2022 (11) TMI 379 - AT - Income Tax

Income taxable in India - Taxability of Inland Haulage Charges ( IHC ) - HELD THAT - We find that similar issue was decided in favour of assessee by the coordinate bench of the Tribunal in CMA CGM SA vs ACIT, 2018 (3) TMI 1832 - ITAT MUMBAI after following judicial precedents rendered in assessee's own case for preceding assessment years held that 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. The issue arising in the present appeal is 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. The learned DR could not show us any reason to deviate from the aforesaid decision and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the order passed by the coordinate bench of the Tribunal in assessee‟s own case cited supra, we uphold the plea of the assessee and direct the AO to delete the addition on account of IHC. As a result, grounds raised in assessee‟s appeal are allowed. Taxability of freight charges from transportation of cargo through feeder vessels - HELD THAT - As decided in own case assessment year 2016 17 2018 (3) TMI 1832 - ITAT MUMBAI freight charges received from transportation of cargo through feeder vessels being part of shipping income in International Traffic is covered under Article-9(1) of the India-France Tax Treaty, hence, not toxable in India. In fact, the aforesaid view of the Tribunal was upheld by the Hon'ble Jurisdictional High Court while dismissing Revenue's appeal in assessee's own case in Assessment Year 2002-03 2012 (8) TMI 1211 - BOMBAY HIGH COURT Treating the agent of assessee in India as permanent establishment of the assessee - HELD THAT - As decided in own case assessment year 2016 17 2018 (3) TMI 1832 - ITAT MUMBAI No material is brought on record to suggest that the transaction with Indian entity is not at arm's length. On the contrary assessee has demonstrated that transaction is as per APA therefore, no further adjustment is required. Respectfully following the decision of Co-ordinate Bench in assessee's own case for assessment year 2015-16 grounds are allowed.

Issues Involved:
1. Assessment of total income.
2. Jurisdiction over assessment proceedings.
3. Taxability of Inland Haulage Charges (IHC).
4. Taxability of freight charges from transportation of cargo through feeder vessels.
5. Agency Permanent Establishment (PE) in India.
6. Levy of interest under section 234B.
7. Initiation of penalty proceedings under section 270A.
8. Non-taxability of IT support services (Fees for Technical Services - FTS).

Detailed Analysis:

1. Assessment of Total Income:
The assessee contested the assessment of total income at INR 41,50,33,680/- against the returned income of INR 9,75,92,572/-. This issue was general in nature and did not require separate adjudication.

2. Jurisdiction Over Assessment Proceedings:
The assessee raised the issue of jurisdiction, but it was not pressed during the hearing and was dismissed as not pressed.

3. Taxability of Inland Haulage Charges (IHC):
The assessee collected INR 308,74,51,331 from customers for IHC, which it claimed was ancillary to international traffic and covered under Article 9 of the India-France DTAA. The AO rejected this claim, treating IHC as taxable in India and applied a 10% net profit rate due to lack of expenditure details. The Dispute Resolution Panel (DRP) upheld this view, following earlier years' directions. However, the Tribunal found that similar issues were decided in favor of the assessee in previous years, holding that IHC forms part of income from operation of ships in international traffic and is not taxable in India under Article 9 of the DTAA. The Tribunal directed the AO to delete the addition on account of IHC.

4. Taxability of Freight Charges from Transportation of Cargo Through Feeder Vessels:
The AO treated INR 11,59,46,291 from transportation via feeder vessels as business profits under Article 7 of the DTAA and section 44B of the Act, adding 7.5% of this amount to the total income. The DRP upheld this view. The Tribunal, following earlier decisions, held that freight charges from feeder vessels are part of shipping income in international traffic and covered under Article 9 of the India-France DTAA, thus not taxable in India. The Tribunal directed the AO to delete this addition.

5. Agency Permanent Establishment (PE) in India:
The AO concluded that the assessee's agent in India constituted a PE under Article 5 of the DTAA. The DRP upheld this view. However, the Tribunal, following earlier decisions, held that if the Indian agent is remunerated at arm's length, it cannot be considered a PE. The Tribunal noted that the transactions were as per an Advance Pricing Agreement (APA) and directed the AO to delete the addition, stating that the Indian agent cannot be considered a PE.

6. Levy of Interest Under Section 234B:
The issue of interest under section 234B amounting to INR 6,32,15,145/- was deemed consequential in nature and allowed for statistical purposes.

7. Initiation of Penalty Proceedings Under Section 270A:
The initiation of penalty proceedings under section 270A was considered premature and dismissed.

8. Non-Taxability of IT Support Services (FTS):
The assessee raised additional grounds regarding the non-taxability of IT support services amounting to INR 8,29,29,430/-, which was inadvertently offered to tax. The Tribunal admitted the additional grounds and evidences, noting that similar issues were decided in favor of the assessee in previous years. The Tribunal restored the issue to the AO for de novo examination, considering the additional evidences and providing a reasonable opportunity for hearing.

Conclusion:
The Tribunal allowed the appeal partly for statistical purposes, directing the AO to delete additions related to IHC and freight charges from feeder vessels, and to reconsider the non-taxability of IT support services. The issues of jurisdiction and penalty proceedings were dismissed, while the levy of interest under section 234B was allowed for statistical purposes.

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