2023 (1) TMI 1260 - AT - Income Tax

Taxability of Inland Haulage Charges (IHC) - Income taxable in India - HELD THAT - Having gone through the decision of this Tribunal in earlier year we note that the issue arising in the present appeal is identical and recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of Tribunal for preceding assessment years. As decided in own case 2022 (9) TMI 1388 - ITAT MUMBAI IHC since forms part of income from operation of ships in International Traffic is covered under Article-9 of the India-France Tax Treaty accordingly not taxable in India. These grounds are decided allowed. Taxability of freight charges from transportation of cargo through feeder vessels - HELD THAT - As decided in own case 2022 (11) TMI 379 - ITAT MUMBAI we uphold the plea of the assessee and direct the AO to delete the addition on account of freight charges for transportation of cargo through feeder vessels. PE in India - treating the agent of assessee in India as permanent establishment of the assessee - HELD THAT - As decided in assessee own case 2022 (9) TMI 1388 - ITAT MUMBAI as factually demonstrated that the payment made by the assessee to its indian agent is at the arm s length price of 18%. That being the case following the aforesaid decision of the Co-ordinate Bench we hold that the Indian Agent of the assessee cannot be considered as an agency PE. Thus grounds are decided in favour of the assessee. Non-taxability of income in the nature of IT support services ( FTS ) - According to assessee FTS arising from IT Services is not taxable in the light of beneficial provision in India France tax treaty - HELD THAT - As assessee contends that the income which has been offered to tax by the assessee in return of income was not taxable. However AO did not entertain such a claim on the ground that assessee has not filed any revised rate of interest making such claim. For saying so the AO relied on the decision of Goetz India 2006 (3) TMI 75 - SUPREME COURT but it has not precluded this Tribunal to admit such a claim even if not raised before the AO. So we admit these grounds of appeal and since this issue require fresh determination we deem it appropriate to restore the same to Assessing Officer for de-novo examination.

Summary

Issues Involved:
1. General assessment of total income.
2. Taxability of Inland Haulage Charges (IHC).
3. Taxability of freight charges from transportation of cargo through feeder vessels.
4. Permanent establishment (PE) status of the agent in India.
5. Non-taxability of income from IT support services (FTS).
6. Levy of interest under sections 234B and 234C.
7. Initiation of penalty proceedings under section 270A.

Detailed Analysis:

1. General Assessment of Total Income:
- The issue raised in ground No. 1 was general in nature and required no separate adjudication.

2. Taxability of Inland Haulage Charges (IHC):
- Facts: The assessee collected INR 377,56,83,161/- as IHC, arguing it falls under Article 9 of the India-France DTAA. The AO taxed it as business profit at a 10% deemed profit rate.
- Tribunal's Decision: The Tribunal found the issue identical to previous years where it ruled in favor of the assessee, stating IHC forms part of income from the operation of ships in international traffic and is covered under Article 9 of the DTAA. Thus, it is not taxable in India.
- Conclusion: Grounds No. 2 - 6 were allowed in favor of the assessee.

3. Taxability of Freight Charges from Transportation of Cargo Through Feeder Vessels:
- Facts: The AO taxed freight income of INR 14,15,60,433/- from feeder vessels not owned or chartered by the assessee. The Ld. DRP upheld this.
- Tribunal's Decision: The Tribunal, following its own decisions and the Bombay High Court's ruling, held that such freight charges are part of shipping income in international traffic and are not taxable in India under Article 9 of the DTAA.
- Conclusion: Grounds No. 7 - 12 were allowed in favor of the assessee.

4. Permanent Establishment (PE) Status of the Agent in India:
- Facts: The AO considered the agent in India as a dependent agent PE of the assessee. The Ld. DRP upheld this.
- Tribunal's Decision: The Tribunal noted that if the agent is remunerated at arm's length, it cannot be considered a PE. It referred to an Advance Pricing Agreement (APA) confirming arm's length remuneration.
- Conclusion: Grounds No. 13 - 15 were allowed in favor of the assessee.

5. Non-Taxability of Income from IT Support Services (FTS):
- Facts: The AO taxed INR 7,60,05,380/- as FTS. The assessee claimed it was not taxable under the India-France DTAA, supported by a Pune Tribunal decision.
- Tribunal's Decision: The Tribunal admitted the claim despite no revised return being filed, as allowed by the Supreme Court in Goetz India. The issue was remanded back to the AO for fresh examination.
- Conclusion: Grounds No. 16 - 20 were allowed for statistical purposes.

6. Levy of Interest Under Sections 234B and 234C:
- Facts: The assessee contested the levy of interest under sections 234B and 234C.
- Tribunal's Decision: These issues were deemed consequential.
- Conclusion: Grounds No. 21 and 22 were allowed for statistical purposes.

7. Initiation of Penalty Proceedings Under Section 270A:
- This issue was not separately adjudicated in the detailed analysis provided.

Conclusion:
The appeal was largely decided in favor of the assessee, with key issues regarding the taxability of IHC, freight charges, and the status of the agent as a PE being resolved based on precedents and the DTAA provisions. The matter of FTS was remanded for fresh consideration. Interest levies were treated as consequential. The appeal was allowed for statistical purposes.