MATHEWSONS EXPORTS & IMPORTS PVT. LTD. Vs. ACIT

JUDGEMENT

(1.) THIS appeal of the assessee is directed against the order of the CIT(A) -II, Kochi dated 22 -10 -2013 and pertains to assessment year 2006 -07.

(2.) THE only issue arises for consideration is non deduction of tax for payment of ship charter hire charges.

(3.) THE ld. representative further submitted that DTAA between the two sovereign countries would override the provisions of Indian Income -tax Act insofar as it is more beneficial to the assessee. According to the ld. representative, Article 8 of the DTAA clearly says that the profit derived by an enterprise of a contracting state from the operation of ships in international water shall be taxable only in that state. Therefore, in view of the specific clause in the DTAA, more particularly, Article 8, the income received by the NRI has to be taxed only in the other contracting state, viz. UAE. On a query from the bench only if the ship was operated in the international traffic/waters then only the profit was taxable in the other contracting state, then how can the assessee substantiate claim that the vessel was operated in the international waters, the ld. representative by placing several documents issued by Tuticorin Port Trust and Customs (C Cargo) submitted that the vessel 'M.V. Thekkadi' arrived to Tuticorin Port from foreign country without any load/material/goods. Therefore, it is obvious that empty vessel sailed all the way from Maldives to Tuticorin. After loading goods at Tuticorin Port, the vessel M.V. Thekkadi sailed to Maldives which is obvious from the documents issued by the customs' authorities (C -Cargo) at Tuticorin Port. No domestic sailing of the ship was undertaken at any point of time. The vessel, M.V. Thekkadi sailed between Tuticorin Port to Maldives Port. Therefore, the operation of vessel M.V. Thekkadi is only in the international waters/traffic, therefore, according to the ld. representative, Article 8 of the DTAA would come into operation. Article 8 of the DTAA would override the provisions of section 9 of the I.T. Act since admittedly, Article 8 is more beneficial to the assessee.