O/TAXAP/847/2015 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 847 of 2015 TO TAX APPEAL NO. 849 of 2015 ========================================================== COMMISSIONER OF INCOME TAX....Appellant(s) Versus TAURUS SHIPPING SERVICES....Opponent(s) ========================================================== Appearance: MR NITIN K MEHTA, ADVOCATE for Appellant(s) No. 1 CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE MOHINDER PAL Date : 01/12/2015 ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Revenue has filed these appeals raising identical question for our consideration which reads as under: Whether impugned order is perverse in law and on facts in wrongly interpreting voyage of vessel between two ports in India, as 'international voyage' and permitting Assessee to avail benefit of Article 8 of India-Singapore Double Taxation Avoidance Agreement? 2. Briefly stated, facts are that: Page 1 of 4 HC-NIC Page 1 of 4 Created On Mon Dec 14 10:59:14 IST 2015 O/TAXAP/847/2015 ORDER respondent-assessee is company and had acted as agent of three vessels which had transported goods from Kandla Port to Visag. freight beneficiary was one M/s. Jaldhi Overseas Pte Limited, who claimed benefit of DTAA between India and Singapore. vessels had undertaken such freight transportation during journey from Singapore elude to Dubai. Assessing Officer came to conclusion that such transportation between Kandla to Visag cannot be considered as international traffic as defined in DTAA and between India and Singapore. Tribunal, however, ultimately held in favour of assessee relying on decision of Tribunal in similar cases. 3. We noticed that term 'international traffic' has been defined in Clause 3(h) of DTAA in question and reads as under: (h) term international traffic means any transport by ship or aircraft operated by enterprise of Contracting State, except when ship or aircraft is operated solely between places in other Contracting State. 4. In terms of Article 8 of DTAA, profits derived by enterprise of contracting state from portion of ships or aircraft in international traffic would be taxable only in that state. In this context, therefore, interpretation of term 'international traffic' becomes relevant. If transport by Page 2 of 4 HC-NIC Page 2 of 4 Created On Mon Dec 14 10:59:14 IST 2015 O/TAXAP/847/2015 ORDER ships in question from Kandla to Visag fall within definition of term 'international traffic', in terms of Article 8, assessee would be entitled to benefit of Article 8 of DTAA. 5. term 'international traffic', as noted, is defined to mean any transport by ship or aircraft operated by enterprise by contracting state. This definition, however, has exception clause which excludes transport when ship or aircraft is operated solely between places in other contracting state. Thus, any transaction by ship or aircraft operated by enterprise or contracting state would be international traffic. However, this would be not so if ship or aircraft is operated solely between places in other contracting state. If ships in question, therefore, were operated solely between Kandla and Visag, in present case, such transport would be excluded from definition of term 'international traffic'. Here, word 'solely' is all important. It is not even case of revenue that journey being undertaken by such vessels in question were confined between two ports in India either routinely or even in individual isolated case. Admitted facts, as noted above, are that such transportation was undertaking during larger journey of vessels from Singapore to Dubai. Under such circumstances, requirement of such journey being solely between places in other contracting state is not satisfied. exclusion clause of definition of term 'international traffic', therefore, would not apply. In other words, transport, which Page 3 of 4 HC-NIC Page 3 of 4 Created On Mon Dec 14 10:59:14 IST 2015 O/TAXAP/847/2015 ORDER was otherwise in nature of international traffic, would be so treated in terms of Clause (h) of Article 3 of DTAA. We see no error in view of Tribunal. Tax Appeals are, therefore, dismissed. (AKIL KURESHI, J.) (MOHINDER PAL, J.) Jyoti Page 4 of 4 HC-NIC Page 4 of 4 Created On Mon Dec 14 10:59:14 IST 2015 Commissioner of Income-tax v. Taurus Shipping Service