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The Tax Publishers Non-resident Shipping line business - Denial of benefit under Indo-Singapore DTAA - alleged royalty income from hiring of ships - reopening of assessment *Facts:* Assessee a Singapore resident was plying ships in international and coastal trade in tie up with Indian entity Tata NYK India Pvt. Ltd. Post facto a scrutiny assessment under Section 143(2) and reference made to Transfer pricing officer (TPO) who agreed that the assessee's international freight was at arm's length price (ALP); the PCIT chose to reopen the case under Section 263. Allegations of the PCIT was the AO failed to inquire information in toto on the three revenue streams viz India inbound import freight amount, India outbound export freight amount and for coastal shipping. The PCIT held that the assessee had only offered coastal shipping to tax in India instead of the entire freight income basing that they were eligible to claim relief under Indo-Singapore DTAA for shipping line operations r/w Section 172. Accordingly, PCIT held that the Singapore structure itself was a sham to avail treaty benefits and the assessee was evading taxes thru treaty shopping and thus taxed only the inbound freight to tax as royalty towards plying of ships, equipment @ 10% and thus also denied the DTAA treaty benefits for shipping business. On higher appeal - Held in favour of the assessee that they were entitled to the DTAA treaty benefits for shipping lines. The reopening of the PCIT was uncalled for. The structure was not a sham and this cannot be brought in hindsight simply as an alternative to reopen the case. *Ed. Note:* The bald allegations of the PCIT is worth noting - 1. The scheme of arrangement employed by the assessee is tax avoidance through treaty shopping mechanism. 2. The assessee company is not a tax resident for the purposes of tax treaty between India-Singapore as it does not satisfy the condition of "liable to tax". 3. The TRC is not sufficient to establish the tax residency if the substance establishes otherwise. 4. There is no commercial rationale of establishment of assessee company in Singapore. 5. The control and management of the assessee company is not conclusively established in Singapore in the light of the facts. *Case:* Tata Nyk Shipping Pte. Ltd. v. CIT 2023 TaxPub(DT) 1688 (Del-Trib)

The Tax Publishers

Non-resident Shipping line business - Denial of benefit under Indo-Singapore DTAA - alleged royalty income from hiring of ships - reopening of assessment

Facts:

Assessee a Singapore resident was plying ships in international and coastal trade in tie up with Indian entity Tata NYK India Pvt. Ltd. Post facto a scrutiny assessment under Section 143(2) and reference made to Transfer pricing officer (TPO) who agreed that the assessee's international freight was at arm's length price (ALP); the PCIT chose to reopen the case under Section 263. Allegations of the PCIT was the AO failed to inquire information in toto on the three revenue streams viz India inbound import freight amount, India outbound export freight amount and for coastal shipping. The PCIT held that the assessee had only offered coastal shipping to tax in India instead of the entire freight income basing that they were eligible to claim relief under Indo-Singapore DTAA for shipping line operations r/w Section 172. Accordingly, PCIT held that the Singapore structure itself was a sham to avail treaty benefits and the assessee was evading taxes thru treaty shopping and thus taxed only the inbound freight to tax as royalty towards plying of ships, equipment @ 10% and thus also denied the DTAA treaty benefits for shipping business. On higher appeal -

Held in favour of the assessee that they were entitled to the DTAA treaty benefits for shipping lines. The reopening of the PCIT was uncalled for. The structure was not a sham and this cannot be brought in hindsight simply as an alternative to reopen the case.

Ed. Note: The bald allegations of the PCIT is worth noting -

1. The scheme of arrangement employed by the assessee is tax avoidance through treaty shopping mechanism.

2. The assessee company is not a tax resident for the purposes of tax treaty between India-Singapore as it does not satisfy the condition of "liable to tax".

3. The TRC is not sufficient to establish the tax residency if the substance establishes otherwise.

4. There is no commercial rationale of establishment of assessee company in Singapore.

5. The control and management of the assessee company is not conclusively established in Singapore in the light of the facts.

Case: Tata Nyk Shipping Pte. Ltd. v. CIT 2023 TaxPub(DT) 1688 (Del-Trib)