2013 (12) TMI 1106 - AT - Income Tax

Income from inland haulage charges Held that - The income from operation of ships in international traffic is exempt under Article 8 of DTAA between India and Belgium - Article 8(2)(b)(ii) also exempts any activity directly connected with shipping Following assessee s own case in 2001-02 - Inland haulage charges are not only incidental but also closely connected with direct operations of ships Decided against Revenue.

Summary

Issues:
Assessment of income from inland haulage charges under Article 8 of DTAA between India and Belgium.

Analysis:
The appeal by the revenue challenged the order of the CIT for the assessment year 2008-09 concerning the assessment of income from inland haulage charges. The assessee, a non-resident company registered in Belgium engaged in ship operations, argued that income from inland haulage charges should be exempt under Article 8 of the DTAA between India and Belgium. The AO, however, disagreed, stating that only specific activities like loading, unloading, and demurrages were directly connected to shipping. The AO assessed the inland handling charges income at Rs. 3,46,74,145 @ 7.5%, based on his estimation. The assessee contended that previous Tribunal decisions supported their claim, emphasizing that inland haulage charges were closely connected with direct ship operations. The CIT(A) agreed with the assessee, citing previous Tribunal decisions in favor of the assessee, and deleted the addition made by the AO.

The Tribunal carefully considered the matter and confirmed the CIT(A)'s decision to allow the claim of the assessee. It was noted that the income from inland haulage charges was viewed as directly connected with shipping income, thus falling under the exemption provided by Article 8 of the DTAA. The Tribunal found that the previous decisions of the Tribunal in the assessee's case for the assessment years 2001-02, 2003-04, and 2005-06 supported the assessee's position. The Tribunal emphasized that the inland haulage charges were not merely incidental but closely linked to the direct operations of ships. Therefore, the Tribunal upheld the CIT(A)'s order based on the consistent interpretation of the Tribunal in the assessee's previous cases.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the decision to exempt the income from inland haulage charges under Article 8 of the DTAA between India and Belgium. The Tribunal's decision was based on the interpretation that the inland haulage charges were directly connected to shipping income, as established by previous Tribunal decisions in the assessee's favor.