Tata NYK Shipping Pte Ltd. Vs DCIT (ITAT Delhi)
ITAT Delhi Quashes ₹986 Cr Royalty Addition: Shipping Income Exempt Under DTAA- Tribunal Reiterates International Freight Not Royalty- Shipping Receipts Protected by Article 8 of DTAA- AO’s Mechanical Addition Struck Down
Delhi Bench of the Tribunal dealt with yet another round of litigation on the taxability of freight receipts of the Singapore-based shipping company. Assessee, a joint venture between Tata Steel Ltd. of India & NYK Holding B.V., Netherlands (a subsidiary of NYK Japan), is engaged in owning, operating & chartering ships for carrying dry bulk & break bulk cargo. For the year under consideration, Assessee received an aggregate sum of ₹986.40 crores from India. Out of this, ₹2.94 crores relating to coastal shipping was offered to tax u/s 44B, while the balance amount was claimed as exempt under Article 8 of the India–Singapore DTAA, treating it as shipping income from international traffic. AO, however, rejected the claim & treated the entire receipts as royalty taxable in India at the rate of 10% on gross basis. DRP, while noting that the very same issue stood decided in favour of Assessee by the Tribunal & upheld by the Delhi High Court for AYs 2016-17 & 2017-18, nevertheless directed AO to verify the pendency of departmental appeals. In a mechanical manner, AO once again followed the earlier approach & made the addition.
