MARIANA EXPRESS LINES PTD. LTD.,CHENNAI V. DCIT, INTL TAXATION-1(2), CHENNAI

ITA 557/CHNY/2025

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Mariana Express Lines Pte. Ltd., a Singaporean company, appealed against the order of the Assistant Commissioner of Income Tax, which had brought to tax the income earned from shipping operations in India under section 44B of the Income Tax Act, 1961. The company argued that this income was exempt from tax in India under Article 8 of the India-Singapore DTAA, and that Article 24, which limits tax relief to amounts actually remitted to the country of residence, should not apply as the income was taxed on an accrual basis in Singapore. The Tribunal examined the applicability of Article 24 in the context of the India-Singapore DTAA and relevant judicial precedents, ultimately deciding in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711870 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2022-2023
• Other Referred Cases: M.E. Maersk Mikege vs. DIT (IT), APL CO. Pte. Ltd. vs. ADIT (IT), Bengal Tiger Line Pte. Ltd. vs. DCIT (IT), Pacific International Lines Pvt. Ltd. vs. DCIT, CIT vs. Lakshmi Textile Exporters Ltd.
• Laws Referred To: Income Tax Act, 1961, India-Singapore DTAA
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E.PAVUNA SUNDARI
• Assessee Lawyers: PERCY PARDIWALLA
• Keywords: Rule of consistency; Competent authority; Double taxation relief; Benefit of exemption; Non-deduction of tax
• Section: 143(3); 10

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, CHENNAI BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT & MS PADMAVATHY S, AM I.T.A. No. 557/Chny/2025 (Assessment Year: 2022-23) Mariana Express Lines Pte. Ltd., Unit 807/809, Raheja Towers, 177 Anna Salai, Chennai-600 002 PAN: AAJCM3083B Vs. Deputy Commissioner of Income Tax Officer (International Taxation)-1(2), Chennai, Tamil Nadu-600006. Appellant) : Respondent) Appellant /Assessee by : Mr. Percy Pardiwalla, Senior Advocate. Revenue / Respondent by : Ms. E. Pavuna Sundari, Sr. DR Date of Hearing : 22.07.2025 Date of Pronouncement : 25.07.2025 O R D E R Per Padmavathy S, AM: This appeal by the assessee is against the order of the Assistant Commissioner of Income Tax, International Circle-1(2) Chennai [in short AO'] passed under section 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 (the Act) dated 16.12.2024 for Assessment Year (AY) 2022-23. Printed from counselvise.com 2 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. 2. The assessee is a company incorporated in Singapore and engaged in plying ships globally including through Indian Ports and earns freight and other charges from this activity. For the year under consideration the assessee filed the return of income declaring Nil income. The assessee while filing the return of income had claimed the benefit under Article-8 of India-Singapore DTAA. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The Assessing Officer (AO) was of the view that the assessee's income is not subject to tax in Singapore by virtue of section 13F of Singapore Income Tax Act and therefore as per Article-24 of India-Singapore DTAA, the benefit under Article 8 should be restricted to the extent of amounts actually remitted to Singapore. In this regard the AO issued a show cause notice to the assessee. The assessee submitted that the provisions of Article-24 cannot be invoked in assesee's case for the reason that the income earned by the assessee is neither exempt nor taxed at lower rate as stated in Article-24 of India-Singapore DTAA. The assessee further submitted that as per the DTAA India has given up the right of taxation and therefore no income of the assessee with respect to profits derived from the operation of Ships can be brought to tax in India. The assessee relied on various judicial pronouncements in this regard. The AO however did not accept the submissions of the assessee. The AO held that the purpose of DTAA is to prevent a situation where the same income does not get taxed twice in both the countries. The AO further held that in assssee's case the income earned is not getting taxed in either of the countries by virtue of Singapore tax provisions which is not the intention behind entering into India- Singapore DTAA. The AO also did not accept the submission of the assessee that as per the IRAS Certificate the income of the assessee is taxable on accrual basis in Singapore. Accordingly, the AO brought to tax the income of the assessee under section 44B of the Act to the tune of Rs. 1,57,20,280/-. On further appeal, the DRP Printed from counselvise.com 3 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. confirmed the addition made by the AO. The assessee is in appeal before the Tribunal against the final order of assessment by the AO. 3. The assessee raised the several grounds contending the impugned addition on merits as well as on legal grounds. During the course of hearing, the ld. AR submitted that if the grounds with regard to applicability of Article 24 in assessee's case are adjudicated in favour of the assessee then the rest of the grounds would become academic and may be left open. The effective grounds argued by the ld. AR are listed as under: “2. Ground no. 2 Benefit of Article 8 of India-Singapore Tax Treaty denied 2.1 On the facts and in the circumstances of the case and in law, the learned DCIT and DRP erred in denying the benefit of Article 8 of India-Singapore Double Taxation Avoidance Agreement (Tax Treaty) to the Appellant by holding that the shipping income earned by the Appellant is taxable in India under section 44B of the IT Act. Ground no. 3-Non-applicability of Article 24 of India-Singapore Tax Treaty 3.1 On the facts and in the circumstances of the case and in law, the learned DCIT and DRP erred in invoking the provisions of Article 24 (Limitation of Relief) of Tax Treaty to deny the benefit of Article 8 of Tax Treaty to the shipping income of the Appellant without appreciating that Article 24 of Tax Treaty has no applicability in the present case. 3.2 On the facts and in the circumstances of the case and in law, the learned DCIT and DRP erred in denying the benefit of Article 8 to the Appellant by invoking Article 24 of Tax Treaty despite the fact that the net freight collected was remitted ultimately into bank account of Appellant in Singapore.” 4. The ld. AR at the outset submitted that the issue of whether the Limitation of Relief under Article-24 of India-Singapore DTAA is applicable to those cases where the assessee has availed the benefit under Article-8 has been considered by various judicial pronouncements as listed below: Printed from counselvise.com 4 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. (i) M.E. Maersk Mikege vs. DIT (IT) [2016] 72 taxmann.com 359 (Guj.) (ii) APL CO. Pte. Ltd. vs. ADIT (IT) [2017] taxmann.com 240 (Mum. Trib.) as confirmed by the Hon'ble Bombay High Court [2023] 156 taxmann.com 530 (Bom.) (iii) Bengal Tiger Line Pte. Ltd. vs. DCIT (IT) [2020] 121 taxmann.com 165 (Chennai Trib.) (iv) Pacific International Lines Pvt. Ltd. vs. DCIT [IT(TP) A No. 59/Chny/2019 dated 29.05.2024] (v) CIT vs. Lakshmi Textile Exporters Ltd. [2001] 115 taxman 572 (Madras) 5. During the course of hearing the ld. AR took the Bench through the relevant findings in the above judicial precedents to submit that the coordinate benches and the Hon'ble High Courts have been consistently holding that Article-24 cannot be invoked to cases where the income is not taxable in India by virtue of Article-8 of India-Singapore DTAA. The ld AR further submitted that the AO is not correct in invoking Article 24 for the reason that the impugned income of the assessee is taxable in Singapore on accrual basis and not on receipt basis. The ld AR also argued that India and Singapore have negotiated the taxability of the shipping income earned by Singapore entity from operation of ships in Indian Ports, and have taken a conscious decision to give the taxing right exclusively to Singapore. It is submitted that when India has taken the decision to give up the taxing rights, then invoking Article 24 to bring to tax a portion of income in India would go against the intentions of two sovereigns who have carefully agreed on the taxing rights of various incomes. Printed from counselvise.com 5 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. 6. The ld. DR on the other hand supported the order of the AO. The ld. DR submitted that the judicial precedents relied on by the ld. AR as listed herein above have been considered and distinguished by the AO in order. The ld DR drew our attention to the relevant observations of the AO as extracted below: “5.5. The next case law is APL Co., Ltd (78 Taxmann.com 240) passed by Hon'ble Mumbai ITAT. In this case also, the court relied upon a letter from Singapore Tax Authorities to hold that shipping income is taxed in Singapore on accrual basis. But as already noted, the Hon'ble Gujarat High Court has already questioned the applicability of such opinions and that a mere letter going against the Income Tax Act of Singapore and the DTAA cannot be relied upon. Another issue raised in this order was whether Article 8 makes shipping income exempt in the source state ie India or it only grants exclusive rights to State of residence. Hon'ble ITAT stated as follows: \"There is another angle to interpret Article 24, which is that, the said Article purports to exclude tax exemption in India if the income is not remitted or received in Singapore for taxation purpose on the premise that this is a foreign income to Singapore. First of all, it has to be seen whether shipping income is exempt from tax in India and, secondly, whether the shipping income is foreign income to Singapore which would then be taxable upon receipt or remittance to Singapore. The shipping income is dealt with under Article 8, which states that \"profits derived by an enterprise of a contracting state from the operation of ships in international traffic shall be taxable only in that state, i.e, resident state.\" The word 32 APL Co Pte. Ltd. ITA No. 4435/Mum/2013 \"only\" debars the other contracting state to tax the shipping income, that is, India is precluded from taxing the shipping income even if it is sourced from India. An enterprise which is tax-resident of Singapore is liable for taxation on its shipping income only in Singapore and not in India. Whence India does not have any taxation right on a shipping income of non-resident entity, which is exclusive domain of the resident state, there is no question of any kind of exemption or reduced rate of taxation in the source state. It only envisages territorial and jurisdictional rights for taxing the income and India has no jurisdiction for any taxing right which are governed by Article 8. There is no stipulation about exemption under Article 8 of the shipping income which as pointed out by Id. Senior Counsel has been specifically provided in some