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Tax Publishers Hire of vessel on Time charter basis with crew - whether royalty under Indo-Singapore DTAA *Facts :* Assessee, a Singapore resident had rented a vessel named Smit Borneo on time charter basis with its crew thereby retaining operational control of the said vessel to one Boskalis offshore contracting. The said vessel was used in oil exploration activities of BG exploration Ltd. Assessee filed a NIL return. It was the case of the revenue that the amounts received arising out of the time charter was taxable as royalty under article 12(3)(b) of the Indo-Singapore DTAAas the same was for the use of equipment, machinery on hire basis. Revenue also impressed that the earlier year taxability of the same vessel was on voyage charter basis and hence the favourable verdict of the ITAT for earlier years ought not to be granted to the assessee. Plea of the assessee was the charter was on time basis with the entire crew retaining the operational control of the vessel thus it was business income and in the absence of a PE it cannot be taxed under section 44BB of the act as well. Held in favour of the assessee that the time charter revenue was not royalty and was also not taxable under section 44BB. *Dissented :* Poompuhar Shipping Corporation Ltd (2013) 30 taxmann.com 150 (Madras) *Upheld :* Smit Singapore Pte Ltd. v. DCIT, in [ITA No.7055/Mum./2017, dt. 09-11-2020] Smit Singapore Pte Ltd. v. DCIT, in [ITA No. 6588/Mum/2018, dt. 20-7-2021] : 2021 TaxPub(DT) 4270 (Mum-Trib) *Applied :* Sical Logistics Ltd. v. ADIT (I.T) Chennai [ITA No. 1074-1079/Mad/2015, dt. 14-12-2016] *Ed. Note :* The distinction between Poompuhar shipping and that of the assessee is explained in the judgment as under. *Case:* Smit Singapore Pte. Ltd. v. Dy. CIT 2023 TaxPub(DT) 3812 (Mum-Trib)

Tax Publishers

Hire of vessel on Time charter basis with crew - whether royalty under Indo-Singapore DTAA

Facts :

Assessee, a Singapore resident had rented a vessel named Smit Borneo on time charter basis with its crew thereby retaining operational control of the said vessel to one Boskalis offshore contracting. The said vessel was used in oil exploration activities of BG exploration Ltd. Assessee filed a NIL return. It was the case of the revenue that the amounts received arising out of the time charter was taxable as royalty under article 12(3)(b) of the Indo-Singapore DTAAas the same was for the use of equipment, machinery on hire basis. Revenue also impressed that the earlier year taxability of the same vessel was on voyage charter basis and hence the favourable verdict of the ITAT for earlier years ought not to be granted to the assessee. Plea of the assessee was the charter was on time basis with the entire crew retaining the operational control of the vessel thus it was business income and in the absence of a PE it cannot be taxed under section 44BB of the act as well.

Held in favour of the assessee that the time charter revenue was not royalty and was also not taxable under section 44BB.

Dissented :

Poompuhar Shipping Corporation Ltd (2013) 30 taxmann.com 150 (Madras)

Upheld :

Smit Singapore Pte Ltd. v. DCIT, in [ITA No.7055/Mum./2017, dt. 09-11-2020]

Smit Singapore Pte Ltd. v. DCIT, in [ITA No. 6588/Mum/2018, dt. 20-7-2021] : 2021 TaxPub(DT) 4270 (Mum-Trib)

Applied :

Sical Logistics Ltd. v. ADIT (I.T) Chennai [ITA No. 1074-1079/Mad/2015, dt. 14-12-2016]

Ed. Note : The distinction between Poompuhar shipping and that of the assessee is explained in the judgment as under.

Case: Smit Singapore Pte. Ltd. v. Dy. CIT 2023 TaxPub(DT) 3812 (Mum-Trib)