We are the Indian agent of a ship owned by a UAE company. We filed the section 172(3) return claiming nothing was payable because of the treaty, and the Assessing Officer taxed 7.5 per cent of the freight without explaining why. Does the treaty defeat the section 172 levy, and what does the Board say?
On the India-UAE treaty, yes. The Gujarat High Court held that where the owner of the ship is admittedly a resident of the UAE, Article 8 of the India-UAE Double Taxation Avoidance Agreement leaves no scope for taxing the income of the ship at any Indian port, because the agreement between the two countries has ousted the jurisdiction of the Indian taxing officers to tax profits derived by the enterprise. The Court reached that conclusion on Article 8 read with two Board circulars which it described but which are not reproduced in the judgment and which I did not read in their own words: Circular No. 333 dated 2 February 1982, which the Court said states that the provisions made in a DTAA prevail over the general provisions of the Act, and Circular No. 732 dated 20 December 1995, which the Court said clarifies that where ships are owned by an enterprise of a country with which India has a treaty providing for taxation of shipping profits only in the country of residence, no tax is payable by such ships at Indian ports.
Decided by the High Court (Bhaskar Bhattacharya, Acting Chief Justice, and J.B. Pardiwala J (common oral order delivered by the Acting Chief Justice)) on 2012-03-20, reported as High Court of Gujarat at Ahmedabad, Tax Appeal Nos. 172 to 181, 191 and 192 of 2011, common oral order dated 20 March 2012; no law-report citation traced. It bears on section 172, section 172(3), section 260A, section 90, section DTAA art 8 of the Income Tax Act 1961, in Presumptive Taxation & Audit, Residence & Treaty Benefit and Assessment & Scrutiny matters.
This is the mechanism by which most s.172 demands on foreign-owned vessels are answered, and it has to be run treaty by treaty. THE TREATY HERE IS INDIA-UAE AND NOTHING IN THIS JUDGMENT IS AUTHORITY FOR ANY OTHER TREATY. The Article 8 the Court set out at its paragraph 8 is a wide one: paragraph 1 allots profits derived by an enterprise of a Contracting State from the operation by that enterprise of ships in international traffic exclusively to that State; paragraph 2 defines those profits as profits from the transportation by sea of passengers, mail, livestock or goods and expressly includes the charter or rental of ships incidental to such transportation, the rental of containers and related equipment used in connection with the operation of ships in international traffic, and gains from the alienation of ships, containers and related equipment owned and operated by the enterprise in international traffic; paragraph 3 treats interest on funds connected with such operation as profits from the operation of ships and disapplies Article 11 to that interest; and paragraph 4 extends paragraphs 1 to 3 to profits from participation in a pool, a joint business or an international operating agency. Other treaties are drafted differently — some place shipping in a different Article altogether, some carve out journeys between places within one Contracting State, some subject relief to a remittance condition — so the first thing to establish in any s.172 treaty claim is which treaty, which Article and what its paragraph 2 covers. Note also the two facts that carried this case: the ship's owner was admittedly a UAE resident, and the Assessing Officer had made no discussion at all in the assessment order of why the claim was not accepted. The second of those is a procedural point worth using in its own right.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
The assessee acted as agent of ships registered in the UAE. It furnished the return required under s.172(3) claiming that no tax was payable, on the footing that the final freight beneficiary was a shipping company resident in the UAE which was not liable to tax by reason of Article 8 of the India-UAE Double Taxation Avoidance Agreement. The Assessing Officer issued a show-cause notice but, in the assessment order, made no discussion as to why the assessee's claim was not accepted, and levied tax at the normal rate. In the lead matter, Tax Appeal No. 172 of 2011, 31,500 MT of cargo had been loaded at USD 15-25, producing income of Rs. 14,77,153 at 7.5 per cent after conversion into Indian rupees; similar assessments were made in the other matters, which differed only as to assessment year, amount, and the name of the vessel, master and owner. The Commissioner of Income Tax (Appeals), relying on Article 8 of the India-UAE agreement, held that the Assessing Officer had no authority to tax the owner of the ship in India. The Rajkot Bench of the Tribunal affirmed that order in ITA No. 626/Rjt/2010 and analogous appeals. The Revenue appealed under s.260A. The only question was whether the Tribunal had committed a substantial error of law in holding that the assessee was not liable to tax in India as per Article 8 of the India-UAE agreement and in deleting the tax levied by the Assessing Officer.
All the appeals were summarily dismissed on the ground that no substantial question of law was involved. Taking into account the Board's circulars and the provisions of Article 8 of the India-UAE Double Taxation Avoidance Agreement, both the Tribunal and the Commissioner (Appeals) had rightly held that, the owner of the ship being admittedly a resident of the UAE, there was no scope for taxing the income of the ship at any of the ports in India; the agreement between the two countries has ousted the jurisdiction of the taxing officers in India to tax profits derived by the enterprise once it is found that the ship belongs to a resident of the other contracting country (para 10).