of the Articles like Article 20, 21 & 22. Hence, it cannot be reckoned that shipping income earned from India is to be treated as exempt from tax or taxed at reduced rate, which is a condition precedent for applicability of Article 24, albeit India at the threshold does not have the Printed from counselvise.com 6 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. jurisdiction to tax the shipping income of the non-resident entity. Thus, the condition of Article 24 is not satisfied in the present case from this angle also. 5.6. Before discussing the above point, one should have an idea about the ways in which double taxation is avoided. Both the UN and OECD Model Conventions on double taxation avoidance list out mainly two such methods - the Exemption Method and the Credit Method. The exemption method provides relief from double taxation by exempting income that is subject to tax in the state of source from tax in the state of residence or vice versa. The Credit Method on the other hand allows taxation of an income in both the Residence State and the Source State, but the assessee gets credit for the taxes paid in the Source State while filing return in the Residence State. The Exemption method therefore implies that the income in question becomes \"exempt from tax in one of the states. 5.7. The Hon'ble ITAT in the above mentioned judgement has relied on the wording without actually seeing the underlying impact. If one carefully reads Article 8. 20,21 and 22 of the India Singapore DTAA, it will become clear that even though the wording might be different, but what the Articles do in effect is to exempt a class of income in the Source State and give the right of taxation to the Residence State. Let us take for example Article 21 of the DTAA, which reads as follows: ARTICLE 21 TEACHERS AND RESEARCHERS 1. An individual who is or was a resident of a Contracting State immediately before making a visit to the other Contracting State, and who, at the invitation of any university, college, school or other similar educational institution, visits that other State for a period not exceeding two years solely for the purpose of teaching or research or both at such educational institution shall be exempt from tax in that other State on any remuneration for such teaching or research. 2. This Article shall not apply to income from research if such research is undertaken primarily for the private benefit of a specific person or persons. 5.8. This Article basically states that an Individual who earns income from teaching or research in a foreign country will only be liable to tax on that income in his country of residence and not in that foreign country ile the country of source. Though the word used here is \"exempt\", in essence what this Article does Printed from counselvise.com 7 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. is grant exclusive rights of taxation to the Resident country. Now if we see Article 8, it states that \"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.\" So we see that even though Article 8 does not expressly use the word \"exempt\", in effect it does the same thing which, Article 20, 21, and 22 does and that is to grant exclusive rights of taxation to the Resident country and exempt this income from taxation in the Source State. 5.9. Another example of this lies in the Income Tax Act itself. One knows that agricultural income is \"Exempt from taxation as per the Income Tax Act. But when one reads the section allowing this exemption, one sees that the word \"exempt\" is not actually mentioned. The relevant portion from the Act is reproduced below: 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- (1) agricultural income.....” The word \"exempt\" in not used while exempting agricultural income from taxation. So if the Hon'ble ITAT's reasoning is applied, then all agricultural income in India would become liable to tax only because the word \"exempt is not used. But that is obviously not the case because interpretation of laws is not a limited exercise of semantics but is an exercise in understanding the meaning implicit in a piece of legislation. This case law therefore stands rejected. 5.10. The assessee with regards to the remittance issue has provided detailed argument and placed its objections that there is no requirement of remitting the income earned since the income is taxable on accrual basis and not on receipt basis. The assessee has relied on the letter provided by the Revenue Authority of Singapore which is already discussed. The crux of the argument here is that the subject matter is profits from shipping and so only the profits should be remitted to Singapore and not the entire income. But section 10 does not speak of profits being remitted but of income. The entire revenue earned by the assessee in India is its income and as per Article 10 as well as Article 24, the income should be remitted not merely the profits. Hence, this argument cannot be accepted. Therefore, to summarize, even if benefit of Article 8 is given to the assessee, it will be limited to the amount actually remitted as is set forth by Article 24 of the DTAA and the charging section of the Singapore Income Tax Act. Printed from counselvise.com 8 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. 5.11 The assessee has placed reliance on the ruling of Chennai ITAT in the case of M/s Bengal Tiger Line Pte Ltd. wherein on a similar issue of shipping income tribunal allowed assessee's appeal. However, Revenue hadn't accepted this decision on merits and filed further appeal in High Court which is pending adjudication. 