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TMI Blog2010 (7) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... of business, they undertook to ship cargo belonging to Indian exporter to the foreign destination of the exporter. It was further pointed out that the principal, in the course of operation of the ships provided containers to the Indian exporters and the freight charged to the exporter was inclusive of the container charges. It was further submitted by the assessee that they had been granted 100 per cent DIT relief for the relevant assessment year and in case the claim was rejected, the provisions of Article 7 of DTAA would be applicable to the profits earned from shipping activities as per which profits will be taxable only if business was carried on through a Permanent Establishment (PE) and in absence of PE, no income could be allocated as business income. The Assessing Officer vide order sheet noting dated 11-3-2005 informed the assessee mat the profit derived from the use, maintenance or rental of containers should be incidental to operation of ships to qualify for exemption from taxation, whereas, the assessee did not fulfill this condition and, therefore, not eligible for exemption. The Assessing Officer has pointed out that in the proceedings dated 11-3-2005, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, held that the agent through which the assessee was carrying on its business was agent of independent nature and, therefore, in view of Article 5(6), it could not be held that the assessee had permanent establishment in India. She, accordingly, held that no income was attributable under Article 7 of the Indian Netherlands treaty. Being aggrieved with the order of ld. CIT(A), the department has filed appeal against the findings of ld. CIT(A) regarding no PE being there of assessee in India and assessee has filed cross objection against the findings of ld. CIT(A) regarding non-applicability of Article 8A. 5. Ld. D.R. submitted that in the present appeal, there are mainly two issues. Firstly, whether the assessee was entitled to the benefits under Article 8A of the DTAA between India and Netherlands and if not so, whether the assessee had any PE in India so as to determine the attributable profits to that PE. He submitted that as far as the issue regarding applicability of Article 8A is concerned, since it is not disputed that the assessee was not engaged in the business of operation of ships and was engaged only in the business of providing containers to the exporters from In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it attributable to such PE. The assessment was concluded only by examining articles 8 and 24. In view of the Assessing Officer s finding of non-applicability of article 8 the mandate of article 7 should have been examined for the purpose of taxation. The ends of justice would meet sufficiently if the impugned order is set aside and the matter is restored to the file of the Assessing Officer for de novo adjudication of the matter in terms of decision rendered in earlier paras after allowing a reasonable opportunity of being heard to the assessee. The assessee is at liberty to take any plea with the Assessing Officer as to the manner of computation of income, which the Assessing Officer will decide as per law. Needless to say, the assessee would extend full cooperation to the Assessing Officer in the framing of such fresh assessment." 7. Ld. Sr. Counsel Mr. P.J. Paridiwala referred to the assessment order para 3 page 2 and pointed out that the assessee had specifically, inter alia, pleaded before the Assessing Officer that if the assessee was denied DIT Relief granted to it earlier, then the provisions of Article 7 of DTAA would apply to the profits earned from shipping activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace of agent can never be the assessee s place. Ld. Counsel further filed before us passages from commentary of PE by Arvind A Skaar "Series on International Taxation", which is reproduced hereunder:- "9.5 Machinery or equipment as "place of business"? Both the frequently used German terms Einrichtung and Anlage (establishment) and the English term "place of business" seem to indicate that more than a spot where the enterprise performs business activities is necessary. German judicial practice suggests, however, that the German terms should have a broader interpretation. As early as 1907, the Prussian Supreme Court s decision in Chimney Sweep required very little of a chimney sweep s place of business, although a PE was denied on other grounds. His portable equipment was very simple and did not amount to a place where the activity was performed. Moreover, in Market Vendor, the court held that the different stands within a marketplace where a market vendor sold his goods were within the scope of these terms, even when no buildings were used. Small requirements in this respect are consistent with recent judicial practice concerning German domestic laws." The commentaries confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om one place to another place, therefore, in view of various judicial pronouncements mentioned in the commentary, it cannot be said that there was fixed place of business. 9. We have considered the rival submissions and perused the record of the case. There is no dispute regarding applicability of DTAA because the assessee s management and control was in Netherlands. First of all, we have to consider whether Article 8A is applicable to the facts of the case or not. This Article reads as under:- "1. Profits from the operation of ships in international traffic shall be taxable only in the state in which the place of effective management of the enterprise is situated. 2. and 3. ** ** ** 4. For the purposes of this Article : ( a )................... ( b )profits from the operation of ships include : ( i )profits derived from the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) in connection with the transport of goods or merchandise in international traffic. ( ii )profits from the rental on a full or bareboat basis of ships if operated in international traffic. Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on the same because in his opinion, the profits were taxable in accordance with section 9(1) of the Income-tax Act. However, ld. CIT(A) has given a finding in respect of PE and for a particular reason i.e., applicability of Article 5(6) and has held that there was no PE in India of the assessee. Therefore, in any case, the issue regarding PE arises out of the order of ld. CIT(A) and if the department wants to support its arguments with reference to different reasoning then it cannot be said that this amounts to enlargement of dispute by the department. The department is correct at this stage to support its contention on the basis of different reasoning. 12. Ld. D.R. referred to the decision of ITAT in the case of Thoresen Chartering Singapore (Pte.) Ltd. ( supra ) to submit that the matter may be restored to the file of the Assessing Officer. We find that the Assessing Officer has not at all considered the issue regarding PE and ld. CIT(A) has considered the issue with reference to Article 5(6). Technically, ld. CIT(A) has decided the issue relating to PE, and, therefore, same can be considered with reference to the ground taken by the department. However, in order to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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