2010 (7) TMI 790 - AT - Income Tax

Summary

Issues:
1. Entitlement to relief under Article 9 of the DTAA between India and France.
2. Inland haulage charges as part of the profit from the operation of ships or not.

Issue 1: Entitlement to relief under Article 9 of the DTAA between India and France.
The Appellate Tribunal noted that the issue of entitlement to relief under Article 9 of the DTAA had been previously decided by the CIT(A) and the Tribunal for the assessment year 2001-02. The Tribunal highlighted that the benefit of Article 9 would not be available solely based on global shipping business engagement. The Tribunal emphasized the importance of establishing a link between the transportation of cargo by feeder vessels and mother vessels owned, leased, or chartered by the assessee. Since the assessee failed to provide complete evidence before the Assessing Officer, the Tribunal remanded the issue back to the CIT(A) for fresh adjudication, emphasizing the need for proper verification and evidence to establish the linkage between vessels. The Tribunal directed the CIT(A) to provide the assessee with another opportunity to substantiate the connection between feeder and mother vessels for a fair decision.

Issue 2: Inland haulage charges as part of the profit from the operation of ships or not.
Regarding the classification of inland haulage charges, the Tribunal referred to a previous decision related to the treatment of such charges as part of the "profits from the operation of ships." The Tribunal highlighted that the treatment of haulage charges would depend on the treatment of freight related to the voyage by feeder vessels. If the freight attributable to feeder vessels falls under Article 9(1), then the haulage charges would also fall under the same article. However, if the freight is not covered under Article 9(1), the charges would be considered as business profits under Article 7 of the DTAA. The Tribunal instructed the CIT(A) to pass an appropriate order based on the previous decision. Additionally, the Tribunal directed the CIT(A) to adjudicate on the tax rate applicable if a portion of the profit earned by the assessee is not exempt under Article 9, providing the assessee with a fair opportunity to present their case.

In conclusion, the Appellate Tribunal remitted both issues back to the CIT(A) for fresh adjudication, emphasizing the importance of providing complete evidence and ensuring a fair opportunity for the assessee to present their case for a just decision.