6. In view of the above discussion, it is concluded that the shipping income earned by assessee is subject to tax in India. The income is computed as per section 44B of the Income tax Act. The total freight revenue earned by the assessee in India is Rs. 20,96,03 732/- based on which its income under section 44B is computed as Rs. 1,57,20,280/-.\" 7. We heard the parties and perused the material on record. The assessee is a Singapore based company, deriving income from operation of ships including operations of ships in Indian ports. The assessee while filing the return of income claimed the benefit of Article 8 of the India-Singapore DTAA and offered Nil income in India. The AO invoked Article 24 of India-Singapore DTAA to state that only the actual amount received in Singapore is eligible for benefit under Article 8 of India-Singapore DTAA. Therefore before proceeding further we will look at the relevant Articles of India-Singapore DTAA. ARTICLE 8 SHIPPING AND AIR TRANSPORT 1. 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 2. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency engaged in the operation of ships or aircraft. 3. Interest on funds connected with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft, and the provisions of Article 11 shall not apply in relation to such interest. Printed from counselvise.com 9 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. 4. For the purposes of this Article, profits from the operation of ships or aircraft in international traffic shall mean profits derived from the transportation by sea or air of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of the ships or aircraft, including profits from: (a) the sale of tickets for such transportation on behalf of other enterprises, (b) the incidental lease of ships or aircraft used in such transportation; (c) the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) in connection with such transportation, and (d) any other activity directly connected with such transportation. ARTICLE 24 LIMITATION OF RELIEF 1. Where this Agreement provides (with or without other conditions) that income from sources in a Contracting State shall be exempt from tax, or taxed at a reduced rate in that Contracting State and under the laws in force in the other Contracting State the said income is subject to tax by reference to the amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the exemption or reduction of tax to be allowed under this Agreement in the first-mentioned Contracting State shall apply to so much of the income as is remitted to or received in that other Contracting State. 2. However, this limitation does not apply to income derived by the Government of a Contracting State or any person approved by the competent authority of that State for the purpose of this paragraph. The term \"Government\" includes its agencies and statutory bodies. 8. The issue for our consideration is whether limitation of relief as stated in Article 24 is applicable to the income derived by the assessee from operation of ships which is taxed only in the country of residence i.e.Singapore. Article 24 restricts the relief as under – (i) In the source country the income derived is either exempt or taxed at a lower rate (ii) In the country of residence the income is taxed only on receipt basis and not on accrual basis Printed from counselvise.com 10 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. (iii) If both the above conditions are applicable to a particular income, then the exemption or the lower rate of tax in the source country is restricted to the amount actually remitted to the country of residence. 9. The contention of the assessee with regard to invoking Article 24 is that the income from shipping business is taxable on accrual basis and not on receipt basis in Singapore. The assessee is further contending that when India has given up the taxing right of shipping income, the question invoking Article 24 does not arise. The assessee is also contending that as per the Singapore Income Tax Act, the income from operation of ship is not taxable subject to certain conditions and therefore the AO is not correct in stating the impugned income is not taxed in either of the countries. The argument of the revenue is that when the impugned income is exempt from getting taxed in India then testing the same under Article 24 would automatically arise. The next argument of the revenue is that the impugned income is not getting taxed in Singapore as per the provisions of Singapore Income Tax Act, there by the impugned income is not taxed in either of the countries which is not true intention of entering into DTAA. 10. We notice that that the coordinate bench of the Tribunal in the case of Bengal Tiger Line Pte. Ltd. (supra) has considered the applicability of Article 24 in the context of income getting taxed only in Singapore under Article 8 and held that \"13. As regards the main issue before us, we have considered arguments of counsels for both sides and perused materials on record along with relevant case laws cited before us. There is no dispute to the fact that the assessee is a tax resident of Singapore. Even the factual finding recorded by the Id.DRP was that the assessee is a tax resident and does not have a PE in India. Undisputedly, the activities carried out by the assessee in India are covered