October 2016
Shipping Company- S. 172 of I. T. Act, 1961- DTAA between India and Singapore- Where freight receipts in question derived by assessee, a Singaporean shipping company, was taxable at Singapore on basis of accrual and not on basis of remittance, benefit of article 8 of DTAA between India and Singapore could not be denied to assessee on ground that fright receipts were remitted to London and not to Singapore
By Keshav B. Bhujle
Advocate
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M.T. Maersk Mikage & 4 Vs. DIT; [2016] 72 taxmann.com 359 (Guj):
The assessee, a Singapore shipping company, had through ships owned or chartered by it, undertaken voyages from various Indian ports and earned income from exporters and out of other such business. The assessee, through present petitioner, filed a return of income u/s. 172(3) of the Income-tax Act, 1961, declaring the gross profit calculations, but claiming Nil income by relying on Article 8 of DTAA between India and Singapore. The Assessing officer denied benefit under article 8 to the assessee on the ground that freight 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. Revision application u/s. 264 of the Act made by the petitioner was dismissed by the CIT.
The Gujarat High Court allowed the writ petition filed by the petitioner and held as under:
“i) The certificate dated 09.01.2013 issued by the Inland Revenue Authority of Singapore certified that the income in question derived by ST Shipping(assessee) 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. In other words, the full income would be assessable to tax on the basis of accrual and not on the basis of remittance.
ii) This clause1 of Article 24 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.
iii) 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 clause1of Article 24 would not survive.
iv) In the result, petition is allowed. Impugned order dated 25.03.2014 passed by the Commissioner is set aside. Resultantly, order of assessment dated 26.12.2011 is also quashed. Petition disposed of accordingly.”
