Income Tax Appellate Tribunal - Panji
M/S Gac Shipping (India) P. Ltd.,, ... vs The Income Tax Officer (Inter. Taxa.), ... on 28 November, 2017
ITA No. 411/Rjt/2016
GAC Shipping (I) Pvt Ltd vs. ITO
Assessment year: 2015-16
Page 1 of 12
IN THE INCOME TAX APPELLATE TRIBUNAL
RAJKOT BENCH, RAJKOT
[Coram: Pramod Kumar AM and Rajpal Yadav JM]
ITA No. 411/Rjt/2016
Assessment year: 2015-16
BP Singapore Pte Ltd ...........................Appellant
[GAC Shipping (India) Pvt Ltd - As agents]
1/20, Sonali Park, Plot No. 317,
Ward 12/B, Gandhidham-370 201 [PAN: AAECB 0468 L]
Vs.
Income Tax Officer- International Taxation
Gandhidham ....................Respondent
Appearances by:
Neeraj Agarwal for the appellant
Har Govind Singh for the respondent
Dates of hearing of this appeal : November 2 and 3, 2017
Date of pronouncing the order : November 28, 2017
O R D E R
Per Pramod Kumar, AM:
1. By way of this appeal, the assessee appellant has challenged correctness of the order dated 12th August 2016 passed by the learned Commissioner of Income- tax (Appeals)-13, Ahmedabad upholding the assessment under section 172(4) of the Income Tax Act, 1961, in respect of m.v. Pacific Rainbow for the assessment year 2015-16.
2. Grievances raised by the assessee are as follows:
"1. The Commissioner of Income Tax (Appeals), Ahmedabad [hereinafter referred to as "the CIT (A)"] erred in confirming the order of the Income Tax Officer (International Taxation), Gandhidham (hereinafter referred to as "the ITO") denying Appellant the benefit of the Agreement for Avoidance of Double Tax between India and Singapore (hereinafter referred to as "DTAA").
2. The CIT (A) erred in not directing ITO to assess the income as nil of freight beneficiary i.e. BP Singapore Pte Ltd. while losing sight of the fact that BP Singapore Pte Ltd. is a Singapore tax resident company engaged in operation of ships in international traffic and hence entitled to benefit of Article ITA No. 411/Rjt/2016 GAC Shipping (I) Pvt Ltd vs. ITO Assessment year: 2015-16 Page 2 of 12 8 of the DTAA and their income from operation of ships in international traffic cannot be taxed in India.
3. The CIT (A) erred in confirming the order of ITO applying Article 24 of DTAA which provides for Limitation of Relief which is made applicable to only limited category which have been exempted from payment of tax as per DTAA or taxed at reduced rate and has no application to the income referred to in Article 8.
4. The CIT (A) erred in confirming the order of ITO holding that since the freight beneficiary was of Singapore and hence funds ought to have remitted to Singapore but funds were not remitted to Singapore, the benefit of DTAA cannot be granted. The CIT(A) failed to appreciate that when Article 24 of DTAA has no application, it has no relevance whether the funds have been received by BP Singapore Pte Ltd. in Singapore or USA or somewhere else.
5. The CIT (A) erred in not appreciating that the ITO has misinterpreted the provisions of DTAA and thereupon wrongly held that DTAA clearly states that the funds should be remitted to Singapore only while losing sight of the fact that the said freight income has been offered for tax purpose and in fact charged to tax in Singapore by observing that there was no evidence brought on record to establish the actual remittance to Singapore and they ought to be assessed to NIL income in India with regard to the profits from the operation of ships in international traffic as they are an enterprise of Singapore.
6. The CIT (A) erred in ignoring settled position of law that once the Income has been charged to tax in contracting state i.e. Singapore in present case, it is not necessary to establish that remittance has to be made or actually been made to Singapore to avail benefit of DTAA. In any case, the CIT (A) failed to appreciate that where the income is taxable on accrual basis, Article 24 of DTAA has no significance and the benefits of DTAA is applicable irrespective of whether remittance is received in Singapore or not.
7. The CIT (A) erred in discarding the submissions and case law relied upon by the Appellant. The CIT (A) failed to appreciate that the facts in present case and the facts in the case of ITA No. 392/RJT/2014 are identical and the said decision squarely applies in present case.
