APL Co. Pvt. Ltd. v. Dy. DIT - Taxpublishers.in

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The Tax Publishers2013 TaxPub(DT) 1546 (Mum-Trib) : (2013) 142 ITD 0498 : (2013) 158 TTJ 0075 : (2013) 094 DTR 0254 Income Tax Act, 1961 --Double taxation relief--Agreement India and Singapore Shipping activities/business--Assessee was a Singapore company. It was engaged in business of sea faring cargo business and operated through out world. In respect of Indian business, it operated its vessels in Singapore Chennia Sector, which was known as Madras service route in Maritime parlance. it entered into Joint service agreement with vessel operators for slot allocation in feeder vessels for carrying cargo to its hub either at Singapore or Sri Lanka, from where cargo was loaded into matter vessel for its destination port under article 8 of DTAA, assessee claimed relief for entire income profits. Assessing officer disallowed relief in respect of 39 vessels on the ground that assessee was neither other not lessee or character of vessels. Held: Was not justified. On facts, assessee was entitled to relief under article 8 of DTAA. When one compare the two Treaties, we find that the relevant Treaty Clause, i.e., article 8 is worded differently and on comparison of clause (4) of article 8, India Brazil Treaty talks of business as such but India Singapore Treaty talks of profits from the operation. Another difference is that India Singapore DTAA Treaty extends its arms to embrace, any other activity directly connected with such transportation, which is not extended in the India Brazil Treaty. [Para 37] Decisions of Federal Express Corp. Delta Airlines and United Parcel Service, all these cases rested their base on India US DTAA Treaty, which in form is the same, as that of India Singapore DTAA, i.e. Income from business of international transport, but in core context are different, because the above cases basically on the import of interpretations either from OECD commentaries and/or commentaries by Klause Vagel, because the language of Treaty would not give a very definite meaning. On this we take notice of the decision of United Parcel Service Co. (supra), wherein die coordinate Bench referred to the case of Hon'ble Supreme Court of India in the case of CIT v. PVAL Kulandagar Chettrai 2008 TaxPub(DT) 1212 (SC) : (2008) 300 ITR 5 (SC), wherein it was held, Model Convention can be taken assistance of only if the language of the treaty is drafted loosely or in an inclusive way or it does not unearth the intention of the contracting States in a candid manner. On going through this extract, nowhere do we find that the Treaty, which we are concerned which is loosely drafted or the intention of the contracting states is not coming out as it wants to be. In fact, if we once again look into the Treaty Articles 8.4(d), it is very clear, any other activity directly connected with such transportation. We have take into consideration that the idea to include such clauses is the economy of the contracting state, i.e. Singapore, which is based primarily on tourism and cargo traffic. In fact, when we read such clauses (b) & (c) as well in unison with sub-clause (d), as referred to by the Authorised Representative, we find that the wording of the Article 8 in India Singapore DTAA Treaty is not only differently worded then the other DTAA Treaties with contracting states, but it is profit specific, that is earned by the enterprises, because, every word used is as per maritime parlance. [Para 38] One must refer to the definition of the expression operation of ship or aircraft in international traffic. This expression has been defined in article 3, i.e. General Definitions. From the definition clause of the treaty, we find that international traffic means any transport by a ship or aircraft operated solely between places in the other contracting state. From the agreements, the two contracting states are India and Singapore. According to the agreements, we the operations of the feeder vessel is on Madras Service Route, i.e. the cargo is lifted by the feeder vessel from Chennai (Madras) or an Indian port, to be taken to its mother feeder hub, either at Singapore or Srilanka, from where it is taken to its onward and final destination. On these basic facts, emerging from the agreements perused by us, apparently the claim of the assessee comes within the precinct of Article 8 of India Singapore DTAA Treaty. [Para 40 Para 41] Further the assessing officer to apply the provisions of section 44B in the case of 7+1 voyages for which there are no supporting documents, taking into consideration the ratio laid down in the case of A.P. Muller, Maersk (P.) Ltd. [Para 42] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1546 (Mum-Trib) : (2013) 142 ITD 0498 : (2013) 158 TTJ 0075 : (2013) 094 DTR 0254

