Shipping Income derived in India from International Traffic is not Taxable in India as per India-UAE Tax Treaty: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench has held that shipping income derived in India from international traffic is not taxable in India as per India - UAE tax treaty.

The appellant, Avana Global FZCO, is incorporated in UAE and is a tax resident of the UAE, and is engaged in the operation of ships in international traffic. During the assessment year, the appellant claimed exemption of income earned from freight handling, terminal handling charges, inland haulage charges, and detention charges in India under Article -8 of India -UAE DTAA.

The Assessing Officer rejected the claim alleging that the appellant has a Permanent Establishment in India, hence the benefit of Article -8 of DTAA is not available and made an addition by applying Rule-10. DRP rejected the objection and hence the appellant approached ITAT.

The counsel for the appellant submitted that the issue of liability to tax in India under section 44B is identical in Assessment Year 2016-17 where the Co-ordinate Bench of the Tribunal after considering the judgment in the case of BalajiShipping (UK) Ltd. granted relief to the assessee. The DRP refused to follow the same as the Department had filed SLP against the said decision before the Supreme Court of India.

The Tribunal observed that the mere fact that an appeal against the said judgment is pending before Supreme Court does not dilate the binding nature of this precedent. Once the jurisdictional High Court takes a view, lower courts and authorities are bound to follow the same-in letter and in spirit.

The Coram of Mr. Vikas Awasthy , Judicial Member and Gagan Goyal, Accountant Member in absence of any contrary material, by relying on the decision of Bombay High Court in CIT vs. Balaji Shipping (UK) Ltd. has upheld the plea of the appellant and granted the benefit of article 8 to the freight.

To Read the full text of the Order CLICK HERE

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