8. The CIT(A) erred in holding that the documents relied upon by the Appellant are the nature of additional evidence which cannot be considered in absence of formal Application and being certificates from private parties cannot override the facts highlighted by the AO or that the remittance of freight to Singapore has not been still evident and hence conclusion drawn by AO in denying the benefit would be justified.
9. The Appellant submits that matter arising out of interpretation of DTAA cannot lead to initiation of penalty proceedings u/s 271(1) (c) of the Act.
10. The Appellant craves leave to add, alter, delete, modify or rescind any of the grounds as and when necessary.
ITA No. 411/Rjt/2016GAC Shipping (I) Pvt Ltd vs. ITO Assessment year: 2015-16 Page 3 of 12
3. Learned representatives fairly agree that whatever we decide in the case of BP Singapore Pte Ltd vs. ITO (ITA No. 409/Rjt/2016) will be equally applicable here as well. Vide our order of even date, in the said case, we have held as follows:
"4. The assessee before us is a Singapore based company said to be engaged in the business of, inter alia, operations of ships in the international traffic. The assessee is freight beneficiary in respect of a vessel, by the name of MT Pacific Rainbow, which sailed from Vadinar, an Indian port, on 30th June 2014. It was in this backdrop that Indian agent of the assessee, i.e. Seaworld Shipping and Logistics Pvt Ltd, had filed a return under section 172(4) and claimed exemption, under article 8 of Indo Singapore tax treaty, of income embedded in the relevant freight receipts aggregating to Rs 5,19,63,857. This claim did not find favour with the Assessing Officer. He was of the view that there is no evidence to show that the money has been actually remitted to Singapore and suffered the tax. It seems that as for the claim of the assessee that the monies, though remitted to USA, have actually suffered tax in Singapore, the Assessing Officer rejected the same and observed that "this is not in the purview of the Indian tax authorities to verify the tax treatment of the remittances made by any person from USA to Singapore, and also not aware about whether the receipts were considered for tax at Singapore or not .... (and)... hence the claim of the assessee is not acceptable".. While the main thrust of the assessee was on Article 24 of Indo Singapore tax treaty, the Assessing Officer did mention that there is no evidence to establish that the income related to the freight receipts has been taxed in Singapore. The Assessing Officer was of the view that "the income generated from freight income definitely is outside the purview of chargeability in Singapore" and, on this basis and invoking the provisions of Article 24 of India Singapore tax treaty, the Assessing Officer declined treaty benefits to the assessee Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. The assessee is not satisfied and is in appeal before us.
5 This appeal was first taken up for hearing on 2nd November 2017, and the record of proceedings for that day reads as follows:
1. When this appeal was called out for hearing, Shri Neeraj Agarwal, learned counsel for the assessee, invited our attention to his petition for the admission of additional evidence by way of letter dated 21st February 2017 issued by the Inland Revenue Authority of Singapore which, inter alia, certifies that "the freight income from India had been brought to tax in Singapore". He submits that once this piece of additional evidence is admitted, which goes to the root of the matter, it will be clear that the freight receipts, taxability of which is impugned in appeal before us, has already suffered tax in Singapore and cannot thus be denied treaty protection in India.
2. Having heard the learned Departmental Representative, we deem it fit and proper to admit the additional evidence. Ordered, accordingly.
3. Learned counsel was then asked whether the freight receipts in question were actually subjected to tax in Singapore. He replies in affirmative.ITA No. 411/Rjt/2016
GAC Shipping (I) Pvt Ltd vs. ITO Assessment year: 2015-16 Page 4 of 12 Our question was followed up by an even more specific question i.e. whether the assessee availed the exemption under section 13F of Singapore Income Tax Act, and, as such, the freight receipts were not actually subjected to tax in Singapore. He admits that the exemption under section 13 F was indeed availed by the assessee in Singapore, and that, to that extent, his earlier submission was giving an incorrect impression and was rather technically worded. Learned counsel admits that the impression given by the certification by the Inland Revenue Authority of Singapore, though technically correct, was giving a rather misleading impression about the status of actual taxability of the freight receipts from India, in Singapore. He also stated that even he was not aware about this aspect of the matter until he, in response to bench's question, sought specific instructions from the assessee. Learned counsel, however, hastens to add that it will not affect the outcome of present appeal inasmuch as all that it is necessary, to invoke the treaty protection, is Singapore's right to tax the subject freight receipts and not the actual taxability in Singapore. He seeks the permission to raise the formal plea to that effect. Learned counsel seeks one day's time so that the bench may be addressed on this aspect.