Income Tax Act, 1961

--Double taxation relief--Agreement India and Singapore Shipping activities/business--Assessee was a Singapore company. It was engaged in business of sea faring cargo business and operated through out world. In respect of Indian business, it operated its vessels in Singapore Chennia Sector, which was known as Madras service route in Maritime parlance. it entered into Joint service agreement with vessel operators for slot allocation in feeder vessels for carrying cargo to its hub either at Singapore or Sri Lanka, from where cargo was loaded into matter vessel for its destination port under article 8 of DTAA, assessee claimed relief for entire income profits. Assessing officer disallowed relief in respect of 39 vessels on the ground that assessee was neither other not lessee or character of vessels. Held: Was not justified. On facts, assessee was entitled to relief under article 8 of DTAA.

When one compare the two Treaties, we find that the relevant Treaty Clause, i.e., article 8 is worded differently and on comparison of clause (4) of article 8, India Brazil Treaty talks of business as such but India Singapore Treaty talks of profits from the operation. Another difference is that India Singapore DTAA Treaty extends its arms to embrace, any other activity directly connected with such transportation, which is not extended in the India Brazil Treaty. [Para 37] Decisions of Federal Express Corp. Delta Airlines and United Parcel Service, all these cases rested their base on India US DTAA Treaty, which in form is the same, as that of India Singapore DTAA, i.e. Income from business of international transport, but in core context are different, because the above cases basically on the import of interpretations either from OECD commentaries and/or commentaries by Klause Vagel, because the language of Treaty would not give a very definite meaning. On this we take notice of the decision of United Parcel Service Co. (supra), wherein die coordinate Bench referred to the case of Hon'ble Supreme Court of India in the case of CIT v. PVAL Kulandagar Chettrai 2008 TaxPub(DT) 1212 (SC) : (2008) 300 ITR 5 (SC), wherein it was held, Model Convention can be taken assistance of only if the language of the treaty is drafted loosely or in an inclusive way or it does not unearth the intention of the contracting States in a candid manner. On going through this extract, nowhere do we find that the Treaty, which we are concerned which is loosely drafted or the intention of the contracting states is not coming out as it wants to be. In fact, if we once again look into the Treaty Articles 8.4(d), it is very clear, any other activity directly connected with such transportation. We have take into consideration that the idea to include such clauses is the economy of the contracting state, i.e. Singapore, which is based primarily on tourism and cargo traffic. In fact, when we read such clauses (b) & (c) as well in unison with sub-clause (d), as referred to by the Authorised Representative, we find that the wording of the Article 8 in India Singapore DTAA Treaty is not only differently worded then the other DTAA Treaties with contracting states, but it is profit specific, that is earned by the enterprises, because, every word used is as per maritime parlance. [Para 38] One must refer to the definition of the expression operation of ship or aircraft in international traffic. This expression has been defined in article 3, i.e. General Definitions. From the definition clause of the treaty, we find that international traffic means any transport by a ship or aircraft operated solely between places in the other contracting state. From the agreements, the two contracting states are India and Singapore. According to the agreements, we the operations of the feeder vessel is on Madras Service Route, i.e. the cargo is lifted by the feeder vessel from Chennai (Madras) or an Indian port, to be taken to its mother feeder hub, either at Singapore or Srilanka, from where it is taken to its onward and final destination. On these basic facts, emerging from the agreements perused by us, apparently the claim of the assessee comes within the precinct of Article 8 of India Singapore DTAA Treaty. [Para 40 Para 41] Further the assessing officer to apply the provisions of section 44B in the case of 7+1 voyages for which there are no supporting documents, taking into consideration the ratio laid down in the case of A.P. Muller, Maersk (P.) Ltd. [Para 42]