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TMI Blog2013 (1) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. 2. The concise grounds raised read as follows :- (i) The learned Officers below have erred in concluding that the beneficiaries of the freight are the owners and not the charterers of the ships and thus, have erred in assessing the appellant as the agents of the owners of the ship, with whom the appellant had no connection of whatsoever nature. (ii) The learned officers below have erred in considering the appellant as the agents of Islamic Republic of Iran Shipping Lines, when they only acted as the agents of the charterer of the ship Puyvast Chartering BV, Netherlands who had chartered the ship on a voyage charter basis. (iii) The learned officers have erred in (a) Not distinguishing between brokerage c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranian Company is the owner of the ship whereas in the return of freight, Puyvast was shown as the charterer and the beneficiary of freight. The revenue contended that the beneficiary of the freight is Islamic Republic of Iran Shipping Lines, Iran. 3.2 In reply to the above notice, the assessee submitted the email correspondence received from Puyvast and a certificate from the owner of the ship confirming that Puyvast was the beneficiary of the freight. The Assessing Officer passed the order under section 172(4) on 29.12.2009. In the said order, it was concluded that the charterer, M/s Puyvast acts only on behalf of his principal (Islamic Republic) and charges commission. The Income-tax authority concluded that the treaty with Netherlands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vast is not just a commission agent but also has undertaken risks and liabilities in the event of tonnage being less than 19,500 tonnes since the charterer cannot be regarded as the freight beneficiary as freight finally goes to the account of the owner being the Iranian company. In view of this, it is held that the Assessing Officer's conclusion is correct that relief under the DTAA is not allowable to the Iranian company which is the freight beneficiary and denial of DTAA benefit is upheld". 6. The assessee being aggrieved is in appeal before us. 7. Elaborate written submission was filed by the learned AR touching upon the OECD commentary on Article 8A by the India-Netherlands tax treaty. It was submitted that the applicability of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentially like a dead rent and thus, the entire risk and reward of the ship belongs to the charterer and the owner is entitled for the fixed rent with an incremental rent if the vessel sails with a higher load. It was submitted that clause 13 of the charter party has not been taken note by the revenue authorities and clause 14 only talks about the time of payment wherein, they used the word '100% freight'. It was submitted that this is not 100% of the freight earned by the ship, but 100% of the freight agreed to be paid as per clause 13. Therefore, it was submitted, the revenue authorities have misinterpreted clause 14 as the clause based on which the owner is rewarded, while it only deals with the timing of the payment entitled by the owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the income of the assessee as taxable". 9. We have heard the rival submissions and perused the materials on record. The solitary issue that arises for our consideration is, who is the freight beneficiary in the charter party executed by the owner of the ship (Iranian entity) and the charterer of the ship (Netherlands entity). If the charterer (Netherlands entity) is the freight beneficiary, the relief under DTAA between India and Netherlands is available, whereas there is no such benefit if the freight beneficiary is the owner of the Vessel, the Iranian party. The dispute is to be resolved by reference to clause 13 and 14 of the charter party executed between the owner of the ship and the charterer. The clause 13 and 14 of the charter pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oice by the charterer and charging 49 Euros per m.tonn is of no relevance, since substantial portion of the freight is paid to the owner of the ship namely, the Iranian entity. As stated earlier, the risk and liabilities undertaken by the charter M/s Puyvast, the Netherlands entity, is limited only to a situation where the tonnage carried by the vessel is less than 19500 tonnes. Therefore, the substantial freight beneficiary is the owner of the ship, the Iranian entity and in view of this, the conclusion of the revenue authorities that relief under DTAA is not allowable is justified and in accordance with law and no interference is called for. It is ordered accordingly.
10. In the result, the appeal filed by the assessee is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X
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