LOB CLAUSE BETWEEN INDIA-SINGAPORE IS NOT APPLICABLE IN CASE OF PAYMENT IS MADE TO A BANK ACCOUNT IN THIRD COUNTRY
LOB CLAUSE BETWEEN INDIA-SINGAPORE IS NOT APPLICABLE IN CASE OF PAYMENT IS MADE TO A BANK ACCOUNT IN THIRD COUNTRY
LOB CLAUSE BETWEEN INDIA-SINGAPORE IS NOT APPLICABLE IN CASE OF PAYMENT IS MADE TO A BANK ACCOUNT IN THIRD COUNTRY IF THE SAID INCOME WAS TAXABLE IN SINGAPORE ON ACCRUAL BASIS AND NOT ON REMITTANCE BASIS. HENCE, THE DTAA BENEFIT UNDER ARTICLE 8 COULD NOT BE DENIED TO THE ASSESSEE.
Alabra Shipping Pte. Ltd., Singapore v. ITO-IT ITA no. 392/RJT/2014 Date of decision- October 09, 2015
Facts
Alabra Shipping Pte Ltd. (ASPL-S), the assessee is a Singapore tax resident and is engaged in shipping business. For the AY 2012-13, GAC India Private Limited (Indian agent for “assessee”) filed return declaring income with respect to the freight receipts received by the assessee and claimed the benefit of Treaty protection under Article 8 of India- Singapore DTAA. During assessment, it was noticed by the AO that while the assessee had claimed the benefit of India- Singapore DTAA for freight receipts, the funds were remitted back to freight beneficiary’s account in UK, i.e. country other than Singapore. AO submitted that remittance to Singapore was a sine quo non for availing benefits of indo-Singapore Tax Treaty (in view of LOB clause under Article 24), and as the freight income was remitted to country other than Singapore, the DTAA benefit under Article 8 could not be granted. On appeal, CIT upheld AO’s order and denied Article 8 benefit holding that in absence of any evidence of bank slip or certificate from the bank that the sum was remitted to Singapore, the Article 8 benefit could not be availed by the assessee.
Decision
The ITAT, Rajkot while distinguishing Abacus International Pvt Ltd Vs DDIT [ITA No. 1045/Mum/2008], observed that the Inland Revenue Authority of Singapore had confirmed that in case of assessee, the freight income had been regarded as Singapore sourced income and bought to tax on accrual basis. It was held that, “the provisions of Article 24 cannot be put into service as this provision can only be triggered when twin conditions of treaty protection, by low or no taxability, in the source jurisdiction and taxability on receipt basis, in the residence jurisdiction, are fulfilled. There is nothing on the record to even vaguely suggest that the freight receipts of ASPL-S were taxation only on receipt basis in Singapore. Quite to the contrary, there is reasonable evidence to demonstrate that such an income was taxable, on accrual basis, in the hands of the assessee. All this material was duly confronted to the Assessing Officer, in the remand proceedings, and the Assessing Officer could not demonstrate that the stand taken by the ASPL-S in this regard was incorrect. Since, it was very well established that the related income was taxable in Singapore on accrual basis and not on remittance basis, the DTAA benefit under Article 8 could not be denied to the assessee. The entire freight income of the assessee, which was only from operations of ship in the international traffic, would be taxable only in Singapore and no income would be taxed in India.
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