Pune Tribunal rules on eligibility of one-member shipping company to claim benefits under Cyprus DTAA

This Tax Alert summarizes a recent decision of the Pune Income Tax Appellate Tribunal (Tribunal) in the case of Shaan Marine Services Pvt. Ltd. (Taxpayer). The issue before the Tribunal was whether freight income of a Cyprus shipping company (Ship Co) was taxable in India as per the provisions of the India-Cyprus Double Taxation Avoidance Agreement (Cyprus DTAA). The Tribunal, on consideration of the facts and the specific language of the Cyprus DTAA, held that Ship Co was not a “paper company” and its “effective management” was situated in Cyprus as it was registered and headquartered in Cyprus. Hence, Ship Co is entitled to benefits of the Cyprus DTAA and its income from transportation of cargo is not taxable in India.