earned by the assessee is not exempted in India, whereas it is taxable only in the country of residence 1.e., Singapore. From the above, it is very clear that exclusive right of taxation in one Contracting State is not the same as the specific exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational traffic shall be taxable only in that State. From the above, it is seen that the enabling word giving exclusive right of taxation to the resident state viz,, Singapore is the word only . This is the position which has been strongly emphasised by the Hon'ble ITAT in its order referred supra. Now it is our endeavor to point out the flaws in such reliance on the word only . A reference to the India Singapore treaty will clearly show that the word only has not only been used in Article 8 but also in other articles like Article 7 Business profits, Article 13 Capital Gains, Article 14 Independent Personal Services, Article 15 Dependent Personal Services, Article 19 Non Government pensions and annuities reproduced as follows: ARTICLE 7 BUSINESS PROFITS 1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as it directly or indirectly attributable to that permanent establishment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll or conduit company that claims it is a resident of a Contracting State shall not be entitled to the benefits of paragraph 4A or paragraph 4C of Article 13 of this Agreement. A shell or conduit company is any legal entity falling within the definition of resident with negligible or nil business operations or with no real and continuous business activities carried out in that Contracting State.. provides for instances wherein said income can also be taxable in the source state. Similarly. Article 8 being, both an enabling provision in respect of resident state and an exempt provision in respect of source state also has a similar provision wherein the rider enabling the source state to tax shipping income is provided at Article 24 Limitation of Relief ARTICLE 24 LIMITATION OF RELIEF 1. Where this Agreement provides (with or without other conditions) that income from sources in a Contracting State shall be exempt from tax, or taxed at a reduced rate in that Contracting State and under the laws in force in the other Contracting State the said income is subject to tax by reference to the amount thereof which is remitted to or received in that other Contracting State and not by referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regard we wish to reiterate the position of the revenue that the certificate issued was only provisional and in fact the certificate issued clearly mentions so and hence the said certificate cannot serve as a bar to the assessment proceedings. In this regard it would be pertinent to note that the DIT relief certificate is issued during the course of the year when no accounts are prepared/returns are filed and in fact based on provisional Information. The above view of the revenue has in fact been affirmed by the Hon'ble Delhi High Court in two two different instances viz case of WP(C) No.12859, 12860, 12863, 12864, 12865, 12866 of 2009 Areva T D SA vs The Asst Director of Income Tax Ors. 21. On a perusal of the order passed, it is clear as day that the same is interim in nature and in fact, the same could not have been anything else but interim in character as the scope of Section 197 is limited. 22. In this context, we may profitably refer to the decision in Dodsal Pvt. Ltd. (supra) wherein it has been held thus: It is well settled that the orders passed under Section 195(2) of the Income-tax Act are provisional and tentative. These orders do not bind the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 172 continue to apply and can be enforced. 21. Accordingly, the first contention of the petitioner that provisions of Section 147/148 cannot be invoked, has to be rejected. We also rely upon decision of a Division Bench of this Court in Areva T D, SA vs. ADIT, 179(2011)DLT314. III. Certificate issued by the Singapore Income Tax Authority It should be noted at the very outset that this letter has not been received from the designated Competent Authorities as required under the DTAA and so it's very veracity is questionable. Such communications clarifying any stand should come from CBDT whose instructions and circulars are binding on tax authorities. It should also be borne in mind that such unilateral letters will not be taken cognizance of unless such a stand is deliberated between the competent authorities of India and Singapore and is duly ratified and notified through a Protocol under the existing DTAA. This letter also basically takes the line that shipping income even if earned abroad accrues in Singapore and therefore it is taxed in Singapore due to its accrual in Singapore and not on receipt. What is odd is that the Singapore Income Tax Act does not actually make such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the taxpayer has done to earn the profit in question and where he has done it. CIR v HKTVB International Ltd [1992] 3 WLR 439 at 444: incomes arising from the sale of