ASST. COMMISSIONER OF INCOME TAX, (INTERNATIONAL TAXATION)-4(3)(2), MUMBAI , MUMBAI vs. WAN HAI LINES LIMITED, MUMBAI

ITITA 3305/MUM/2026Status: DisposedITAT Mumbai29 May 2026AY 2023-2415 pages
AI SummaryDismissed

What were the facts?

The Revenue (Assessing Officer) is in appeal against the orders of the CIT(A) for Assessment Years (AY) 2020-21 and 2023-24, concerning the deletion of additions made on account of Inland Haulage Charges (IHC). The assessee, Wan Hai Lines Limited, is a non-resident shipping company from Taiwan, operating ships in international traffic. The assessee provides comprehensive shipping services, including inland container movement, port handling, and ocean freight, under a single Bill of Lading. The Assessing Officer treated IHC as income from domestic transport, outside the scope of Article 8 of the India-Taiwan DTAA, and attributed a portion to a Permanent Establishment (PE) in India, making an addition of Rs. 2,20,21,956/- for AY 2020-21. The CIT(A) deleted this addition. The facts for AY 2023-24 are identical.

What did the Tribunal hold?

The Tribunal held that the Inland Haulage Charges (IHC) are inextricably linked with the transportation of cargo in international traffic and constitute an integral and incidental part of the overall shipping operation. The movement of containers inland is not an independent domestic activity but forms part of a continuous international transportation arrangement connected with the carriage of goods by sea. The contractual obligation of the assessee is not complete until delivery to the customer within India. The Tribunal emphasized that clause 2(b) of Article 8 of the India-Taipei DTAA, which deals with profits from the use or rental of containers, provides an exception for containers used solely within the other territory. The use of the expression 'unless' indicates that only activities entirely confined within the source territory fall outside the protective ambit of Article 8. Since IHC receipts retain a direct and proximate nexus with the operation of ships in international traffic, they cannot be regarded as arising from containers 'used solely within the other territory'. Therefore, the exception in clause 2(b) does not apply, and these receipts continue to fall within the scope of Article 8 of the India-Taipei DTAA. The Tribunal respectfully followed the decision of the Hon'ble Bombay High Court in Safmarine Container Lines NV and the coordinate bench decision in Delmas S.A.S. Accordingly, the grounds raised by the revenue for both AYs were dismissed.

What were the issues?

1. Whether the CIT(A) erred in deleting the addition on account of Inland Haulage Charges (IHC) by considering them as services rendered in international waters, rather than domestic inland transport, thus not eligible for the benefit of Article 8 of the India-Taiwan DTAA? (Question of law/mixed law and fact, concerning Article 8 of India-Taiwan DTAA). 2. Whether the CIT(A) erred in deleting the addition on account of IHC by relying on the decision of the Hon'ble Bombay High Court in Safmarine Container Lines NV, without considering that the Department's SLP was dismissed as withdrawn by the Hon'ble Apex Court without adjudicating on merits? (Question of law, concerning the precedential value of a dismissed SLP). Assessee's Contentions: - IHC receipts are an inseparable part of the total freight earned under a single Bill of Lading and are directly connected with international transportation. - IHC forms part of a single composite contract and is covered under a single Bill of Lading. - Inland movement is an integral and indispensable component of the Assessee's international shipping operation, undertaken solely for export or import and inseparable from the maritime leg. - IHC receipts are duly included in the presumptive income computed under Section 44B of the Act and are covered under Article 8 of the India-Taiwan DTAA. - Relied on the decision of the Hon'ble Bombay High Court in Safmarine Container Lines NV and the Tribunal's decision in Delmas S.A.S. Revenue's Contentions: - IHC are received for services rendered in domestic inland transport and not in international waters. - IHC pertains to 'inland transportation' which cannot be considered 'International Traffic' and thus not eligible for the benefit of Article 8 of the India-Taiwan DTAA. - The decision in Safmarine Container Lines NV was not acceptable to the Department, and an SLP was preferred before the Hon'ble Apex Court.

Which sections of the Income-tax Act were involved?

Section 44B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “I” BENCH, MUMBAI

Before: SMT. BEENA PILLAI & SHRI ARUN KHODPIA

For Appellant: Shri. Ajay R. Singh a/w Shri. Akshay A. Pawar
For Respondent: Ms. ShrutiAnzare – Sr. DR
Hearing: 13.05.2026Pronounced: 29.05.2026

Heard together (2 matters)

I.T.A. No. 3304/Mum/2026
I.T.A. No. 3305/Mum/2026

Read from the judgment's own cause title. This page is filed under one of them.

Per Smt. Beena Pillai, JM: Present appeals filed by the Revenue arises out of the separate orders passed dated 28.01.2026 by Ld.CIT(A), 58, Mumbai, for A.Y. 2020-21 and 2023-24. It is submitted by both sides that the facts based on which the disallowance/addition are made by the Ld.AO are identical for both the years under consideration. Accordingly, both these appeals are disposed off by the way of the common order.

IT (IT) A 3304/Mum/2026 & 3305/Mum/2026 Wan Hai Lines Limited

For the sake of convenience Grounds pertaining to the A.Y. 2

The order continues below.

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