9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (11) TMI 970 - AT - Income TaxTaxability of freight receipts Held that - The assessee firm is the managing owner and in that capacity only, it manages the affairs of these two companies for which it is remunerated as per the relevant terms agreed between the parties - It cannot be held that whatever income accrues during the carrying on such business belongs to the assessee firm - The entire infrastructure including the vessels which are deployed in the international traffic belongs to the two companies, the income accruing from exploiting / deployment of such assets / vessels cannot belong to the assessee firm - The assessee can be compared to a CEO of a company who is managing the affairs of the company and this does not lead to any inference that the income of the company belongs to the CEO - The assessee is only representative and the actual shipping business and freight receipts belong to these two companies - The assessee firm is separate and distinct from two companies and any income accruing on account of shipping operations does not belong to the assessee, but to these two companies only - The assessee firm which is only a representative of these companies and is carrying out its obligation for filing of the return of income as well as managing the entire affairs - Income per-se cannot be taxed in the hands of the assessee as a partnership firm but as a representative of these two companies Decided against Revenue. Sharing of global software cost - Payments received from gropup company Maersk India Pvt. Ltd Held that - The assessee is not rendering any service of managerial, technical or consultancy to its agent or group entities by allowing its group companies to be usage of software. The assessee s main income is only from freight receipt received from operations of ships and it is not providing any technical service to them. It has developed a software for running of shipping business globally in a more effective and efficient manner and access of such software has been provided to various agents / group companies - They are reimbursing the cost to the assessee without any mark-up. Such a recovery of a cost cannot be held to be fees for technical services - The cost recovered from the various agents/ group companies towards usage of software are directly connected with the shipping operations then the same has to be treated as covered under Article-9(1) and, hence, it cannot be taxed in India Following assessee s own case right from the assessment year 2001-02 to 2007-08 - Such payments received by the assessee towards recovery of cost is not fees for technical services Decided against Revenue. Management fees received and the reimbursement of expenditure Held that - The payment has been made by non-resident company i.e., two Danish companies to another non-resident i.e., a partnership firm established under the laws of Denmark - Since the payment has been made from one non- resident to another non-resident in connection with the entire global business in Denmark only - Such a payment can be taxed in India either as fees for technical services or as royalty - By virtue of Article-13(6), such a payment cannot be taxed in India, because it has nothing to do with the MIPL as the main criteria that such a payment has to be deductible in the hands of the P.E. is not at all applicable in the present case - The treaty benefit is available to the assessee - Decided in favour of the assessee. Treaty benefit under India and Denmark DTAA Held that - If the income of the partnership firm is fully taxed in the other contracting State (say, India) and the same income is also taxed in the hands of the partners in the resident State (say, Denmark), then it will result into double taxation - The partnership firm is a transparent entity but once its income and profit is taxed in the hands of the partners, the treaty benefit should be extended to the partners - Following Linklaters LLP Versus ITO 2010 (7) TMI 535 - ITAT, MUMBAI - The assessee firm is entitled for the treaty benefit and if any such income of the assessee is not liable for tax under the Articles of the treaty, the benefit has to be given - The resident State has a right to tax the income of the partnership firm irrespective of the fact that the same is being taxed from the partners - It has to be treated as fiscal domicile of that State within Article-4 Decided in favour of assessee. Interest under section 234D Held that - Following CIT v/s Reliance Energy Ltd. 2013 (10) TMI 280 - SUPREME COURT - Having regard to the legal position which has been clarified by the Parliament by insertion of Explanation (2) in Section 234D - Section 234D cannot be applied retrospectively Decided against assessee.
Issues Involved:
1. Freight income assessment. 2. Payments towards I.T. Global Online System. 3. Levy of interest under section 234B. 4. Management fees and reimbursement of expenses. 5. Treaty benefits under India-Denmark DTAA. 6. Levy of interest under section 234D. Detailed Analysis: 1. Freight Income Assessment: The primary issue was whether the freight income from shipping business should be assessed in the hands of the two companies, "Svendborg" and "1912," or in the hands of the assessee, which is the managing owner of these companies. The Tribunal held that the income from the operation of ships accrues to Svendborg and 1912 and not to the assessee, which merely acts as a managing owner. The freight receipts from shipping business from India should thus be assessed in the hands of Svendborg and 1912. 2. Payments Towards I.T. Global Online System: The second issue was whether the payments made by Maersk India Pvt. Ltd. (MIPL) towards their share of the cost of the I.T. Global Online System paid to "Svendborg" and "1912" are taxable. The Tribunal concluded that these payments were on account of sharing the cost of the I.T. Global Online System and software, which is integral to the international shipping business of Svendborg and 1912. Therefore, the payments cannot be treated as income either of the assessee firm or of these two companies and are not taxable as fees for technical services or royalty. 3. Levy of Interest Under Section 234B: The third issue involved the levy of interest under section 234B, questioning whether the assessee was liable for advance tax. The Tribunal agreed with the contention of the assessee that it was not liable for payment of advance tax, following various decisions cited by the assessee, and directed the Assessing Officer to delete the levy of such interest. 4. Management Fees and Reimbursement of Expenses: The Tribunal addressed whether the management fees received and the reimbursement of expenditure to A.P. Moller A/S are chargeable to tax in India. The Tribunal held that the management fees are not chargeable to tax in India by virtue of Article 13(6) of the DTAA, as the payment was made by one non-resident to another non-resident and not in connection with any permanent establishment in India. 5. Treaty Benefits Under India-Denmark DTAA: The Tribunal examined whether the treaty benefits under the India-Denmark DTAA are available to the assessee. The Tribunal concluded that the assessee firm is entitled to the treaty benefit, as the income of the partnership firm is fully taxable in the hands of the partners in Denmark. Therefore, the benefit of the DTAA cannot be denied to the assessee firm. 6. Levy of Interest Under Section 234D: The final issue was the levy of interest under section 234D. The Tribunal directed the Assessing Officer to consider and follow the decision of the Hon'ble Supreme Court in CIT v/s Reliance Energy Ltd., which held that section 234D cannot be applied retrospectively. Consequently, the Tribunal restored the issue back to the file of the Assessing Officer to give effect to this order. Conclusion: The Tribunal ruled in favor of the assessee on all major issues, holding that the freight income belongs to the two companies, the payments towards the I.T. Global Online System are not taxable, the management fees are not chargeable to tax in India, and the assessee is entitled to the treaty benefits under the India-Denmark DTAA. The levy of interest under sections 234B and 234D was also addressed in favor of the assessee.
|