under Article 8 of India-Singapore DTAA As per Article 8 of India-Singapore DTAA, the profits derived by an enterprise of a Contracting State from the operation of ships or Printed from counselvise.com 11 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. aircraft in international traffic shall be taxable only in that State. Therefore, by virtue of Article 8 of India-Singapore DTAA, the international shipping income of a resident of a Contracting State is taxable only in that State Le, the shipping income of a Singaporean resident by the operations of ships in international waters is taxable only in Singapore on accrual basis. Similarly, Article 24 of India-Singapore DTAA limits the relief on the basis of income from sources in a Contracting State is exempt from tax or taxed at a reduced rate in that Contracting State and under the laws in force in the other Contracting State, the said income is subject to tax by reference to the amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the exemption or reduction of tax to be allowed under this agreement in the first-mentioned Contracting State shall apply to so much of the income as is remitted to or received in that other Contracting State. From the combined reading of Articles 8 and 24 of India-Singapore DTAA, it is very clear that article 8 provides exclusive right of taxation to country of residence, i.e. Singapore on accrual basis. Similarly, article 24 limits the exemption, in case income is exempt or taxed at reduced rate in source country, Le in India and further such income is taxable in country of residence on receipt basis. The AO, referring to Article 24 of the tax treaty, was of the opinion that although global shipping income of a Singapore tax resident is taxable only at resident State, but by virtue of Article 24 exemption would apply only to the extent of the amount repatriated/remitted to Singapore. In our view, the above conclusion of the AO is under the misconception of the provisions of India-Singapore tax treaty, because as per Article 8 of India-Singapore tax treaty, it was clearly specified that only the resident country has the right of taxation of freight income earned from operation of ships in international traffic. As may be seen from the provisions of Article 8(1), we are of the considered view that it is not an exemption provision but an enabling provision which provides an exclusive right of taxation of income to the residence country. Further, by entering into treaty with Singapore, India has given up its right to tax shipping income of a non-resident in India. Therefore, any income of a non-resident shipping company which is a tax resident of Singapore is liable to tax only in Singapore but not in India. 14. The provision of Article 24 of India-Singapore DTAA is applicable for income which is exempt from tax as per the tax treaty. As has been clarified above, it may be noted that Article 8 is unambiguously not an exemption provision but only a provision which provides a taxation right to the country of residence. Therefore, the international shipping income earned by the assessee is not exempted in India, whereas it is taxable only in the country of residence i.e., Singapore. From the above, it is very clear that exclusive right of taxation in one Contracting State is not the same as the specific exemption being available in other Contracting State. Further, shipping income dealt with in Article 8 states that profits derived by an enterprise of a Contracting State by operation of ships Printed from counselvise.com 12 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. in international traffic shall be taxable only in the State of residence. The word 'only debars the other Contracting State to tax the shipping income; ie. India is precluded from taxing the shipping income even if it is sourced from India. When India does not have any taxation right on a shipping income of non-resident entity, exemption or reduced rate of taxation in the source state is of no relevance because once the taxing right has been given off, the other conditions like exemption of reduced rate of tax has no bearing on the taxability of particular income in other Contracting State. From the reading of Article 8, which clearly envisages derivable or jurisdictional rights for taxing the income and as per which India has no jurisdiction for taxing any income which are covered by Article 8. Therefore, we are of the considered view that international shipping income of a non-resident of a Contracting State is taxable only in that state and in this case, the assessee being tax resident of Singapore, shipping income earned from India on international waters is taxable only at Singapore on accrual basis. 