The Court set out Article 8 of the India-UAE agreement in full at paragraph 8, including its paragraph 2 definition of profits from the operation of ships in international traffic as profits from the transportation by sea of passengers, mail, livestock or goods, extended to the charter or rental of ships incidental to such transportation, the rental of containers and related equipment used in connection with the operation of ships in international traffic, and gains from the alienation of ships, containers and related equipment owned and operated by the enterprise in international traffic. At paragraph 9 it referred to Circular No. 333 dated 2 February 1982, which states that the provisions made in a double taxation avoidance agreement would prevail over the general provisions of the Act, and to Circular No. 732 dated 20 December 1995, which further clarifies that if ships are owned by an enterprise belonging to a country with which India has entered into an agreement for avoidance of double taxation, and the agreement provides for taxation of shipping profits only in the country of which the enterprise is a resident, no tax is payable by such ships at the Indian ports. On that footing the Court held at paragraph 10 that the concurrent conclusion below was right, and at paragraph 11 that no substantial question of law arose.
The agreement between the two countries has ousted the jurisdiction of the taxing officers in India to tax the profits derived by the enterprise once it is found that the ship belongs to a resident of the other contracting country and such position has also been clarified by the Circulars issued by the Board as indicated above.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppOn the India-UAE treaty, yes. The Gujarat High Court held that where the owner of the ship is admittedly a resident of the UAE, Article 8 of the India-UAE Double Taxation Avoidance Agreement leaves no scope for taxing the income of the ship at any Indian port, because the agreement between the two countries has ousted the jurisdiction of the Indian taxing officers to tax profits derived by the enterprise. The Court reached that conclusion on Article 8 read with two Board circulars which it described but which are not reproduced in the judgment and which I did not read in their own words: Circular No. 333 dated 2 February 1982, which the Court said states that the provisions made in a DTAA prevail over the general provisions of the Act, and Circular No. 732 dated 20 December 1995, which the Court said clarifies that where ships are owned by an enterprise of a country with which India has a treaty providing for taxation of shipping profits only in the country of residence, no tax is payable by such ships at Indian ports. This was decided by the High Court (Bhaskar Bhattacharya, Acting Chief Justice, and J.B. Pardiwala J (common oral order delivered by the Acting Chief Justice)) and bears on section 172, section 172(3), section 260A, section 90, section DTAA art 8 of the Income Tax Act 1961. It is reported as High Court of Gujarat at Ahmedabad, Tax Appeal Nos. 172 to 181, 191 and 192 of 2011, common oral order dated 20 March 2012; no law-report citation traced. This is the mechanism by which most s.172 demands on foreign-owned vessels are answered, and it has to be run treaty by treaty. THE TREATY HERE IS INDIA-UAE AND NOTHING IN THIS JUDGMENT IS AUTHORITY FOR ANY OTHER TREATY. The Article 8 the Court set out at its paragraph 8 is a wide one: paragraph 1 allots profits derived by an enterprise of a Contracting State from the operation by that enterprise of ships in international traffic exclusively to that State; paragraph 2 defines those profits as profits from the transportation by sea of passengers, mail, livestock or goods and expressly includes the charter or rental of ships incidental to such transportation, the rental of containers and related equipment used in connection with the operation of ships in international traffic, and gains from the alienation of ships, containers and related equipment owned and operated by the enterprise in international traffic; paragraph 3 treats interest on funds connected with such operation as profits from the operation of ships and disapplies Article 11 to that interest; and paragraph 4 extends paragraphs 1 to 3 to profits from participation in a pool, a joint business or an international operating agency. Other treaties are drafted differently — some place shipping in a different Article altogether, some carve out journeys between places within one Contracting State, some subject relief to a remittance condition — so the first thing to establish in any s.172 treaty claim is which treaty, which Article and what its paragraph 2 covers. Note also the two facts that carried this case: the ship's owner was admittedly a UAE resident, and the Assessing Officer had made no discussion at all in the assessment order of why the claim was not accepted. The second of those is a procedural point worth using in its own right. If it applies to you, the first step is this: Identify the treaty and the Article before anything else, and read the shipping Article's own definition paragraph. Do not carry an Article 8 proposition across from one treaty to another.
