Shipping business - denial of DTAA benefits as per
Indo-Singapore DTAA Article 24 - Limitation of benefits class
Facts:
Assessee was the agent of a non-resident shipping line
based out of Singapore. They had claimed tax relief as per Article 8 pertaining
to Shipping business as per Indo-Singapore DTAA for freight receipts received
from India on the plea that the same was to be taxed in the country of actual
residence viz. Singapore. It was noticed by the AO that the remittance was
being done to a bank account in London instead of Singapore and thus AO invoked
Article 24 of the Indo-Singapore DTAA (LOB clause) citing that Companies
domiciled in Singapore are not taxed for incomes not brought into Singapore,
Thus no matter production of a certificate from Singapore Internal revenue
authorities assessee was not entitled to the benefits of the Indo-Singapore
DTAA. On appeal, CIT(A) voiced views of the AO. On higher appeal to ITAT
assessee's plea was that vide M. T. Maersk Mikage vs. DIT (Intl. Taxation) (2016)
72 taxmann.com 359 (Gujarat-HC) : 2016 TaxPub(DT) 3859 (Guj-HC)
had accepted the certificate of the Singapore revenue authorities and had
granted the benefit of Article 8 to analogous shipping business, thus they were
also entitled to the same.
Held against the assessee that when Article 24 has made an
explicit mention that the amounts ought to have been received in Singapore to
avail DTAA exemption as Singapore does not tax a foreign company for monies not
repatriated into Singapore/retained overseas. The certificate issued does not
expressly mention if the same incomes were subject to tax in Singapore to avail
DTAA benefit. If not taxed it would become a case of non-taxation via DTAA
exemption/relief. Accordingly the certificate requires investigation with the
Singapore tax authorities and thus remanded back to the AO for the same.
Applied:
Abacus International Pvt. Ltd. (2013) 34 taxmann.com 21
(Mumbai-Tribunal) : 2013 TaxPub(DT) 2059 (Mum-Trib)
Ed Note: The LOB
clause is a Damocles sword especially given that the conditions imposed on it
need to be met diligently to avail DTAA relief/exemptions. There are contrary
verdicts also on this specific case of the assessee on shipping line taxation.
But the way the case has been dealt shows that Indian tax authorities are not
going to accept any DTAA relief/exemption on the face of it.
Case: Atlantic
Shipping (P) Ltd. v. ITO 2024 TaxPub(DT) 1429 (Rjk-Trib)