4. Learned counsel's prayer is accepted, and, accordingly, the adjournment is granted for one day. The hearing of these appeals will resume tomorrow i.e. on 3rd November 2017 Sd/xx 2.11.17 Sd/xx 2.11.17 Rajpal Yadav Pramod Kumar Judicial Member Accountant Member Sd/xx 3.11.2017 Neeraj Agarwal (AR)
6. The matter was then heard on 3rd November 2017. Pursuant to the liberty granted by us, the assessee has also filed written submissions which are taken to record. The assessee was asked to argue the matter on the first principles since in all the judicial precedents cited by the learned counsel, authorities have proceeded to accept, without any question or doubt, the claim of the assessee that the relevant income has been subjected to tax in Singapore - a claim, which, for the detailed reasons we will set out in a short while, we have reservations on. We will deal with these judicial precedents a little later. Learned counsel's first plea is that the provisions of Article 24 of India Singapore tax treaty cannot be invoked on the facts of the present case for the elementary reason that the Indian shipping income of the Singaporean assessee, to quote the words of the learned counsel, is "neither exempt from tax in India nor taxed at reduced rate in India". He then goes on to discuss the difference between an income "exempt from tax" and an income which "taxable only in one of the contracting state". He then refers to Article 20, 21 and 22 which use the expression "exempt from tax" in the context of students and trainee, and teachers and researchers. We are urged to compare the expression employed in these three articles with the expression employed in article 8 which merely says that the "profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State". Essentially, therefore, this income cannot ITA No. 411/Rjt/2016 GAC Shipping (I) Pvt Ltd vs. ITO Assessment year: 2015-16 Page 5 of 12 be treated as exempt from tax in India, as India does not have the right to tax it at all, and since it is not an income exempt from tax in India, Article 24 of India Singapore tax treaty cannot at all be invoked. Learned counsel then relies upon an order passed by the Tribunal in the case of APL Co Pte Ltd Vs CIT [(2017) 78 taxmann.com 240 (Mum)] in support of this proposition. Learned counsel then submits that the income in question is taxable on accrual basis, and not on receipts basis, and, for this short reason alone, article 24 of Indo Singapore tax treaty does not come into play at all. He then submits that based on the certificate issued by the Inland Revenue Authority of Singapore, regarding shipping income being brought to tax on accrual basis, this very bench of the Tribunal, in the case of Alabra Shipping Pte Ltd Vs ITO [(2015) 62 taxmann.com 185], has upheld treaty entitlement of the Singaporean shipping companies in India, which has now been confirmed by Hon'ble Gujarat High Court in the case of MT Maersk Mikage Vs DIT [(2016) 72 taxmann.com 359 (Guj)]. Learned counsel then refers, apparently treating the expressions 'liable to tax' and 'subject to tax' as synonymous, to Hon'ble Gujarat High Court's judgment in the case of DIT Vs Venkatesh Karrier Ltd [ (2012) 349 ITR 124 (Guj)] and Emirates Shipping Line FZE Vs ADIT [(2012) 349 ITR 493 (Del)] upholding treaty protection from UAE shipping companies even though, beyond any dispute or controversy, these shipping companies did not pay any taxes in UAE either. It is thus contended that the payment of tax is not a condition precedent for availing the treaty benefit. Learned counsel then refers to Hon'ble Supreme Court's judgment in the case of Union of India Vs Azadi Bachao Andolan [(2003) 276 ITR 370 (SC)] and specifically refers to the observation made therein to the effect that "to the extent an exemption is agreed to, its effect, in principle, is independent of both whether the other contracting state imposes a tax in a situation to which the exemption applies and of whether the state actually applies the tax"