15. Having said so, let us examine the applicability of Article 24 of India- Singapore DTAA. Article 24 of India-Singapore DTAA contemplates twin conditions for its applicability. The first condition is that income sourced in a Contracting State and such income should be exempt or taxed at a reduced rate by virtue of any article under the India-Singapore DTAA. As we noted earlier Article 8 of India-Singapore DTAA does not provide for exemption or reduced rate of taxation of such income. It is crucial to note that Article 8 of India- Singapore DTAA contemplates the taxation rights of a particular income in particular State. As per said article, the country of residence is having exclusive right over taxation of shipping income and that being the case, the assessee being resident of Singapore vest with right to tax such income under the Singapore Income Tax laws. Accordingly, the shipping income earned in India is neither exempt nor taxed at reduced rate as per Article 8 of DTAA which is a condition precedent for applicability of Article 24. This fact has been clarified by the IRAS vide its letter dated 17-9-2018, where it was specifically stated that provisions of Article 24 of India-Singapore DTAA would not be applicable to the shipping income. The second condition that is required to be looked into before applying Article 24 of DTAA is income of the non-resident should be taxable i \"receipt\" basis in Singapore. As we have already noted in earlier para of this order, under Article it of lodia Singapore DTAA, global shipping income of a tax resident of Singapore is only taxable in the country of residence. Once the income is taxable in the country of residence on \"accrual\" basis, the second condition prescribed under Article 24 of India-Singapore DTAA is not satisfied. This fact is further strengthened by the letter of the Inland Revenue Authority Singapore (IRAS) letter 17-9-2018, where it was clarified that the income of a Singaporean company from the operation of ships in international traffic is taxable in Singapore on \"accrual\" basis. Thus, both the conditions of Article 24 Printed from counselvise.com 13 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. is not satisfied in the present case. We, therefore are of the considered view that the AO was erred in invoking Article 24 of India-Singapore DTAA to tax the income earned by the assessee from shipping operations in India. 16. The interplay between Articles 8 and 24 of India-Singapore DTAA has been considered by various Tribunals and Courts. As per the settled position of law, the Article 24 Limitation of Benefit is not applicable once shipping income of a non-resident is taxable on \"accrual\" basis in the country of residence. This principle is well settled by the decision of the Hon'ble Gujarat High Court in the case of M.T. Maersk Mikage (supra), where the Hon'ble court clearly held that where income earned by Singapore based shipping company through shipping business carried out at Indian Ports, was not taxable at Singapore on basis of remittance but on basis of accrual, clause (1) of Article 24 of Indo-Singapore DTAA would not apply to deny benefit of Article 8 of Indo-Singapore DTAA to said company. The Hon'ble High Court while considering the issue has analyzed the provisions of Article 8 vis-a-vis Article 24 of DTAA and after considering relevant facts, the court held that in case certain income is taxed by a Contracting State not on the basis of accrual but on the basis of remittance, applicability of Article 8 would be ousted to the extent such income is not remitted. The court further held that this clause does not provide that in every case of non-remittance of income to the Contracting State, Article 8 would not apply irrespective of tax treatment such income is given. The Hon'ble court while arriving at the above conclusion has taken support from the letter issued by Singapore Revenue Authority clarifying the taxation position of global shipping income of tax resident of Singapore and held that when shipping income of a tax resident of Singapore was taxable at Singapore on the basis of accrual, the very basis of applying Article 24 would not survive. This issue was further considered by the Mumbai Bench of ITAT in the case of APL Co. Pte Ltd. (supra), where it was held that in order to invoke provisions of Article 24, two conditions need to be fulfilled. Firstly, income earned from source State (India) is exempt from tax or is taxed at a reduced rate in source State (India) as per DTAA; and secondly as per the laws in force of resident state (Singapore), such income is subject to tax by reference to amount thereof which is remitted to or received in resident State and not by reference to full amount thereof. The Tribunal further noted that the key phrases which need to be borne in mind while understanding Article 24 is \"under the laws in force in other contracting state\" (Singapore). Here, in this case, the income of assessee company from shipping operations is not taxable on remittance basis under the laws of Singapore, albeit is 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\". A similar view has been expressed by the Hyderabad Bench of the Tribunal in the case of For Shipping (Singapore) Pte Ltd. (supra). Further, the Mumbai Bench of the Tribunal in the case of D.B. International (Asia) Ltd. (supra) has dealt with Printed from counselvise.com 14 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. the interplay between the Articles 13 and 24 and after considering relevant clauses categorically held that income derived by a resident of a Contracting State shall be taxable only in that state in view of the clear and unambiguous terms of DTAA. Therefore, we are of the considered view that in terms of Article 8 of India-Singapore DTAA, global income of a tax resident of Singapore from shipping operations, even though which is earned outside Singapore is taxable only in Singapore on accrual basis and consequently Article 24 of India- Singapore DTAA cannot be invoked to deny the benefit of exemption merely for the simple reason that the said income was not taxed in Singapore by virtue of separate exemptions provided under Singapore Income Tax Act. 17. In this