9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (11) TMI 1474 - AT - Income TaxDenying the benefit of Article-8 of the India- Malaysia DTAA - freight income earned by the assessee from shippers for transporting cargo loaded on feeder vessels for onward transportation by vessels owned, leased or chartered by the assessee - Held that - As decided in the immediately preceding Assessment Years 2004-05 to 2007-08. we hold that the entire profits derived from the transportation of goods carried on by the assessee is to be treated as profits from operation of ships and therefore the benefit of Article-8 cannot be denied to the assessee on the part of the freight from voyage by the feeder vessels. Thus Ground No.1 raised by the assessee is allowed. Since the benefit of Article-8 has been given to the assessee on the freight income earned by it, we are not adjudicating upon the plea for the benefit under Article-8(3). Similarly, the issue of permanent establishment Article-5 is also not adjudicated upon as the same will come into question once the benefit under Article-8 is denied and income is to be computed as per Article-7. Thus the rest of the grounds of appeal are treated as academic in nature.
Issues Involved:
1. Denial of benefit under Article 8 of the India-Malaysia Double Taxation Avoidance Agreement (DTAA) on freight income. 2. Classification of freight income under Article 8(3) of the DTAA. 3. Determination of Permanent Establishment (PE) status under Article 5 of the DTAA. 4. Tax liability extinguishment through arm's length commission. 5. Estimation of freight attributable to feeder voyages. 6. Computation of taxable shipping income. Detailed Analysis: 1. Denial of Benefit under Article 8 of the DTAA: The primary issue raised by the assessee was the denial of the benefit under Article 8 of the India-Malaysia DTAA on freight income earned from transporting cargo loaded on feeder vessels for onward transportation by vessels owned, leased, or chartered by the assessee. The Tribunal referenced the assessee's own case in previous assessment years (2004-05 to 2009-10), where it was held that the entire profits derived from the transportation of goods should be treated as profits from the operation of ships. The Tribunal concluded that the benefit of Article 8 could not be denied on the part of the freight from the voyage by the feeder vessels. The Tribunal allowed this ground in favor of the assessee, stating that the transportation of cargo in containers from Indian ports to hub ports through feeder vessels falls within the ambit of "charterer" and thus within the scope of "operation of ships" as defined in Article 8(2) of the DTAA. 2. Classification of Freight Income under Article 8(3): Given that the Tribunal granted the benefit of Article 8 to the assessee on the freight income, it did not adjudicate upon the plea for the benefit under Article 8(3). This issue became redundant as the primary relief sought under Article 8 was already granted. 3. Determination of Permanent Establishment (PE) Status under Article 5: The issue of whether Crescent Shipping Agencies (India) Ltd. constituted a Permanent Establishment (PE) of the assessee in India under Article 5 of the DTAA was not adjudicated upon. The Tribunal noted that this issue would only come into question if the benefit under Article 8 was denied and income needed to be computed as per Article 7. Since the benefit under Article 8 was granted, the PE determination was treated as academic and not addressed. 4. Tax Liability Extinguishment through Arm's Length Commission: The assessee argued that no income could be brought to tax in India as the arm's length commission paid to Crescent, which is taxable in India, fully extinguishes the tax liability of the appellant. This argument was not separately addressed by the Tribunal as the primary relief under Article 8 was granted, rendering this ground academic. 5. Estimation of Freight Attributable to Feeder Voyages: The assessee contested the CIT(A)'s estimation of freight attributable to the feeder voyage at 25% of the total freight from voyages involving feeder operations. The Tribunal did not specifically address this issue, as the primary relief under Article 8 was granted, making this ground academic. 6. Computation of Taxable Shipping Income: The assessee challenged the computation of taxable shipping income by applying a deemed income rate of 10% instead of 7.5% given under section 44B. The Tribunal did not specifically address this issue due to the primary relief granted under Article 8, rendering this ground academic. Condonation of Delay: The Tribunal condoned a delay of 471 days in filing the appeal, accepting the assessee's explanation that the delay was due to the appellant being a foreign company with no presence in India since 2012 and the delay in receiving documents from its erstwhile agent. The Tribunal found the reasons sufficient and admitted the appeal for disposal on merits. Conclusion: The appeal of the assessee was partly allowed, with the Tribunal granting the benefit of Article 8 of the India-Malaysia DTAA on the freight income earned from feeder vessels, thereby treating the entire profits from transportation as profits from the operation of ships. Other grounds were treated as academic due to the primary relief granted.
|
