Receipts from operation of ships in international traffic is exempt in terms of India-Singapore DTAA

Tata NYK Shipping Pvt Ltd Vs DCIT (ITAT Delhi)

ITAT Delhi held that as per Article 8 of India–Singapore DTAA receipts from operation of ships and aircrafts in international traffic is taxable in the country of residence of the recipient. Therefore, amounts received by the assessee from operation of ships in international traffic would be exempt.

Facts- The issue involved in the present appeal is that the revenue taxed the amount received by the assessee as income from royalty holding that there was no commercial rationale for incorporation of the appellant company in Singapore, the appellant company was used as a conduit with the intent of availing treaty benefits under DTAA and income of the appellant from shipping activity being exempt from tax in Singapore as per Singapore domestic tax laws, the appellant was not liable to tax in Singapore and hence could not be regarded as tax resident of Singapore entitled to benefit of DTAA.

Conclusion- In assessee’s own case it is held that as per Article 8 of India–Singapore DTAA receipts from operation of ships and aircrafts in international traffic is taxable in the country of residence of the recipient. Therefore, as per the treaty provisions, amounts received by the assessee from operation of ships in international traffic would be exempt. Therefore, when the TRC was available before the Assessing Officer, in a way, he was justified in allowing benefit to the assessee under Article 8 of the Treaty.

Held that the Co-ordinate Bench of Tribunal has already held that the assessee is entitled to treaty benefit after examination of the tax returns of the assessee filed before the tax authority of Singapore and also held that the assessee is to be considered as the tax resident of Singapore. The Tribunal has also held that the assessee has not entered into any back-to-back arrangement. The Tribunal has also held that the receipts cannot be treated as royalty.

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