and that "the treaty not only prevent current but also potential double taxation". Learned counsel thus urges us to hold that the benefit of article 8 of India Singapore tax treaty are admissible to the assessee, on the facts of this case, and that, accordingly, his income should not be held to be taxable in India. Learned Departmental Representative, on the other hand, points out that the judicial precedents in favour of the assessee were obtained with the help of misrepresentation of facts, and the judicial precedents so obtained cannot have any precedence value. It is pointed out that in these judicial precedents the assessee had all along given the impression that the income in question has been taxed in Singapore and evidence in support of this proposition were also filed, and yet, as it has now come out in open, no taxes were actually paid in Singapore either. The assessee has now accepted that the income in question was, as a result of an incentive provision in Singaporean law, not taxable in Singapore. When assessee himself accepts that the income in question was exempt from tax in Singapore, it cannot be said to be have been subjected to tax in Singapore. These evidences, at the minimum, were misleading and aimed at creating a wrong impression about the Singaporean taxability of income in question. He points out that it is for the first time, and as a result of specific questions by the bench, that the fact of this income being exempt from tax in Singapore has come to the light now. He ITA No. 411/Rjt/2016 GAC Shipping (I) Pvt Ltd vs. ITO Assessment year: 2015-16 Page 6 of 12 submits that looking to the scheme of the Indo Singapore tax treaty, which specifically states that only such income can be given treaty benefit in India which has suffered tax in Singapore- as evident from article 24, an income which is not taxed in Singapore cannot be granted tax exemption in India. Learned Departmental Representative relies upon the stand of the authorities below, and, as if taking a cue from the observations made by us from the bench, submits that article 24 at least makes it clear that what has not actually suffered tax in one country cannot at all be allowed treaty benefit in the other country, and, for this short reason alone, the assessee cannot be allowed treaty benefit in India. He seeks liberty to file the written submission on the basis of inputs from the international taxation wing, and, in any case, submits that, as evident from the questions put by the bench- which learned counsel has not been able to answer, these pleas are not sustainable in law. We are urged to confirm the stand of the authorities below and decline to interfere in the matter. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. We may begin by reproducing the certificates obtained by the assessee from the KPMG and the Inland Revenue Authority of Singapore which read as follows:
1. Certificate from the KPMG Services Pte Ltd 20 February 2017 ................
We issue this clarification in the capacity as tax advisors to BP Singapore Pte Ltd.
Based on the auditor's certification dated 14 June 2016 that the freight income of BP Singapore Pte Ltd (as specified previously in Appendix 1 of our fetter dated 24 June, 2016) for the financial years ended December 2014 and December 2015 have been included as part of the Company's profits in the respective financial years, we confirm that such freight income has been liable to Singapore income tax and has been included in the Singapore income tax returns for the Years of Assessment 2015 and 2016 respectively.
2. Certificate from Inland Revenue Authority of Singapore ...........
Date: 21/02/17 ............
I refer to your emails dated 10 and 13 February 2017 and our telephone conversation on 13 February 2017 in respect of your request for confirmation that the freight income received from India had been subject to tax in Singapore.
Section 10(1)(a) of the Singapore Income Tax Act (SITA) provides that tax shall be payable upon the income of any person accruing in or derived from Singapore or received in Singapore from outside Singapore in respect of gains or profits from any trade, business, profession or vocation. As such, where the income is accruing in or ITA No. 411/Rjt/2016 GAC Shipping (I) Pvt Ltd vs. ITO Assessment year: 2015-16 Page 7 of 12 derived from Singapore, it would be taxed in Singapore even if it is not remitted into Singapore. In this regard, we understand that the freight income received from India had been accrued in/ derived from Singapore. In compliance with Singapore tax laws, the freight income had been brought to tax in Singapore on an accrual basis in the relevant years even though it had not been remitted Into Singapore. You have requested for us to confirm that the freight income received from India had been taxed in Singapore. In relation to this, we have reviewed the information provided and confirm that the freight income received from India had been brought to tax in Singapore in the Years of Assessment ("YA") 2015 (Basis period: 1 January 2014 to 31 December 2014) and 2016 (Basis period: 1 January 2015 to 31 December 2015). We trust the above is sufficient for your requirements.