securities by a Singapore-incorporated subsidiary of an overseas company effected on an overseas exchange by way of instruction to an overseas broker by taxpayer's non-resident director outside of Singapore are not incomes accruing in or derived from Singapore Hang Seng Bank case the place where whereby the contract was made and executed to be a relevant factor TTT Pte Ltd v Comptroller of Income Tax (1995) 2 MSTC 5189. establishing the geographical location of the taxpayer's profit-producing transactions themselves as distinct from activities antecedent or incidental to those transactions. Such antecedent activities will often be commercially essential to the operations and profitability of the taxpayer's business, but they do not provide the legal test for ascertaining the geographical source of profits ING Baring Securities (Hong Kong) Ltd. v. Commissioner of Inland Revenue [2007] HKCU 1666 Hong Kong Court of Final. The Indian Jurisprudence on the concept of accrual and place of accrual are also on. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India and the income is received In India. Given the above fact and both Singapore and Indian Jurisprudence, the Income of the appellant has accrued and arisen only in India and not in Singapore as claimed in the certificate issued by the Singapore tax authorities. IV. Decision in the case of Bengal Tiger Line Ltd vs. DDIT(International Taxation [2013] 33 taxmann.com 307 In para 19 of the said order ..We further noted that this issue is considered by the Tribunal in the assessee own group company case in Bengal Tiger Line Ltd vs. DDIT (International Taxation) (2013) 33 taxmann.com 307, where the Tribunal has considered the India Cyprus DTAA and has clearly held that where assessee, a non-resident company registered in Cyprus DTAA and has clearly held that where assessee, a non-resident company registered in Cyprus, was in shipping business and it had effective management of enterprise in Cyprus, Income earned by assessee from shipping business was not taxable in India. The Hon'ble Tribunal erred in placing reliance on the above decision for the reason that the Indie Cyprus treaty and India Singapore treaty are different in their provisions as India Cyprus treaty did not have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 amount remitted to or received in Singapore. In fact, the certifying authority went on to opine that in view of such facts, Article 24.1 of the DTAA would not be applicable and consequently, Article 8 would apply. 18. To this later opinion of the Revenue authority of Singapore, we may not be fully guided since it falls within the realm of interpretation of the relevant clauses of DTAA. However, in absence of any rebuttal material produced by the Revenue, we would certainly be guided by the factual declaration made by the said authority in the said certificate and this declaration in 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, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id order ..The AO has made an attempt to deny the benefit of exemption claimed by the assessee by invoking Article 24 of India Singapore DTAA, even though, the conditions stipulated under Article 24 are not satisfied. This brings us once again to Article 24, which states that when an income in the source state is exempt from tax under this Agreement, and that income is subject to tax by reference to the amount remitted to that state, then the benefit will be restricted to the remitted amount. This Article therefore envisages situations such as this one, where an income, in this case shipping income is exempt from tax in the source states i.e. India, due to provisions of Article 8. But when such income is exempt in source state and is subject to tax in resident state with reference to the amount of remittance, then this exemption provided in source state, le, India will be restricted to the amount actually remitted to Singapore. There are 3 main components of this Article, which are listed below: i) An income earned from the source state should be exempt from tax, or taxed at a reduced rate as per the various provision of the articles of the treaty; ii) That income should be subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve them the benefit of the provisions of the Convention on such income. Contracting States which agree to restrict the application of the provisions of the Convention to income that is effectively taxed in the hands of these persons may do so by adding the following provision to the Convention: Where under any provision of this Convention income arising in a Contracting State is relieved in whole or in part from tax in that State and under the law in force in the other Contracting State a person, in respect of the sald income, is subject to tax by reference to the amount thereof which is remitted to or received in that other State and not by reference to the full amount thereof, then any relief provided by the provisions of this Convention shall apply only to so much of the income as is taxed in the other Contracting State. In some States, the application of that