CIT Vs APL Co. Pte. Ltd. (Bombay High Court)
The Bombay High Court considered two appeals filed by the Revenue concerning the taxability of freight income earned by a Singapore tax resident engaged in the business of owning and operating ships in international waters. The assessee, whose business operations and management were based in Singapore, filed its return for Assessment Year 2008-09 declaring nil income by claiming the benefit of Article 8 of the India-Singapore Double Taxation Avoidance Agreement (DTAA) in respect of freight earnings collected from India.
The Assessing Officer observed that the assessee had claimed exemption for freight income from 136 ships but had produced registration certificates for only 128 ships. Consequently, freight income relating to eight ships was denied Article 8 benefit and taxed under Section 44B of the Income-tax Act, 1961 at 7.5%, resulting in assessed income of Rs.22.98 lakhs.
The Commissioner of Income-tax (Appeals) enhanced the assessment by denying Article 8 benefit in respect of an additional 97 ships. The principal ground was that the limitation of relief contained in Article 24 of the India-Singapore DTAA applied to the income claimed under Article 8. The assessee challenged this order before the Income Tax Appellate Tribunal (ITAT).
