Payment of hire charges on bareboat charter basis is not taxable if the agreement for hire was executed outside India and vessel was delivered / situa

Court : Authority for Advance Ruling

Citation : Seabird Exploration FZ, LLC, UAE [2010-TII-27-ARA-INTL]

Brief : Payment of hire charges on bare boat charter basis is not taxable if the agreement for hire was executed outside India and vessel was delivered/ situated outside India at the time of entering into the agreement.

Recently the Authority for Advance Ruling (AAR) in the case of Seabird Exploration FZ, LLC, UAE [2010-TII-27-ARA-INTL] held that the hire charges paid by the applicant to Vessel Providing Companies (VPC) under global usage bareboat charter agreements shall be liable to tax in India only in the cases where vessel was in India at the time of entering into agreement.

The AAR held that the ‘source of income’ for hire charges of a vessel is to be determined having regard to the place where the agreement for hire was executed and the place where the vessel was delivered/situated at the time of entering into the agreement. In the present case, since at the time of renewal of the agreements the vessels were situated in India, the hire charges pertaining to that period are taxable in India.

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