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Facts
The assessee, a Singapore-based company engaged in international shipping, claimed exemption on freight income under Article 8 of the India-Singapore DTAA for AY 2016-17 and AY 2019-20. The assessee offered income under Section 44B and claimed relief under Section 90. The CPC denied this relief, and the CIT(A) upheld the denial.
Held
The Tribunal held that the assessee is eligible for exemption under Article 8 of the DTAA. The denial of relief by the CPC was due to processing the original return with an incorrect country code instead of the revised return. The issue for both assessment years was remitted back to the AO for allowing the tax relief.
Key Issues
Whether the assessee is eligible for exemption of freight income from international shipping under Article 8 of the India-Singapore DTAA, and if the denial of tax relief by the CPC and CIT(A) was justified.
Sections Cited
44B, 90, 143(1), 154
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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI PAWAN SINGH, JM &
Feedertech Pte. Ltd. O R D E R Per Padmavathy S, AM: These appeals by the assessee are against the separate orders of the Commissioner of Income Tax (Appeals)-56, Mumbai dated 25.09.2024 for AY 2019-20 and dated 14.05.2024 for AY 2016-17. The common issue contended by the assessee in both the AYs pertain to the issue of not granting exemption under Article-8 of the DTAA between India and Singapore towards the profits from operation of ships in International Traffic by the assessee.
We will first consider the appeal filed for AY 2016-17 for adjudication. The assessee is a non-resident company incorporated as per the regulations of Singapore and is a tax resident of Singapore. The assessee is engaged in the business of operation of Ships in International Traffic and earns freight income from the vessel voyages performed. The assessee filed the return of income for AY 2016-27 on 22.09.2016 declaring an income of Rs. 5,21,38,908/- which included freight income of Rs. 5,06,01,816/- and interest income of Rs. 15,37,092/-. The assessee in the return of income declared income @ 7.5% of the freight income under section 44B of the Income Tax Act 1961 (the Act) and claimed the tax relief under section 90 the tax payable became Nil. The assessee claimed the relief for the reason that as per Article-8 of the DTAA between India and Singapore the freight income of the assessee from the operation of ships in international traffic. The return of the assessee was processed under section 143(1) of the Act wherein the assessee was denied the tax relief claimed by the assessee. The assessee filed a rectification petition and the same was rejected on the ground that the Jurisdictional officer of the assessee has initiated scrutiny proceeding in the case of the assessee where the relief claimed would be considered. The assessee being aggrieved by the order under Feedertech Pte. Ltd. section 154 filed further appeal before the CIT(A). The CIT(A) dismiss the appeal on the ground that the assessee himself has declared the income under section 44B of the Act and that there is no provision under section 143(1) of the Act to reduce the income of the assessee as claimed in the return of income. With regard to the claim of exemption under Article-8 of the DTAA between India and Singapore the CIT(A) denied the benefit stating that it is a fresh claim by placing reliance on the decision of the Hon'ble Supreme Court in the case of Goetz India Ltd. 284 ITR 323 (SC).
The ld. AR during the course of hearing submitted that in the return of income format for AY 2016-17 there is no provision for claiming the exemption of income under DTAA and therefore the assessee calculated the income as per the provisions of section 44B and claimed the benefit of exemption under Article-8 of DTAA between India and Singapore as relief under section 90 of the Act. The ld. AR argued that by denying the relief of tax the revenue has denied the benefit of Article-8 to the assessee which is not correct.
The ld DR on the other hand vehemently supported the orders of the lower authorities.
We heard the parties and perused the material on record. We notice that the assessee has offered 7.5% of the total receipts from the operation of Ships in the International Traffic as Business Income under section 44B of the Act while filing the return of income. The assessee arrived at the tax on the said income and claimed the same as relief under section 90. The CPC, Bangalore while processing the return did not allow the relief claimed by the assessee under section 90 of the Act which resulted in a tax demand of Rs. 2,82,75,943/-. We notice that while processing the Feedertech Pte. Ltd. rectification petition vide letter dated 14.01.2021 (page 111 of the PB) the AO denied the tax relief for the reason that the country code for the purpose of tax relief is mentioned as UAE whereas the assessee was claiming relief under Singapore treaty. However on perusal of records, we notice that the assessee has filed a revised return on 14.03.2018 wherein the assessee has rectified the country code for which relief towards tax exemptions are claimed to Singapore from UAE which was erroneously mentioned in the original return of income. We further notice that the CPC, Bangalore has processed the original return of income denying the tax relief claimed by the assessee and the revised return with the correct country code has not been considered by the revenue. It is an undisputed fact that the income of the assessee from the operation of ships in international traffic is eligible for exemption under Article-8 of the DTAA between India and Singapore. The assessee's as per the submissions of the ld AR claimed the tax as a relief under section 90 instead of the claiming the income as exempt under DTAA for the reason that the ITR for the said AY did not have provisions to claim exemption under the DTAA. It is also relevant to note here that only the original return is processed and not the revised return where the country code for tax relief has been corrected as Singapore. In view of these discussion, and considering the fact that the revenue has not disputed that the assessee is otherwise eligible for exemption under Article 8 of DTAA between India and Singapore, we deem it fit to remit the impugned issue back to the AO. The AO is directed to allow the tax relief claimed by the assessee under section 90 in the return of income to the extent of the income which is eligible for exemption under Article-8 of the DTAA between India and Singapore. Needless to say that the assessee be given a reasonable opportunity of being heard.
For AY 2019-20 the assessee has filed the return of income declaring the income under section 44B of the Act and claiming the tax computed there from as Feedertech Pte. Ltd. relief under section 90 of the Act similar to AY 2016-17. The CPC, Bangalore while processing the return of income has denied the relief under section 90 of the Act which is upheld by the CIT(A). The ld. AR for AY 2019-20 raised a legal contention that the assessee was not issued notice by CPC, Bangalore which is in violation of the Principle of Natural Justice as contemplated in the 1st proviso to section 143(1)(a) of the Act. The assessee raised this additional ground on 08.07.2024 and the ld. AR prayed for admission of the same. The additional grounds raised are pure legal issue, which does not require investigation of new facts. Hence, placing reliance on the judgment of the Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC), we admit the additional grounds.
We heard the parties and perused the material on record. Since the facts for AY 2019-20 are identical, in our considered view our decision for AY 2016-17 on merits of the issue is mutatis mutandis applicable for AY 2019-20 also. Accordingly we remit the issue for AY 2019-20 also back to the AO with similar directions. Further we have given relief to the assessee based on the merits of the issue and therefore the legal contentions raised through additional ground have become academic and left open accordingly.