The assessee acted as agent of ships registered in the UAE. It furnished the return required under s.172(3) claiming that no tax was payable, on the footing that the final freight beneficiary was a shipping company resident in the UAE which was not liable to tax by reason of Article 8 of the India-UAE Double Taxation Avoidance Agreement. The Assessing Officer issued a show-cause notice but, in the assessment order, made no discussion as to why the assessee's claim was not accepted, and levied tax at the normal rate. In the lead matter, Tax Appeal No. 172 of 2011, 31,500 MT of cargo had been loaded at USD 15-25, producing income of Rs. 14,77,153 at 7.5 per cent after conversion into Indian rupees; similar assessments were made in the other matters, which differed only as to assessment year, amount, and the name of the vessel, master and owner. The Commissioner of Income Tax (Appeals), relying on Article 8 of the India-UAE agreement, held that the Assessing Officer had no authority to tax the owner of the ship in India. The Rajkot Bench of the Tribunal affirmed that order in ITA No. 626/Rjt/2010 and analogous appeals. The Revenue appealed under s.260A. The only question was whether the Tribunal had committed a substantial error of law in holding that the assessee was not liable to tax in India as per Article 8 of the India-UAE agreement and in deleting the tax levied by the Assessing Officer. The matter was decided on 2012-03-20 by the High Court (Bhaskar Bhattacharya, Acting Chief Justice, and J.B. Pardiwala J (common oral order delivered by the Acting Chief Justice)). On those facts the High Court held as follows. All the appeals were summarily dismissed on the ground that no substantial question of law was involved. Taking into account the Board's circulars and the provisions of Article 8 of the India-UAE Double Taxation Avoidance Agreement, both the Tribunal and the Commissioner (Appeals) had rightly held that, the owner of the ship being admittedly a resident of the UAE, there was no scope for taxing the income of the ship at any of the ports in India; the agreement between the two countries has ousted the jurisdiction of the taxing officers in India to tax profits derived by the enterprise once it is found that the ship belongs to a resident of the other contracting country (para 10).
The Court set out Article 8 of the India-UAE agreement in full at paragraph 8, including its paragraph 2 definition of profits from the operation of ships in international traffic as profits from the transportation by sea of passengers, mail, livestock or goods, extended to the charter or rental of ships incidental to such transportation, the rental of containers and related equipment used in connection with the operation of ships in international traffic, and gains from the alienation of ships, containers and related equipment owned and operated by the enterprise in international traffic. At paragraph 9 it referred to Circular No. 333 dated 2 February 1982, which states that the provisions made in a double taxation avoidance agreement would prevail over the general provisions of the Act, and to Circular No. 732 dated 20 December 1995, which further clarifies that if ships are owned by an enterprise belonging to a country with which India has entered into an agreement for avoidance of double taxation, and the agreement provides for taxation of shipping profits only in the country of which the enterprise is a resident, no tax is payable by such ships at the Indian ports. On that footing the Court held at paragraph 10 that the concurrent conclusion below was right, and at paragraph 11 that no substantial question of law arose. In the words reproduced by the source cited on this page: "The agreement between the two countries has ousted the jurisdiction of the taxing officers in India to tax the profits derived by the enterprise once it is found that the ship belongs to a resident of the other contracting country and such position has also been clarified by the Circulars issued by the Board as indicated above."
It was decided by the High Court on 2012-03-20 and is reported as High Court of Gujarat at Ahmedabad, Tax Appeal Nos. 172 to 181, 191 and 192 of 2011, common oral order dated 20 March 2012; no law-report citation traced. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 172, section 172(3), section 260A, section 90, section DTAA art 8, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. All the appeals were summarily dismissed on the ground that no substantial question of law was involved. Taking into account the Board's circulars and the provisions of Article 8 of the India-UAE Double Taxation Avoidance Agreement, both the Tribunal and the Commissioner (Appeals) had rightly held that, the owner of the ship being admittedly a resident of the UAE, there was no scope for taxing the income of the ship at any of the ports in India; the agreement between the two countries has ousted the jurisdiction of the taxing officers in India to tax profits derived by the enterprise once it is found that the ship belongs to a resident of the other contracting country (para 10). It arises in Presumptive Taxation & Audit, Residence & Treaty Benefit and Assessment & Scrutiny matters, on section 172, section 172(3), section 260A, section 90, section DTAA art 8 of the Income Tax Act 1961, and was decided by Bhaskar Bhattacharya, Acting Chief Justice, and J.B. Pardiwala J (common oral order delivered by the Acting Chief Justice). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Establish who the freight beneficiary is and that it is a resident of the treaty State. That was the fact on which this case turned — the owner of the ship was admittedly a UAE resident. Make the claim in the s.172(3) return itself, as the agent did here, rather than waiting for the assessment. Cite the two Board circulars the Court relied on — Circular No. 333 dated 2 February 1982 and Circular No. 732 dated 20 December 1995 — but read them first. Neither is reproduced in this judgment and what is said about them here is the Court's own description of them at paragraph 9; Circular No. 732 is cross-referred in the departmental footnote list to section 172. If the assessment order simply levies tax without dealing with the treaty claim, take that as a separate ground. The Court recorded here that no discussion was made in the assessment order as to why the assessee's claim was not accepted. Do not over-read the disposal. The appeals were dismissed summarily on the footing that no substantial question of law arose, so the judgment's force is as a High Court's approval of the Tribunal's and the Commissioner (Appeals)' conclusion on the India-UAE Article 8, not as an extended construction of it.