7. These certificates give an impression that the freight income received from India has been subjected to tax in Singapore. In response to assessee's request for confirming that "freight income received from India has been taxed in Singapore", the IRAS has stated that, based on their review of information supplied by the assessee, "the freight income received from India has been brought to tax in Singapore". Let us consider this is in the light of the factual position admitted before us to the effect that the assessee has availed exemption under section 13F of the Singapore's Income Tax Act, and, to that extent, the income embedded in these receipts has not actually been taxed in Singapore. When learned counsel is confronted with this glaring contradiction, he submits that a mere exemption of income in Singapore does not take that income out of the ambit of income liable to be taxed in Singapore, and it will be eligible for treaty benefits nevertheless. We will take up these legal niceties a little later but staying with the factual aspect of the matter, it is not in dispute that the income embedded in the freight receipts from India was not actually subjected to tax in Singapore even though it was liable to be taxed there by the virtue of fiscal domicile of the assessee. To put a question to ourselves, is it what is actually conveyed by the certificates issued by the Inland Revenue of Authority of Singapore or the public accounting firm KPMG. We do not think so. KMPG certificate talks about taxation of accrual basis under section 10(1) of the Singapore Income Tax Act, without any firm comments on actual taxability, and IRAs certificate, relying upon the information furnished by the assessee confirms that the said income "has been brought to tax in Singapore". "Bringing an income to tax in Singapore" to a layman, and even to judicial officers like us with cumulative experience of over 33 years in the Income Tax Appellate Tribunal itself, suggests an "income being actually taxed in Singapore", but this is admittedly not the correct position. The said income was never actually taxed in Singapore. What these certificates miss out is the vital fact that the said income was never actually taxable in Singapore- though by the virtue of a specific incentive provision. Undoubtedly, by the virtue of the assessee being fiscally domiciled in Singapore, the said income was 'liable to tax' but then 'liable to tax' is not the same thing as 'subject to tax'. Elaborating upon important difference between the scope of these two impressions, Hon'ble Authority for Advance Ruling, in the case of ITA No. 411/Rjt/2016 GAC Shipping (I) Pvt Ltd vs. ITO Assessment year: 2015-16 Page 8 of 12 General Electric Pension Trust In Re [(2006) 280 ITR 425 (AAR)], has observed that, "It is worth pointing out that the phrase 'liable to tax' in para 1 and the phrase 'subject to tax' in proviso (b) are not synonymous. If both were to be read as synonymous, proviso (b) would become otiose". There cannot be any dispute or controversy on this proposition, and we are considered agreement with these observations of the Authority of Advance Ruling. As regards learned counsel's reliance upon the judicial precedents in the cases of Azadi Bachao Andolan (supra), Venkatesh Karrier (supra) and Emirate Shipping Lines (supra), these were the cases in which the expression 'liable to tax', in the context of article 4(1) of India UAE Double Taxation Avoidance Agreement and India Mauritius Double Taxation Avoidance Agreement, which appeared alongwith the words ''by reason of domicile, residence, place of management, place of incorporation or any other criterion of similar nature". These DTAAs are quite different from the one that we are dealing with inasmuch as the emphasis on 'subject to tax' in the India Singapore DTAA is clear and unambiguous, and article 24 leaves no doubt about this underlying thrust of the double taxation avoidance agreement. As to what is the scope of 'subject to tax', we find guidance from UK's HMRC International Manual (https://www.gov.uk/hmrc-internal- manuals/international-manual/intm162090) which, inter alia, states that "
It should be noted that the term subject to tax is different from being 'liable to tax'. 'Liable to tax' means that the customer only needs to be within the general scope of tax in the UK........ On the other hand, 'subject to tax' means that the relevant income has to be actually taxable and the customer cannot be exempt from tax on that income.
8. Clearly, therefore, the relief granted in the judicial precedents in question may have been based on an erroneous impression of the fact regarding actual taxability, in Singapore, of the income embedded in the freight receipts from India, particularly as the income was actually exempt from tax in Singapore as well. As a matter of fact, when the issue regarding non-taxability of this income in Singapore was raised before Hon'ble jurisdictional High Court in the case of MT Mersek Mikage (supra). Their Lordships declined to deal with this aspect of the matter as it was being raised before Their Lordships for the first time but then Their Lordships specifically left this issue open to be decided in an appropriate case by observing as follows:
21. .........Before closing, we may briefly touch on one more aspect sought to be raised by the Revenue viz. of the actual tax being paid by the assessee on such income at Singapore on the ground that such income is exempt from payment of tax, the Revenue desired to impose tax in India. .............
22. In the present case, however, we are not inclined to conclude this issue since this was not even a ground on which either the Assessing Officer or the Commissioner has refused to grant the benefit to the petitioner. It is a ground sought to be raised for the first time before us by the Revenue, for which, neither full factual evidence, nor legal ITA No. 411/Rjt/2016 GAC Shipping (I) Pvt Ltd vs. ITO Assessment year: 2015-16 Page 9 of 12 foundation is laid. We leave such an issue open to be decided in the appropriate case.