provision could create administrative difficulties if a substantial amount of time elapsed between the time the income arose in a Contracting State and the time it were taxed by the other Contracting State in the hands of a resident of that other State. States concerned by these difficulties could subject the rule in the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxpayer is a resident will be required to pay tax on its global income. To avoid the double taxation, two rules are devised in the DTAA s, i.e., one is by way of providing Distributive Rules under which taxing rights allocated between contracting State with respect to various kinds of income; and the Second rule is to put state of residence under an obligation to give either credit for taxes paid in the source state or to exempt the income which is taxed in source state . These two rules have also been explained in para 19 of OECD Commentary which reads as under:- 19. For the purpose of eliminating double taxation, the Convention establishes two categories of rules. First, Articles 6 to 21 determine, with regard to different classes of Income, the respective rights to tax of the State of source or situs and of the State of residence, and Article 22 does the same with regard to capital. In the case of a number of items of income and capital, an exclusive right to tax is conferred on one of the Contracting States. The other Contracting State is thereby prevented from taxing those items and double taxation is avoided. As a rule, this exclusive right to tax is conferred on the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent (Article 7 and paragraph 2 of Articles 13 and 22); an exception is made, however, if the permanent establishment is maintained for the purposes of international shipping, inland waterways transport, and international air transport (cf. paragraph 23 below); income from the activities of artistes and sportsmen exercised in that State, irrespective of whether such income accrues to the artiste or sportsman himself or to another person (Article 17); directors fees paid by a company that is a resident of that State (Article 16); remuneration in respect of an employment in the private sector, exercised in that State, unless the employee is present therein for a period not exceeding 183 days in any twelve month period commencing or ending in the fiscal year concerned and certain conditions are met; and remuneration in respect of an employment exercised aboard a ship or aircraft operated internationally or aboard a boat, if the place of effective management of the enterprise is situated in that State (Article 15); subject to certain conditions, remuneration and pensions paid in respect of government service (Article 19). 22. The following are the classes of income that may be subjected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the use of the phrase may be taxed does not give exclusive right of taxation to state of residence. As per these Model of Convention, the word may be taxed and may also be taxed gives simultaneous taxing rights to state of source. If, in the DTAA, an item of income is may be taxed in state of source and nothing is mentioned about taxing right of state of residence in convention itself, then state of residence is not precluded from taxing such income and can tax such income using inherent right of state of residence to tax such global income of its resident. Only in the case of phrase shall be taxed only used, then only the state of residence is precluded from taxing it. In such cases, where the phrase may be taxed used, the state of residence has not given up its inherent right to tax. In such case, the convention leaves it to contracting state to choose between two methods of relief, the exemption method or the credit method. (and India follows credit method). 9. Having taken note of the aforesaid fundamental principles (supra), we find that Article 8 of India-Singapore Treaty mandates that income of assessee enterprise from shipping business in international traffic shall be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to deny the benefit of exemption merely for the simple reason that the said income was not taxed in Singapore by virtue of separate exemptions provided under Singapore Income Tax Act. 17. In this case, the Assessing Officer has attempted to deny the exemption claimed by the assessee under Article 8 by invoking Article 24 of India Singapore tax treaty on a misconception of two clauses of India Singapore DTAA by referring to the provisions of Section 13F of the Singapore Income Tax Act, ignoring the fact that Section 13F of the Singapore Income Tax Act was already in existence since 01.04.1991 and as such the articles provided in India Singapore DTAA which was came in to existence from 27.05.1994 was inserted by the Competent Authorities of both the Contracting States after thoroughly considering the provisions of Section 13F of Singapore Income Tax Act and further choose not to alter the taxation right of shipping income which is generally available to the country of residence. We further noted that