During course of international voyage traffic between Indian ports deemed as 'international traffic'

Journey of a vessel between two Indian ports deemed as "international traffic" under Article 8 of India-Singapore DTAA as same was part of a larger journey between two foreign ports

Facts

a)    Assessee-company had acted as an agent of three vessels which had transported goods from Kandla Port to Vizag.  The vessels had undertaken such freight transportation during the journey from Singapore to Dubai.

b)    The freight beneficiary was one M/s. Jaldhi Overseas Pte Limited, who claimed benefit under Article 8 of India-Singapore DTAA.

c)    The Assessing Officer (AO) contended that transportation between Kandla to Vizag cannot be considered as international traffic in terms of India-Singapore DTAA.

d)    The tribunal set aside the order of AO. Aggrieved by the order of tribunal, revenue filed the instant appeal before the High Court.

The High Court held in favour of assessee as under-

1)    The word ‘international traffic' is defined in Article 3 of DTAA between India and Singapore as under:

"the term "international traffic" means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State."

2)    The term 'international traffic', as noted above, is defined to mean any transport by a ship or aircraft operated by an enterprise of a contracting state. This definition, however, has an exceptional clause which excludes the transport when the ship or aircraft is operated solely between the places in the other contracting state.

3)    Hence, it is only when a ship or aircraft is operating 'solely' between places in other contracting state that the transport is excluded from scope of "international traffic". 

4)    In the instant case, the transportation between two Indian ports was undertaking during a larger journey of the vessels from Singapore to Dubai. Therefore, the requirement of such journey being solely between places in the other contracting state was not satisfied.

5)    Thus, journey of a vessel between two Indian ports would be deemed as "international traffic" under Article 8 of India-Singapore DTAA if the same was part of a larger journey between two foreign ports- CIT v. Taurus Shipping Services [2015] 64 taxmann.com 64 (Gujarat)