9. As regards the plea that assessee's income embedded in freight receipts from India is not exempt from tax in India, such a plea is contrary to the scheme of thee India Singapore tax treaty. While assigning meaning to a term employed in the tax treaty, one must not lose sight of article 3(2) which gives primacy to the context in which the term is used. Elaborating upon this principle, a coordinate bench of this Tribunal, in the case of Hindalco Industries Limited Vs ACIT [(2005) 94 ITD 242 (Mum)] in paragraph 18 thereof, had observed that ".... the purpose of the relevant provision in the tax treaty is indeed one of the relevant considerations in deciding the contextual meaning. Second, even if it is debatable as to whether contextual meaning of a term has precedence over the domestic tax law meaning of that term, it is also certainly not anybody's case that domestic law meaning of a term will have precedence over the contextual meaning of that term; the dispute is only with regard to whether an interpretation seeking adoption of contextual meaning, or treaty meaning as learned authors put it, has to onus to demonstrate that such a meaning must be adopted in the present context". The expression 'exempt from tax' is an undefined term in the treaty and the context in which it is used in Article 24 is that when an income is granted an exclusion from taxable income in one of the contracting state or taxed at a lower rate in one of the contracting state, such an exclusion must depend on its status of taxability in the other contracting state. The context in which expression 'exempt from tax' is set out in article 24, it essentially implies that the treaty benefit of non-taxation of an income, or its being taxed at a lower rate, in a contracting state depends on the status of taxability in another contracting state. In such a situation, to hold that only income covered by article 20, 21 and 22 can be said to be exempt in the source state because the expression 'exempt from tax' is used therein, is plainly contrary to the context in which expression 'exempt from tax' is used; it is the net effect not the wording which is relevant in the present context. In any case, what is referred to as exemption under article 20, 21 and 22 of Indo Singapore tax treaty in the source country are conditional exemptions subject to the riders, whereas an income exempt under article 8 is plain vanilla provision. Whether an income is taxed only in the residence country or whether an income is exempt from tax in the source country, the effect on exemption of income in the source country is the same- particularly in the context of the treaty benefit being dependent on the taxation inn the residence country is concerned. The wordings may differ but the impact is the same, and that is all the more clear when seen in the context in which the issue arises. Even if the meaning canvassed by the learned counsel was to be defined in the statute or the treaty itself, in view of the contextual requirements, such a meaning was to be discarded in the present context. Having said that we are aware that there is a division bench which has taken a contrary view on the basis of a very erudite analysis of the treaty provisions, but, without taking into account the provisions of Article 3(2) and binding judicial precedent on the same. While ITA No. 411/Rjt/2016 GAC Shipping (I) Pvt Ltd vs. ITO Assessment year: 2015-16 Page 10 of 12 we have highest respect and reverence for the view so adopted by the coordinate bench as well, it is just that we do not find ourselves in agreement with the same. To us, it appears that the view expressed by the coordinate bench is so much out of context that even the IRAS certificate from the residence country, which has been reproduced in the order itself, does not envisage treaty benefit in a situation in which the shipping profits in India are taxed on remittance basis in Singapore and the remittances to Singapore have not been made, but then, going by the analysis of the coordinate bench, the taxation in Singapore in such a situation is wholly irrelevant. That's clearly an incongruity and is going much beyond what is even imagined by Singapore. As for the references to article 20,21 and 22 for the application of Article 24 LoB clause, it is wholly misconceived inasmuch as in the article 20 and 21 situation tax object is current resident of source state (who were resident of the other contracting state in the immediately preceding period- i.e. Singapore in the present context) and as such remittance rule does not at all come into play, and in the article 22 only governmental institutions are referred, which are anyway not taxable in the residence state, remittance rule does not come into play at all. The conclusion thus arrived at by the bench leads to a situation in which article 24 is otiose but then, as is the elementary legal position, a treaty or a statute cannot be interpreted in such a manner so as to make a provision redundant, as is reflected in the legal maxim ut res magis valeat quam pereat [see Herman J's observations in Union Texas Petroleum Corporation vs. Critchley (1988) STC 69, affirming the observations of Goulding, J. in IRC vs. Exxon Corporation (1982) STC 356 at p. 359 - referred in Hindalco Industries (supra)]. In any case, the interpretation of a tax treaty is not the same thing as interpretation of a statute and there are well settled ground rules for interpretation of statutes which have been laid down by several decisions of the coordinate benches, and the interpretation by the coordinate bench is clearly contrary to the law laid down by these binding judicial precedents. For all these reasons, taken together as also independent of each other, the views of the coordinate bench do not appeal to us and we do not think it appropriate to uphold this plea of the assessee. Notwithstanding our inability to concur with the views of the coordinate bench, however, we see no need to refer the matter to a larger bench as the earlier binding judicial precedents, such as Hindalco Industries (supra), on the role of context in interpretation of a treaty term were not brought to the notice of the bench, and, to that extent, this decision does not constitute a binding judicial precedent in the light of law laid down by Hon'ble AP High Court's full bench decision in the case of CIT Vs B R Constructions [(2002) 202 ITR 222 (AP)]. That apart, for the reasons we will set out in a short while, we are not adjudicating the matter on merits anyway, and, therefore, there cannot be any occasion to refer this issue, which is purely academic as on now, to a larger bench.
