2023 (6) TMI 664 - AT - Income Tax

Taxability of Inland Haulage Charges - Assessee claimed to be not taxable in India in the light of Article- 9 of India-France DTAA - HELD THAT - As in assessee s own case in the preceding assessment years 2016-17 2022 (9) TMI 1388 - ITAT MUMBAI we hold 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. Taxability of Freight Charges for transportation of cargo through Feeder Vessels - assessee invoked treaty provisions and claimed that the said amount is not subject to tax in India - AO held that the said receipts are taxable in India u/s. 44B and made addition of 7.5% of the total receipts - HELD THAT - We find that the Co-ordinate Bench in 2022 (9) TMI 1388 - ITAT MUMBAI to hold that 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 taxable in India. This issue is also confirmed by HC 2012 (8) TMI 1211 - BOMBAY HIGH COURT . Agency PE - CMA CGA Agencies (India) Pvt. Ltd. Whether Agency Permanent Establishment (PE) of the assessee in India? - HELD THAT - This issue is recurring and has been repeatedly subject matter of appeal since assessment year 2012-13 2020 (1) TMI 1641 - ITAT PUNE - The Tribunal has been consistently holding that the assessee has no Agency PE in India. No material has been placed on record by the Revenue to force us to take a different view. Non-taxability of income in the nature of IT support services (FTS) - HELD THAT - In the instant case, the DRP rejected the claim of assessee merely following its own order in assessment year 2017-18 2022 (11) TMI 379 - ITAT MUMBAI . Now, that the assessment order for assessment year 2017-18 has been reversed by the Co-ordinate Bench and has restored the issue back to the file of Assessing Officer for adjudication, we deem it appropriate to decide this issue in similar terms as the issue has neither been examined by the Assessing Officer or the DRP. Thus, ground of appeal allowed for statistical purpose.

Issues Involved:
1. Taxability of Inland Haulage Charges (IHC)
2. Taxability of Freight Charges for transportation of cargo through Feeder Vessels
3. Whether CMA CGA Agencies (India) Pvt. Ltd. is an Agency Permanent Establishment (PE) of the assessee in India
4. Non-taxability of income in the nature of IT support services (FTS)
5. Interest under section 234A and 234B of the Act
6. Initiation of penalty proceedings under section 270A of the Act

Summary:

1. Taxability of Inland Haulage Charges (IHC):
The assessee collected IHC of Rs. 384,82,82,478/- and claimed it to be non-taxable in India under Article 9 of the India-France DTAA. The Assessing Officer rejected this claim and added Rs. 79,39,00,675/- based on a profitability rate of 20.63%. The Tribunal, following its own decisions in preceding assessment years and the decision of the Hon'ble Jurisdictional High Court in the case of Safmarine Container Lines NV, held that IHC forms part of income from the operation of ships in international traffic and is covered under Article 9 of the India-France DTAA, thus not taxable in India. Consequently, grounds No. 2 to 5 of the appeal were allowed.

2. Taxability of Freight Charges for Transportation of Cargo through Feeder Vessels:
The assessee earned freight income of Rs. 14,96,75,976/- and claimed it to be non-taxable under the treaty provisions. The Assessing Officer taxed it under section 44B of the Act, adding 7.5% of the total receipts (Rs. 1,12,25,698/-). The Tribunal, following its own decisions in preceding years and the decision of the Hon'ble Bombay High Court, held that freight charges for transportation of cargo through feeder vessels are part of shipping income in international traffic and are covered under Article 9 of the India-France DTAA, thus not taxable in India. Grounds No. 7 to 11 of the appeal were allowed.

3. Whether CMA CGA Agencies (India) Pvt. Ltd. is an Agency Permanent Establishment (PE) of the Assessee in India:
The Tribunal consistently held that the assessee has no Agency PE in India since the assessment year 2012-13. No new material was presented by the Revenue to change this view. Grounds No. 12 to 14 of the appeal were allowed.

4. Non-taxability of Income in the Nature of IT Support Services (FTS):
The assessee initially offered Rs. 96,42,989/- as income from IT support services but later claimed it as non-taxable. The Assessing Officer rejected this claim based on the Goetze (India) Ltd. vs. CIT ruling. The Tribunal, following its decision in the assessment year 2017-18, admitted the additional grounds of appeal and restored the issue to the Assessing Officer for de novo examination. Grounds No. 15 to 19 were allowed for statistical purposes.

5. Interest under Section 234A and 234B of the Act:
The Tribunal held that charging interest under sections 234A and 234B is mandatory and consequential. Hence, grounds No. 20 and 21 were dismissed.

6. Initiation of Penalty Proceedings under Section 270A of the Act:
The Tribunal deemed the challenge to penalty proceedings premature at this stage and dismissed ground No. 22.

Conclusion:
The appeal of the assessee was partly allowed. The Tribunal pronounced the order in the open court on June 12, 2023.

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