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TMI Blog2011 (6) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. ORDER N.V. Vasudevan, Judicial Member. These are appeals by the revenue against two orders both dated 25-6-2009 of CIT(A) XXXI, Mumbai relating to assessment years 2010-11 and 2009-10. 2. The appellant is ACM Shipping India Limited, a company (hereinafter referred to as "the Appellant"). It is engaged in the business of ship broking and arranges for transportation of cargo from India to other countries. The appellant is a subsidiary of ACM Shipping Ltd. ('ACM UK') is a foreign company incorporated in UK, having its office at Kinnaird House, 1 Pall Mall, London SWIY 5AU. ACM UK is engaged in international business of ship broking services. According to the appellant ACM UK has an extensive worldwide net work/connection with large number of international ship owners and has substantial experience in dealing with them. ACM UK is a tax resident of the United Kingdom. A copy of the Tax Residency Certificate was also filed before the Assessing Officer. 3. According to the appellant, it needs contact information/details of international ship owners for arranging international shipments. The appellant therefore entered into a service agreement dated 1-4-2008 with ACM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) held that ACM, UK is getting commission for services rendered by them in UK for arranging the contracts with ship owners and the appellant is getting commission in respect of arranging clients in India for carrying their cargo. According to the CIT(A) the appellant was paying 50 per cent of the commission it earned to ACM UK for the services rendered for getting contract with the ship owners and the customers. According to the CIT(A) the commission is payable by the ship owners to ACM, UK directly, but is routed through the appellant because the customers is based in India. As per the contract with the ship owner and the customer, the customer has to deduct the commission payable out of the gross freight and the commission is paid to the appellant which in turn is shared between the appellant and the foreign company. The CIT(A) relied on Circular No. 23, dated 23-7-1969 wherein it has been clarified that where there are transactions with the non-resident on a principal to principal basis there will be no liability on accrual basis to the non-resident on the profits made by him. It has further been clarified that the real relationship between the parties has to be looked into o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the CIT(A) in holding that the commission earned by ACM UK is not chargeable to tax in India relied Circular No. 23, dated 23-7-1969 and this circular has been withdrawn by the CBDT by Circular No. 7 of 2009, dated 22-10-2009. It was also submitted by the ld. D.R. that the finding of the CIT(A) that ACM UK was being paid commission for services rendered abroad is without any basis. It was her submission that the income earned by ACM UK was by virtue of a business connection in India, therefore, income is deemed to have accrued to ACM UK in India under section 9 of the Act. With regard to the finding of the CIT(A) that the appellant was not PE of ACM UK, the ld. D.R. submitted that the provisions of Article 5(4)(c) and Article 5(5) of the DTAA will be applicable. In this regard it was pointed out by the ld. D.R. that the appellant habitually secures orders for ACM UK. It was further submitted that the appellant is a subsidiary of ACM UK. In this regard ld. D.R. also pointed out that the appellant cannot be considered as a person acting independently. It was further submitted that since CIT(A) has not examined the issue from this perspective, the CIT(A) should be directed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance placed on Circular No. 23, dated 23-7-1969 is no longer relevant because the same has been withdrawn by Circular No. 7 of 2009, dated 22-10-2009. Even otherwise it is doubtful as to whether the said circular issued in the context of sale of goods can be applied to a case of rendering of services. In any event the payment to the non-resident by the appellant is dependent upon the service charges realized by the appellant in India. Therefore Circular No. 23 would not be applicable. The decision of the Hon'ble Bombay High Court in the case of Set Satellite Singapore Pte. Ltd. v. Dy. CIT [2008] 307 ITR 205/173 Taxman 475 would also be not relevant because the said decision is based on Circular No. 23 which has already been withdrawn by the CBDT. 11. As far as the existence of PE in India is concerned, the CIT(A) has not examined the applicability of Article 5(4)(c) and 5 of the DTAA between India and UK in proper perspective. The same is as follows : "5. Permanent establishment. (1) For the purposes of this Convention, the term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on, ** ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e factors which will have a bearing. These aspects have not been examined by the CIT(A). The case of the Assessing Officer is based on Article 5(4) and Article 5(5) of the India-UK DTAA. Even though the Assessing Officer has not examined the case from any particular sub-clause of Article 5(4) of the India-UK DTAA, it is clear from his order that he had applied Article 5(4)(c) of the India-UK DTAA. The CIT(A) while reversing the order of the Assessing Officer ought to have dealt with that aspect. The learned D.R. in this regard also raised an issue that there was no justification for the Appellant to pay 50 per cent of the commission that it earns to ACM UK. At this stage, we shall restrict our discussion only to chargeability to tax of the receipts in the hands of ACM UK in India. The revenue in an assessment in the case of either the appellant or ACM UK, if they are ultimately found to be liable to tax in India, is free to examine this aspect. As far as the present appeal is concerned, the applicability of Article 5(4)(c) and Article 5(5) of Indo-UK DTAA, needs to be examined afresh by the CIT(A). We therefore set aside the order of CIT(A) and direct the CIT(A) to examine the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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