PACIFIC INTERNATIONAL LINES P LTD,CHENNAI vs. DCIT INTERNATIONAL TAXATION-2(1), CHENNAI

ITTPA 1/CHNY/2020Status: DisposedITAT Chennai29 May 2024AY 2016-1747 pages
AI SummaryAllowed

What were the facts?

The appeals concern M/s. Pacific International Lines Pvt. Ltd. and M/s. Advance Container Lines Pte. Ltd. for assessment years ranging from 2012-13 to 2018-19. The core issue revolves around the taxability of freight income earned by these Singapore-resident companies from operating ships through Indian ports. The Assessing Officer (AO) and Dispute Resolution Panel (DRP) invoked Section 44B of the Income Tax Act, 1961, and Article 24 of the India-Singapore Double Taxation Avoidance Agreement (DTAA) to tax this income, which the assessees claimed was exclusively taxable in Singapore under Article 8 of the DTAA. The AO noted that the assessee's Indian agent collected freight charges, debited expenses, and remitted the balance to Singapore. The assessees filed returns reporting income accrued in India but claimed treaty benefits, asserting Singapore had the exclusive right to tax their global shipping income.

What did the Tribunal hold?

The Tribunal held that the AO and DRP erred in invoking Section 44B and Article 24 of the India-Singapore DTAA to tax the freight income. The Tribunal concurred with the view of coordinate benches and High Court decisions, stating that in terms of Article 8 of the India-Singapore DTAA, the global income of a tax resident of Singapore from shipping operations, even if earned outside Singapore, is taxable only in Singapore on an accrual basis. Consequently, Article 24 of the DTAA ought not to have been invoked to deny the DTAA exemption merely because the income was not taxed in Singapore due to separate exemptions under Singapore's Income Tax Act. The Tribunal directed the AO to delete the additions made towards the shipping income earned by the assessee in India. The issue of actual tax paid in Singapore was not decided as it was not a ground for refusal by the lower authorities and lacked factual and legal foundation before the Tribunal.

What were the issues?

1. Whether the assessee's freight income of Rs.64,17,08,105/- is taxable under Section 44B of the Income Tax Act, 1961, in light of the India-Singapore DTAA? (Question of law and fact, concerning Section 44B and Article 8 of the India-Singapore DTAA). Assessee's contentions: The assessee argued that Section 44B had no application as the income was exclusively taxable in Singapore under Article 8 of the India-Singapore DTAA. They contended that the DTAA clearly restricts the taxation of profits from international shipping operations to the country of residence (Singapore) and that invoking Article 24 to tax the freight income was incorrect. They also argued that the distinction between 'subject to tax' and 'liable to tax' was erroneous and that treaty benefits under Article 8 were correctly claimed, irrespective of whether the income was actually taxed in Singapore due to specific exemptions there. They relied on precedents like Emirates Shipping Line, FZE and M.T. Maersk Mikage. Revenue's contentions: The revenue contended that the DTAA's purpose was avoidance of double taxation, and Article 24 could be invoked to restrict treaty benefits. They argued that the treaty protection should be confined to the amount actually subjected to tax in the residence jurisdiction, especially when the residence country (Singapore) taxes repatriated income. They also raised the issue of actual tax paid in Singapore, though this was not a primary ground for refusal by the AO/DRP.

Which sections of the Income-tax Act were involved?

Section 44B

AI-generated summary — verify with the full judgment below

आयकर अपीलीय अिधकरण, ’डी’ "यायपीठ, चे"ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI "ी एबी टी. वक", "ाियक सद" एवं एवं एवं एवं "ी जगदीश, लेखा सद" के सम" BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER

IT (TP) A No.59/Chny/2019 िनधा"रणवष"/Assessment Year: 2015-16 & IT (TP) A No.01/Chny/2020 िनधा"रणवष"/Assessment Year: 2016-17 & IT (TP) A Nos.12 to 14/Chny/2021 िनधा"रणवष"/Assessment Years: 2012-13 to 2014-15 & IT (TP) A Nos.36 & 37/Chny/2022 िनधा"रणवष"/Assessment Years: 2017-18 & 2018-19

v. M/s.Pacific International Lines- The DCIT / ACIT, Pvt. Ltd., International Taxation-2(1), Unit 807/809, Raheja Towers, Chennai-600 006. Anna Salai, Chennai-600 002. [PAN: AADCP 5513 D] (अपीलाथ"/Appellant) (""यथ"/Respondent) IT (TP) A No.79/Chny/2019 िनधा"रणवष"/Assessment Year: 2016-17

v. M/s.Advance Container Lines- The DCIT, Pte. Ltd., International Taxation-1(1), Unit 807-809, Raheja Towers, Chennai-600 006. Anna Salai, Chennai-600 002. [PAN: AAFCA 1707 N] (अपीलाथ"/Appellant) (""यथ"/Respondent)

अपीलाथ" क" ओर से/ Appellant by : Shri S. Sridhar, Advocate ""यथ" क" ओर से /Respondent by : Shri A. Sasikumar, CIT : सुनवाईक"तारीख/Date of Hearing 24.04.2

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