case, the Assessing Officer has attempted to deny the exemption claimed by the assessee under Article 8 by invoking Article 24 of India- Singapore tax treaty on a misconception of two clauses of India-Singapore DTAA by referring to the provisions of Section 13F of the Singapore Income Tax Act, ignoring the fact that Section 13F of the Singapore Income Tax Act was already in existence since 1-4-1991 and as such the articles provided in India-Singapore DTAA which was came into existence from 27-5-1994 was inserted by the Competent Authorities of both the Contracting States after thoroughly considering the provisions of Section 13F of Singapore Income Tax Act and further choose not to alter the taxation right of shipping income which is generally available to the country of residence. We further noted that two sovereign nations have entered into a bilateral agreement and specifically agreed on the taxing rights of particular streams of income, the provisions of such agreement should be merely given effect to and as such the action of the AO to claim taxing right over the said income which is not provided in the treaty is ultra vires the power of the AO and will amount to dishonouring the bilateral agreement between two sovereign nations. We further noted that the Assessing Officer has taken resident that is accrued or received in Singapore is chargeable to tax in Singapore at the specified income tax from taxation as per Section 13F of Singapore Income Tax Act, but such income is always liable to tax in Singapore. The exemption provided u/s 13F of Singapore Income Tax Act is only on a case to case basis for a limited period of time and it is subject to certain conditions. Therefore, we are of the considered view that the liability to taxation is not dependent on whether taxes are actually paid in the said jurisdiction. This fact is strengthened by the decision of the Hon'ble Supreme Court in the case of Azadi Bachao Andolan (supra) where the Hon'ble Supreme Court in para 79 of the order has states that \"merely because exemption has been granted in respect of taxability of a particular source of income, it cannot be postulated that the entity is not able to tax' as contended by the respondents.\" The ITAT, Mumbai Bench in the case of Bhagwan T. Shivioni (supra) has considered an identical issue and by following the decision of Hon'ble Supreme Court in the case of Union of India v. Azadi Bachao Andolan (supra) has held that the expression Printed from counselvise.com 15 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. liable to tax' in Contracting State as used in Article 4(1) of Indo-UAE DTAA does not necessarily imply that person should actually be liable to tax in that contracting State. It is enough if other contracting State has right to tax such person, whether or not such a right is exercised. This fact is further strengthened by Article 31(1) of Vienna Convention where it was stated that as per the general rule of interpretation, ordinary meaning is to be given to the terms of the treaty in the context and in the light of its object and purpose. The object and purpose of having Article 8 in the India-Singapore DTAA is to clearly allocate the taxing rights of international shipping income to the residence country i.e., Singapore in the present assessee case. Therefore, as per sub-clause (2) of Article 31 of the Vienna Convention, the 'context' for the purpose of interpretation of a treaty would primarily include the text, preamble and annexure to the treaty. Therefore, in order to give the ordinary meanings to the terms in their 'context' the whole treaty should be read as it is without giving any meaning which is not the purpose intended by the Articles. In this case, the AO has stated that the preamble should be read to understand the object and purpose. However it may be noted that Article 31(2) of Vienna Convention does not cover object and purpose. Therefore, we are of the considered view that AO has misunderstood the general rules of interpretation in the Vienna Convention. Even assuming without conceding that the preamble should be referred to understand the object and purpose, the stated objective of the treaty is \"avoidance of double taxation\". This object can be achieved in two ways, which one way by credit mechanism when both the countries tax the same income and the second way is providing 'exclusive right of taxation' to one country and thereby double taxation can be avoided. In the present case, Article 8 provides exclusive right of taxation of shipping income to Singapore in order to avoid double taxation method where India has given up its right of taxation of international shipping income of a Singaporean resident and as such Singapore has reserved its exclusive right to tax the same. Once the country of resident is having exclusive rights to tax a particular income by way of separate Article, then limiting or denying such benefit by interpreting the other Articles which are provided for limiting the benefit in case such income is exempt or taxed at reduced rate of tax in other Contracting State is contrary to the purpose and object of DTAA. 18. In this case, the Assessing Officer has denied the benefit only on the simple ground that the income of the assessee received in India is exempt by virtue of separate provisions of Singapore Income Tax Act and on the misconception of law to come to the conclusion that once a country of residence has exempts particular income from tax, the