Dtaa -india singapore - limitation of relief -art-24

N SURYANARAYANA (Querist) 26 November 2014 This query is : Resolved
In case of freight earned by non-resident shipping company and as per Article-24 of DTAA “Limitation of Relief” clause entered into India with Singapore the tax treaty benefit is available when the amount is remitted/received in Singapore. What is the correct position of law in case where there is a short remittance of freight amount on account of “address commission”, brokerage etc, which are deducted from the freight amount and which are at the standing instructions of the non-resident shipping company itself and for which proof is produced ? Whether any proportionate taxation to be done in India for such short remitted amount in Singapore ? Your valuable comments are solicited since this being a contentious issue between the IT Department and agents acting on behalf of non-resident shipping companies .

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J K Agrawal (Expert) 26 November 2014
Dear Sir
In simple words, Article 24 DTAA, only says that the tax benefit is available on only that part of amount which is remitted or received in another country. It is not available on entire earned amount.

It is prime condition that such income should be taxable in both countries.

As far as i understand from your query, You shall have to pay tax at least at one country. you can choose the country where the tax rate is lower but payment of tax will be at that country where the money is earned.

But again to be noted that the treaty is regarding Net earnings only which is liable for taxation. If any expenditure is deductible from the gross income, it does not come in scope of Income.