CBDT streamlines No Objection Certificate, Port Clearance Certificate, voyage return and voyage assessment processes for Foreign Shipping Companies
The Central Board of Direct Taxes (CBDT) issued Circular No. 732 dated 20 December 1995 to discontinue the procedure of obtaining a No Objection Certificate (NOC) for each voyage in the case of foreign companies covered by a Double Taxation Avoidance Agreement (DTAA). However, till date, Foreign Shipping Companies (FSCs) were still required to obtain a Port Clearance Certificate (PCC) for each voyage at the port for onward submission to the Customs department at the port. Further, there was no uniform practice followed in providing NOCs or conducting the assessment of voyage return filed as per provisions of section 172(3) of the Income Tax Act, 1961 (the Act).
Several FSCs made a representation that only some ports honoured the annual NOC issued by the jurisdictional Assessing Officer (AO), and port clearance and voyage return assessment were done in a routine manner. AOs at various ports were not honouring the annual NOC and insisted on documentation such as the Tax Residency Certificate, place of effective management proof, etc. This led to duplication of work as these documents would have been filed before and verified by the jurisdictional AO at the time of issuing the annual NOC.
To streamline the process, the CBDT recently issued Circular No. 30/2016 dated 26 August 2016. The circular states that the AO, before whom the request for an annual NOC is filed, should examine the applicability of DTAA. The AO should continue to take the declaration from the FSC that the DTAA benefits would be available only for freight in international traffic. The annual NOC should clearly mention the following:
Furthermore, the issuance of voyage-wise PCC shall be dealt with in three different ways:
- Names of the ships owned by the foreign company;
- Names of the ships chartered or names of shipping companies from which ships are chartered by the FSC; and
- Names of members of the pool and their ships which are a part of this pool.
Furthermore, in all cases, the voyage return shall continue to be filed with the jurisdictional AO.
- In cases wherein the entire cargo belongs to a single FSC and that FSC is eligible to claim full DTAA relief, there is no need to obtain a PCC for each voyage from the Income Tax Officer and the Customs authorities shall accept the annual NOC issued by the jurisdictional AO before issuing a PCC to such ships.
- In cases wherein the cargo belongs to a number of FSCs and each FSC is eligible to claim full DTAA relief, and each FSC has obtained an annual NOC issued by the respective jurisdictional AO, the PCC for each voyage is not required. Instead, a certificate from a Chartered Accountant (CA) in the prescribed format is required to be filed by the ‘Master of the ship’ before the Customs authorities. The CA certificate is required to be accompanied with an annual NOC for all the FSCs.
- In any other case, a voyage NOC is required to be obtained. The customs authorities shall issue the PCC only upon production of such NOC.
The circular states that in case FSC is to be assessed on a voyage-wise basis, the assessment in such cases must be expeditiously done and without conducting any further verification with respect to the eligibility of DTAA relief to the FSC and the annual NOC issued by the jurisdictional AO must be honoured. Furthermore, the circular clarifies that in cases where the FSC files an intimation to be assessed on an annual basis instead of on a voyage basis, then the AO shall intimate the details of the voyage and freight in respect of that FSC to the jurisdictional AO issuing the annual NOC.