ASST. COMMISSIONER OF INCOME TAX, (INTERNATIONAL TAXATION)-4(3)(2), MUMBAI , MUMBAI vs. ZIM INTEGRATED SHIPPING SERVICES LIMITED, VIDYANAGARI

ITITA 664/MUM/2026Status: DisposedITAT Mumbai30 March 2026AY 2023-2422 pages
AI SummaryAllowed

What were the facts?

The assessee, ZIM Integrated Shipping Services Limited, a resident of Israel, is engaged in the business of operating ships in international traffic. The appeals by the Revenue and cross-objections by the assessee pertain to Assessment Years 2018-19 and 2023-24. The dispute centers on the taxability of Inland Haulage Charges. For AY 2018-19, the assessee declared total income of Rs. 17,340, and for AY 2023-24, Rs. 1,49,11,040. The Assessing Officer (AO) proposed to tax Inland Haulage Charges, amounting to Rs. 53,63,67,514 for AY 2018-19 and Rs. 40,26,00,664 for AY 2023-24, on the grounds that these services are rendered in domestic inland transport and not in international waters. The Commissioner of Income Tax (Appeals) deleted these additions, a decision now under challenge by the Revenue. The assessee contends that these charges are incidental to international shipping operations and eligible for exemption under Article 8 of the India-Israel DTAA.

What did the Tribunal hold?

The Tribunal held that the Inland Haulage Charges earned by the assessee are ancillary and incidental to the operation of ships in international traffic and are therefore squarely covered under Article 8 of the India-Israel DTAA. Consequently, these charges are taxable only in the State of residence of the assessee (Israel), and the provisions of Article 7 read with Article 5 of the DTAA have no application. The Tribunal found no infirmity in the view taken by the Ld. CIT(A) and upheld it. The reasoning was based on the principle that activities directly connected with or ancillary to the operation of ships in international traffic fall within the scope of Article 8. The Tribunal drew support from the OECD Commentary on Article 8, which clarifies that the term 'operation of ships' extends beyond mere carriage by sea to include directly connected or ancillary activities. The Tribunal also referenced decisions of the Hon’ble Bombay High Court in similar cases, such as DIT(IT) vs. Balaji Shipping UK and CIT vs. Balaji Shipping (UK) Ltd., which held that inland transportation, being integrally connected with international shipping operations, cannot be segregated for separate taxation. The Tribunal noted that the dismissal of the Department's SLP in the Safmarine case, though for low tax effect, did not alter the binding nature of the High Court's decision on the merits for the Tribunal. The grounds raised by the Revenue in its appeal were dismissed, and the grounds raised by the assessee in its cross-objections were allowed, including the issue of PE and incorrect charging of interest under sections 234A and 234B, which were not adjudicated in detail in the provided extract but were implicitly allowed by the overall outcome.

What were the issues?

The Tribunal had to decide the following questions: 1. Whether the Ld. CIT(A) erred in deleting the addition on account of Inland Haulage Charges, considering they are for services rendered in domestic inland transport and not in international waters, thus not eligible for the benefit of Article 8 of the India-Israel Treaty? (Question of law and fact, concerning Article 8 of India-Israel DTAA and the definition of 'International Traffic'). 2. Whether the Ld. CIT(A) erred in deleting the addition 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 due to low tax effect without adjudicating on merits? (Question of law, concerning the precedential value of a dismissed SLP). Assessee's Contentions: * Inland Haulage Charges are an integral part of the international shipping operations, representing first-mile/last-mile connectivity for door-to-door transportation. * The movement of cargo within India is incidental to the main international voyage and forms part of a single, continuous international carriage of goods, evidenced by a combined bill of lading. * These receipts have been accepted by the Revenue as not taxable in India in past assessments under Article 8 of the India-Israel DTAA. * The assessee has consistently been engaged in this business since 2005, and there has been no change in the nature of these charges. * The assessee has obtained 100% DIT relief certificates under Article 8 of the India-Israel DTAA. * The assessee does not have a Permanent Establishment (PE) in India under the India-Israel DTAA. * Benefit under the India-Israel DTAA should be granted on dividend income. * Interest under sections 234A and 234B was charged incorrectly. Revenue's Contentions: * Inland Haulage Charges are received for services rendered in domestic inland transport and not in international waters. * Inland Haulage Charges pertain to 'inland transportation' which cannot be considered 'International Traffic' and thus are not eligible for the benefit of Article 8 of the India-Israel Treaty. * The decision in Safmarine Container Lines NV was not accepted by the Department, and an SLP was preferred, which was dismissed as withdrawn due to low tax effect without adjudicating on merits.

Which sections of the Income-tax Act were involved?

Section 44AA,Section 44B,Section 234A,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “I” BENCH, MUMBAI

Before: SMT. BEENA PILLAI & SHRI BIJAYANANDA PRUSETH

For Appellant: Shri Bomi Daruwala / Avanish Patil / Ms. Anita
For Respondent: Shri Krishna Kumar, Sr. DR
Hearing: 17.03.2026Pronounced: 30.03.2026

Per Smt. Beena Pillai, JM: These cross appeals filed by the Revenue in I.T.A. Nos. 663 & 664/Mum/2026 and the Cross Objections filed by the assessee in C.O. Nos. 112 & 113/Mum/2026 arise out of separate orders dated 14/11/2025 passed by the Learned Commissioner of

The order continues below.

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