other Contracting State (source country) can levy tax on such income without understanding the true meaning of Article 8 of India- Singapore DTAA. The AO has also ignored the arguments taken by the assessee in the light of DIT relief certificate issued by the Department for the subject assessment year, where the AO after considering the TRC and supporting Printed from counselvise.com 16 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. documents issued DIT Relief Certificate dated 25-6-2014 and 14-8-2014 by holding that Article 8 of India-Singapore DTAA is applicable to the assessee and income from operation in international traffic will not be taxable in India. No doubt, the certificate is issued for the purpose of non-deduction of tax at source as argued by the Ld.DR, but fact remains is that unless the AO has bring on record any change in fact or law which was prevalent at the time of issuing DIT Relief Certificate and at the time of framing assessment, no contrary view can be taken in violation of Doctrine of Promissory Estoppel. No doubt, the fundamental principles of res judicata will not be applicable to income tax proceedings, but the rule of consistency needs to be followed unless there is change in fact or law while taking a different view. This view is supported by the decision of the Hon'ble Supreme Court in the case of Radhasoami Satsang (supra). 11. On perusal of the above decision we notice that the coordinate bench has laid down the following principles with respect to applicability of Article 24 limiting the relief granted under Article 8 of the India Singapore DTAA – (i) Article 24 gets invoked in cases of exemption and in the given case the income from shipping business is not exempt but is taxed in the residence country (ii) Article 8 is not an exemption provision but is an enabling provision granting exclusive taxing right to the resident country i.e. Singapore and not source country i.e.India (iii) Under Article 8 India has given up the right to tax and therefore the income can be taxed ONLY in Singapore. (iv) The test of whether the income is exempt or taxed at lower rate is of no relevance once the right to tax is given up (v) In Singapore when the shipping is taxed on accrual basis, Article 24 cannot be applied since the said Article can be invoked only when the income is taxed on receipt basis in the country of residence i.e. Singapore (vi) Once the country of resident is having exclusive rights to tax a particular income by way of separate Article, then limiting or denying such benefit by interpreting the other Articles which are provided for limiting the benefit in case such income is exempt or taxed at reduced rate of tax in other Contracting State is contrary to the purpose and object of DTAA (vii) When Article 8 of India Singapore DTAA came into existence from 27.05.1994, Section 13Fof Singapore Income Tax Act was in existence and Printed from counselvise.com 17 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. Competent Authorities still choose not to alter the taxation right of shipping income which is generally available to the country of residence. (viii) The avoidance of double taxation is achieved either by 'credit mechanism' when both the countries tax the same income or by providing 'exclusive right of taxation' to one country and Article 8 provides exclusive right of taxation of shipping income to Singapore in order to avoid double taxation method 12. In the light of the above ratio when we examine the assessee's case we notice that the facts are identical and the assessee in the present case also has obtained the certificate from IRAS stating that the income is taxable on accrual basis in Singapore which is held as not foolproof by the AO. We further notice that the above decision of the coordinate bench has not been considered by the AO on the ground that the revenue has filed further appeal before the Hon'ble High Court and that the AO has not given any specific findings distinguishing the facts in assessee's case. Therefore in our considered view, there is merit in the submission that the decision of the coordinate bench is applicable to assessee's case also. This is further strengthened by the decisions as listed above of the Hon'ble Bombay High Court and the Hon'ble Gujarat High Court where a similar view has been held. It is relevant to mention here that the findings of the AO for not applying the ratio laid down in this regard by judicial precedence have been well addressed in the above decision of the coordinate bench. Accordingly we hold that AO is not correct in making addition towards the income derived from operation of ships which is taxable exclusively in Singapore under Article 8 of India-Singapore DTAA by invoking the limitation of relief under Article 24 of India-Singapore DTAA. We therefore direct the AO to delete the addition made in this regard. Printed from counselvise.com 18 ITA No. 557/Chny/2025 Mariana Express Lines Pte. Ltd. 13. Since we have deleted the addition while adjudicating Ground No.2 & 3 the other grounds contenting the addition on alternate plea and the legal contentions of the assessee have become academic and left open accordingly. 14. In result, appeal of the assessee is allowed. Order pronounced in the open court on 25-07-2025. Sd/- Sd/- (GEORGE GEORGE K) (PADMAVATHY S) Vice President Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Chennai 4. CIT, Chennai 5. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "