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2011 (11) TMI 300 - AT - Income TaxAgent of Non Resident - Business Connection - Payments made to Non residents without deducting TDS - DTAA between India and Singapore - Held that - The business of the non-resident was transhipment of cargo and the appellant engaged their services for shipment of cargo from India to a destination which the appellant could not reach without assistance non-resident. The appellant cannot segregate the business activity of shipment of cargo as one upto the port of transhipment and the other from the port of transhipment to the port of final destination. The above facts justify that non resident has business connections in India. Further the person who makes payment to non resident is his agent. where the appellant makes payment to non resident on the debit notes raised by him does not leave any room for treating the appellant as his agent. Decided in favor of assessee.
Issues Involved:
1. Whether the remittances made by the appellant to WSA 1994 Ltd. were assessable as income chargeable to tax in India. 2. Whether WSA Shipping (Bombay) Pvt. Ltd. should be treated as an agent of the non-resident under section 163 of the Income Tax Act, 1961. 3. Whether there was a business connection between the non-resident and India. 4. Whether the non-resident had a Permanent Establishment (PE) in India under the DTAA between India and Singapore. 5. Whether the income accrued to the non-resident in India was taxable. Issue-wise Detailed Analysis: 1. Whether the remittances made by the appellant to WSA 1994 Ltd. were assessable as income chargeable to tax in India: The appellant, WSA Shipping (Bombay) Pvt. Ltd., engaged in Cargo Consolidation, remitted payments to WSA 1994 Pte. Ltd., Singapore, for services rendered outside India. The Assessing Officer (AO) noticed that no tax was deducted at source on these payments and issued a show-cause notice. The AO concluded that WSA Shipping (Bombay) Pvt. Ltd. should be treated as an agent of the non-resident under section 163 of the Income Tax Act, 1961, and the remittances were assessable as income chargeable to tax in India. 2. Whether WSA Shipping (Bombay) Pvt. Ltd. should be treated as an agent of the non-resident under section 163 of the Income Tax Act, 1961: The AO treated WSA Shipping (Bombay) Pvt. Ltd. as an agent of WSA 1994 Pte. Ltd., Singapore, under section 163 of the Act, based on the business connection and remittance of freight collected from Mumbai to the ultimate destination without tax deduction. The Tribunal confirmed this order, stating that the appellant and the non-resident had a tacit understanding regarding freight charges and that the non-resident had control over the freight charges collected by the appellant. 3. Whether there was a business connection between the non-resident and India: The Tribunal held that there was a business connection between the non-resident and India. The business of the non-resident was transshipment of cargo, and the appellant engaged their services for shipment of cargo from India to destinations that the appellant could not reach without the non-resident's assistance. The Tribunal concluded that the activities were integrated, and the absence of a direct contract between the customer in India and the non-resident did not negate the business connection. 4. Whether the non-resident had a Permanent Establishment (PE) in India under the DTAA between India and Singapore: The AO and CIT(A) concluded that the non-resident had a PE in India under Article 5(8) to (10) of the DTAA between India and Singapore. However, the Tribunal found no evidence to show that WSA Shipping (Bombay) Pvt. Ltd. habitually exercised authority to conclude contracts or secured orders wholly or almost wholly for the non-resident. The Tribunal also noted that WSA Shipping (Bombay) Pvt. Ltd. acted on behalf of several non-residents, indicating independence. Consequently, the Tribunal held that the non-resident did not have a PE in India. 5. Whether the income accrued to the non-resident in India was taxable: The Tribunal held that income accrued to the non-resident in India was business income. Under Article 7 of the DTAA between India and Singapore, business profits of a Singapore enterprise are taxable in India only if the enterprise has a PE in India. Since the Tribunal concluded that the non-resident did not have a PE in India, the income could not be taxed in India. The Tribunal allowed the appeals, holding that the receipts by the non-resident from WSA Shipping (Bombay) Pvt. Ltd. could not be brought to tax in India. Conclusion: The Tribunal allowed all the appeals, concluding that the non-resident did not have a PE in India, and thus the income accrued to the non-resident could not be taxed in India. The findings in the proceedings under section 163 of the Act were not sufficient to establish a PE under the DTAA provisions. The Tribunal's decision applied to all similar cases involving different non-residents and countries, following the same criteria as the DTAA between India and Singapore.
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