two sovereign nations have entered into a bilateral agreement and specifically agreed on the taxing rights of particular streams of income, the provisions of such agreement should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... international shipping income to the residence country i.e., Singapore in the present assessee case. Therefore, as per sub-clause (2) of Article 31 of the Vienna Convention, the 'context' for the purpose of interpretation of a treaty would primarily include the text, preamble and annexure to the treaty. Therefore, in order to give the ordinary meanings to the terms in their 'context' the whole treaty should be read as it is without giving any meaning which is not the purpose intended by the Articles. In this case, the AO has stated that the preamble should be read to understand the object and purpose. However it may be noted that Article 31(2) of Vienna Convention does not cover object and purpose. Therefore, we are of the considered view that AO has misunderstood the general rules of interpretation in the Vienna Convention. Even assuming without conceding that the preamble should be referred to understand the object and purpose, the stated objective of the treaty is avoidance of double taxation . This object can be achieved in two ways, which one way by credit mechanism when both the countries tax the same income and the second way is providing 'exclusive right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CIT, 193 ITR 321. 19. We further noted that this issue is considered by the Tribunal in the assessee own group company case in Bengal Tiger Line Ltd vs. DDIT(International Taxation), [2013] 33 taxmann.com 307, where the Tribunal has considered the India Cyprus DTAA and has clearly held that where assessee, a non-resident company registered in Cyprus, was in shipping business and it had effective management of enterprise in Cyprus, income earned by assessee from shipping business was not taxable in India. The Tribunal while arriving at above conclusion has taken support from the decision of Hon'ble Gujarat High Court in the case of Arabian Express Line Ltd of United Kingdom and also considered Circular No.333 issued by CBDT and held that in the DTAA between India and Cyprus and India and U.K the provisions relating to taxation of shipping business are pari materia. Therefore, the income earned by the assessee from shipping operations in India is taxable only at Contracting State (country of residence). The relevant findings of the Tribunal are as under:- 7. We have heard the submissions made by both the parties. We have perused the order of the Assessing Officer and the direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ships are owned by an enterprise belonging to a country with which India has entered into an agreement of avoidance of double taxation and the agreement provides for taxation of shipping profits only in the country of which the enterprise is a rexident, no tax is payable by such ships at the Indian ports. In the DTAA between India and Cyprus and India and U.K. the provisions relating to taxation of shipping business are pari materia. Therefore, the income earned by the assessee is not taxable in India. Rather the Assessing Officer had no jurisdiction to levy tax on the appellant/assessee. 20. In this view of the matter and considering facts and circumstances of this case, we are of the considered view that Article 8 of India Singapore DTAA is applicable and as per which shipping income of a resident of Singapore is taxable only in Singapore but not in India. The AO has made an attempt to deny the benefit of exemption claimed by the assessee by invoking Article 24 of India Singapore DTAA, even though, the conditions stipulated under Article 24 are not satisfied. We, therefore are of the considered view that the AO as well as the Ld.DRP were erred in coming to the conclusion that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee at Singapore , and therefore, such a view was taken by Hyderabad ITAT by observing as under at Para No.19: 19. We may further point out that the ld.AR during the course of argument has not relied upon any other judgment. However in the Paper Book filed by him, there is a reference to two decisions namely, Alabra Shipping Pvt. Ltd. Singapore Vs. ITO (International Taxation), Gandhidham (ITA 392/RJT/2014 dt.09.10.2015) at Page 79 of the paper book and also the decision in the case of Emirates Shipping Line, FZE VS. ADIT (WP(Civil) No.9780 of 2009 dt.26.07.2012) at Page 84 of the paper book. In our opinion, the finding recorded by the Tribunal in the first decision namely Alabra Shipping Pvt. Ltd (supra) does not come to the rescue of the appellant for the reasons mentioned at Para 8 of the said decision, which are self-explanatory. We are reproducing the said Para 8 hereinbelow for ready reference. *8. As regards reliance of the authorities below on the decision of this Tribunal, in the case of Abacus International (supra), suffice to say that it was in the context of interest income of the assessee and there was nothing on record to suggest that such an income was to be taxed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Tribunal (Hyderabad Bench) in the case of M/s.PACC Container Line Pvt. Ltd. v. ITO (International Taxation) is not applicable. 