a) Singapore based company was engaged in the business of operation of ships in international waters. It had a shipping agent in India in the form of a wholly owned subsidiary ‘ALP India Pvt. Ltd.’
b) In return of income, assessee sought to claim benefit of article 8 of India-Singapore DTAA for its gross freight earnings collected from India.
c) Assessing Officer (AO) noted that the assessee could not produce ship registration certificates and copies of charter party agreements of few ships so he denied benefit of article 8 of DTAA in respect of such operating ships.
d) Further, CIT (Appeals) denied entire benefit by invoking the limitation clause of article24 of India-Singapore DTAA. Aggrieved-assessee filed the instant appeal before the Tribunal.
Tribunal held in favour of assessee as under:
1) As per the remittance basis of taxation under Singapore law, income arising outside the country is taxable only when that income is remitted to and received in the Singapore. However, any income accruing in or derived from Singapore is taxable on accrual basis under Singapore law.
2) For applicability of limitation of benefit clause, two conditions needs to be satisfy, firstly, income earned from the source state (here in this case, India) is exempt from tax or is taxed at a reduced rate; and secondly, under the laws in force of the resident State (Singapore), such income is subject to tax by reference to the amount thereof which is remitted to or received in the resident State and not by reference to the full amount thereof. If both the conditions are satisfied, then only the exemption is allowed or the reduced rate of tax is levied on the amount so remitted.
3) In the instant case, the income of assessee-company from shipping operations was not taxable on remittance basis under the laws of Singapore, albeit it was liable to be taxed in-principle on accrual basis by virtue of the fact that this income under the income tax laws of Singapore is regarded as 'accruing in or derived from Singapore'.
4) Thus, the condition of article 24 couldn’t be satisfied in the present case. Therefore, CIT (Appeals) was not justified in denying the benefit of article 8 by invoking the limitation of benefit clause. -  78 taxmann.com 240 (Mumbai - Trib.)