10. We have noted that the additional evidence submitted by the assessee was admitted by us and this additional evidence has not been considered by any of the authorities below, and that certain factual aspects of the matter have come to light only as a result of questions put by the bench and the ITA No. 411/Rjt/2016 GAC Shipping (I) Pvt Ltd vs. ITO Assessment year: 2015-16 Page 11 of 12 authorities below, therefore, did not have any occasion to deal with these aspects in sufficient detail. As a result of these factual aspects coming to light, there are some interesting legal propositions have also come to the centre stage. It is an aspect to be considered whether even if the income is actually exempt from tax in the residence jurisdiction, given the unambiguous thrust of the treaty on income being subjected to tax in one contracting state to be able to claim treaty protection in the other contracting state, and avoidance of double non-taxation is a clear objective of the Indo Singapore tax treaty, such an exempt income will also be liable to get treaty protection in the source state. We did not have the benefit of hearing parties in sufficient detail on these issues nor is it reasonable to expect that such issues, coming up for the first time before us, can be addressed suitably on such short notice. Learned counsel for the assessee has also made a specific request for detailed hearing on the new issues that have come to the light during the course of hearing of this appeal. Learned Departmental Representative, who had sought liberty to file written submissions in the light of inputs from the directorate of international taxation, has also not been able to file the written submissions till now, and we do not have the benefit of departmental stand on these issues either. In any event, as additional evidence is submitted at the stage of proceedings before us and as the new facts have come to light at the stage of hearing before us, the parties also should have a full opportunity of presenting their case in the light of these facts, even though this situation has arisen due to their evasive and not so transparent conduct. Let all the relevant aspects be examined afresh in this light and the perspectives of both the parties be taken to the record and be analysed properly, particularly as this issue concerns a large number of Singaporean companies operating India. In view of these discussions and bearing in mind entirety of the case, we deem it fit and proper to remit the matter to the file of the learned CIT(A) for adjudication de novo in the light of the new facts emerging as above, in accordance with the law and by way of a speaking order. All the issues are left open. We direct so."
4. We see no reasons to take any other view of the matter than the view so taken by us as above. Respectfully following our views as above, we remit the matter to the file of the Assessing Officer in this case as well. Our observations as above will apply mutatis mutandis in this case as well.
5. In the result, the appeal is allowed for statistical purposes in the terms indicated above. Pronounced in the open court today on the 28th day of November, 2017.
Sd/- Sd/-
Rajpal Yadav Pramod Kumar
(Judicial Member) (Accountant Member)
Dated: 28th day of November, 2017
**am**bt
ITA No. 411/Rjt/2016
GAC Shipping (I) Pvt Ltd vs. ITO
Assessment year: 2015-16
Page 12 of 12
Copies to: (1) The appellant (2) The respondent
(3) Commissioner (4) CIT(A)
(5) Departmental Representative (6) Guard File
By order
TRUE COPY
Assistant Registrar
Income Tax Appellate Tribunal
Rajkot bench, Rajkot
1. Date of dictation: ..27.11.2017- prepared by Hon'ble AM on his own computer-...... ...
2. Date on which the typed draft is placed before the Dictating Member: ....27.11.2017.......
3. Date on which the approved draft comes to the Sr. P.S./P.S.: ...28.11.2017....... .
4. Date on which the fair order is placed before the Dictating Member for Pronouncement: ...28.11.2017..
5. Date on which the file goes to the Bench Clerk : ...28.11.2017..
6. Date on which the file goes to the Head Clerk : ..................................
7. The date on which the file goes to the Assistant Registrar for signature on the order: ..........................