13. The Ld.AR further drew our attention to the decision of this Tribunal (Chennai Bench) in the case of M/s.Bengal Tiger Line Pte. Ltd. in IT(TP) A No.18/Chny/2021 placed at Page Nos.174-242 of the Paper Book, wherein, the decision of the Tribunal (Hyderabad Bench) in the case of M/s.PACC Container Line Pvt. Ltd. v. ITO (supra) was also considered while deciding the merit of the action of Revenue as well as the Tribunal decided the issue on jurisdiction of reopening of assessment u/s. 147 of the Act. This Tribunal allowed the appeal filed by the assessee both on legal issue as well as on merits by observing as under: 28. The Ld. CIT-DR has cited the decision of Hyderabad Tribunal in Mis PACC Container Line Pvt. Ltd. (supra). Having gone through the same, we find this case law deal with a situation wherein the authorities have granted the benefit of DTAA to the assessee but restricted the same to the extent of amount remitted by the assessee. This decision does not consider any of the decision as cited before us including the cited decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case, the Appellate Tribunal was right in law in holding that there is no valid jurisdiction acquired by the AO? (iv) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in adjudicating on merits even after quashing the assessment order on legal/technical grounds? 3. Post these appeals on 27.02.2024. 15. Thus, according to the Ld.AR, the findings given by the Tribunal that Article 24(1) of the DTAA between India and Singapore would not apply in the facts of the assessee s case, since its income is taxable on accrual basis in Singapore; and by virtue of Article 8(1) of DTAA.; the assessee s global shipping income is taxable only in Singapore and not in India. For completion, the Ld.AR also drew our attention to the decision of the Hon ble Gujarat High Court in the case of DCIT (International Taxation) v. Venkatesh Karrier Ltd. reported in [2012] 349 ITR 124. In that case, the Hon ble High Court upheld the action of the Tribunal holding that in the light of applicability of Article 8 of DTAA between India and UAE, and assessee being a resident of UAE, there was no scope of taxing the income of the ships in any port in India. And ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 amount remitted to or received in Singapore. In fact, the certifying authority went on to opine that in view of such facts, Article 24.1 of the DTAA would not be applicable and consequently, Article 8 would apply. 18. To this later opinion of the Revenue authority of Singapore, we may not be fully guided since it falls within the realm of interpretation of the relevant clauses of DTAA. However, in absence of any rebuttal material produced by the Revenue, we would certainly be guided by the factual declaration made by the said authority in the said certificate and this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) 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 method of taxation is followed by a tax jurisdiction and the taxability for income from activities carried out outside the home jurisdiction is restricted to the income repatriated to such tax jurisdiction, as in the case of Singapore, the treaty protection must remain confined to the amount which is actually subjected to tax. Any other approach could result in a situation in which an income, which is not subject matter of taxation in the residence jurisdiction, will anyway be available for treaty protection in the source country. It is in this background that the scope of LOB provision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner is set aside. Resultantly, order of assessment dated 26.12.2011 is also quashed. Petition disposed of accordingly. 16. in the light of the judicial precedents cited (supra), and considering the facts and circumstances of the appeals, we concur with the view of the co-ordinate Bench of this Tribunal in M/s.Bengal Tigers Line Pte (supra) and the decision of the Hon ble Gujarat High Court in the case of M.T. Maersk Mikage Mikage (supra) and hold that in terms of Article 8 of India Singapore DTAA, global income of a tax resident of Singapore from shipping operations, even though, which is earned outside Singapore is taxable only in Singapore on accrual basis; and consequently Article 24 of India Singapore DTAA ought not to have been invoked to deny the benefit of DTAA exemption merely for the reason that the said income was not taxed in Singapore by virtue of separate exemptions provided under Singapore Income Tax Act. We are, therefore, of the considered view that the AO as well as the Ld.DRP erred in coming to the conclusion that income earned by the assessee from shipping operations in India is taxable in India by virtue of Article 24 of India Singapore DTAA. Hence, we direct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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