Hire of vessel on Time charter basis with crew -
whether royalty under Indo-Singapore DTAA
Facts :
Assessee,
a Singapore resident had rented a vessel named Smit Borneo on time charter
basis with its crew thereby retaining operational control of the said vessel to
one Boskalis offshore contracting. The said vessel was used in oil exploration
activities of BG exploration Ltd. Assessee filed a NIL return. It was
the case of the revenue that the amounts received arising out of the time
charter was taxable as royalty under article 12(3)(b) of the Indo-Singapore
DTAAas the same was for the use of equipment, machinery on hire basis. Revenue
also impressed that the earlier year taxability of the same vessel was on
voyage charter basis and hence the favourable verdict of the ITAT for
earlier years ought not to be granted to the assessee. Plea of the
assessee was the charter was on time basis with the entire crew retaining the
operational control of the vessel thus it was business income and in the
absence of a PE it cannot be taxed under section 44BB of the act as well.
Held
in favour of the assessee that the time charter revenue was not royalty and was
also not taxable under section 44BB.
Dissented :
Poompuhar Shipping Corporation Ltd (2013)
30 taxmann.com 150 (Madras)
Upheld :
Smit Singapore Pte Ltd. v. DCIT, in [ITA No.7055/Mum./2017,
dt. 09-11-2020]
Smit Singapore Pte Ltd. v. DCIT, in [ITA No. 6588/Mum/2018, dt.
20-7-2021] : 2021 TaxPub(DT) 4270 (Mum-Trib)
Applied :
Sical Logistics Ltd. v. ADIT (I.T) Chennai [ITA No.
1074-1079/Mad/2015, dt. 14-12-2016]
Ed. Note : The distinction between Poompuhar shipping and that of the assessee is
explained in the judgment as under.
Case: Smit
Singapore Pte. Ltd. v. Dy. CIT 2023 TaxPub(DT) 3812 (Mum-Trib)