Still good law. indiankanoon's citedby index is empty for this judgment, so the check was run by name: 22 documents mention it. The Delhi High Court adopted it within months, in Emirates Shipping Line FZE v ADIT (26 July 2012), holding at para 32 that 'Similar view has been taken by Gujarat High Court in Venkatesh Karrier Limited (supra) holding that the company incorporated in Dubai and carrying on shipping business in India is entitled to benefit under Article 8 of the DTAA and there is no scope of taxing them in any port of India', and quashing the reassessment notice. The Calcutta High Court in P & O Nedlloyd Ltd v ADIT (7 November 2014) had it before it among the authorities and recorded that 'None of the propositions of law laid down by the above decisions were disputed', allowing the writ - support of a weaker kind, since the Bench did not reason from it. The Tribunal applies it across benches - Mumbai (APL Co Pte Ltd, 16 February 2017; Citicorp Investment Bank (Singapore), 24 March 2017), Hyderabad (Far Shipping Singapore, 16 June 2017) and Rajkot (Maersk Tankers Singapore, 30 November 2022). No High Court taking the contrary view on Article 8 of the India-UAE treaty and s.172 was found, and nothing overruling, doubting or confining the judgment was found. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment is short — eleven numbered paragraphs, ending with the disposal at paragraph 11 — and I read it through to the signature block, so this is not a truncated report. Paragraph 10, from which the quotation is taken, was reproduced identically on a separate fragment fetch. Two limits on what I could establish. First, the text of Article 8 set out in this entry is Article 8 AS QUOTED BY THE COURT at its paragraph 8; I did not retrieve the India-UAE treaty text from any official source and a reader relying on the Article for a different year should check it, since the India-UAE agreement has been amended by protocol more than once (the Delhi High Court in Emirates Shipping Line FZE v. ADIT, decided 26 July 2012, records at its paragraph 33 that Article 4(1) of that agreement was amended with effect from 1 April 2008). Second, I did NOT retrieve CBDT Circular No. 333 or CBDT Circular No. 732 in their own words; what appears above about them is the Court's own description at its paragraph 9, and it is attributed to the Court rather than quoted as the circulars' text. Circular No. 732, dated 20-12-1995 is independently cross-referred in the footnote list to s.172 on the departmental page. The indiankanoon listing for this document gives the party names as "Director vs M/S", which is a defect in that site's indexing; the cause title in the document names the parties as Director of Income Tax (International Taxation) and M/s Venkatesh Karrier Ltd. A search of the library's full title list for "Venkatesh" and "Karrier" returned only two unrelated entries. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
All the appeals were summarily dismissed on the ground that no substantial question of law was involved. Taking into account the Board's circulars and the provisions of Article 8 of the India-UAE Double Taxation Avoidance Agreement, both the Tribunal and the Commissioner (Appeals) had rightly held that, the owner of the ship being admittedly a resident of the UAE, there was no scope for taxing the income of the ship at any of the ports in India; the agreement between the two countries has ousted the jurisdiction of the taxing officers in India to tax profits derived by the enterprise once it is found that the ship belongs to a resident of the other contracting country (para 10).
TaxSphere, “DIT (International Taxation) v Venkatesh Karrier Ltd — Article 8 of the India-UAE treaty ousts the section 172 levy where the ship belongs to a UAE resident”, https://taxnotice.vittsphere.com/caselaw/case/dit-v-venkatesh-karrier-article-8-india-uae-treaty-ousts-the-section-172-levy/ (validity last checked 2026-09-09)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
Our principal's freight was exempt under Article 8, but the officer says Article 24 applies because the freight went to a London account. Who wins?
Our foreign shipping client elected under section 172(7) for a regular assessment and is now getting a refund. The Department says no interest is payable on it because of an old Board circular. Is that circular still good?
A foreign ship loaded our cargo at an Indian port and the Assessing Officer is demanding tax from the master before port clearance. What is the levy, what return has to be filed, is there any time limit on the officer, and can the owner ask instead to be assessed on his year's income?
Our Belgian shipping client bills its exporters a single freight covering carriage from an inland container depot to the Indian port and then to the foreign destination. The Assessing Officer has taxed the inland leg separately as business profits. Does the shipping Article cover the inland haulage?
