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TMI Blog2014 (7) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the assessee firm - the assessee firm is separate and distinct from two companies and any income accruing on account of shipping operations does not belong to the assessee, but to these two companies only. The status in the return of income as well as in the assessment orders has always been held to be that of non-resident corporate company and not as a partnership firm. From the assessment year 2004—05, two sets of returns of income are being filed, one by the assessee firm on managing commission / fees which is being claimed as non—taxable and second return of income in the name of these two companies which has now been merged referred to as A.P. Moller Maersk A/S showing shipping income - the shipping income belongs to these companies only and not in the hands of the assessee firm which is only a representative of these companies and is carrying out its obligation for filing of the return of income as well as managing the entire affairs. Fees from managerial services treated as fees for technical services – Held that:- Following Deputy Director of Income-tax Versus AP Moller Maersk [2013 (11) TMI 827 - ITAT MUMBAI] - for taxing the royalty and fees for technical servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 14,36,87,471/- was wrongly reduced from the amount of gross freight. He was of the opinion that the income of the assessee thus had escaped assessment to the extent of ₹ 1,07,76,560/- i.e. 7.5% of ₹ 14,36,87,471/-. He therefore reopened the assessment for A.Y. 2003-04 after recording the reasons and issued notice u/s 148 of the Act on 31-3-2010 declaring nil income. In the reassessment completed u/s 143(3) r.w.s. 147 of the Act vide an order dated 16-12-2010, the amount of ₹ 1,07,76,560/- was brought to tax by the A.O. in the hands of the assessee on account of income from feeder freight. He also added a further sum of ₹ 52,02,535/- in the hands of the assessee on account of fees for managerial services treating the same as fees for technical services as done in the assessment originally completed u/s 143(3) of the Act. 3. Against the order passed by the A.O. u/s 143(3) r.w.s. 147 of the Act, an appeal was preferred by the assessee before the ld. CIT(A) challenging the validity of the said assessment as well as disputing both the additions of ₹ 1,07,76,560/- and ₹ 52,02,535/- made therein by the A.O. After considering the submissions made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax in India in the hands of the Appellant as fees for technical service. Ground 4b: The learned SSIT erred in holding that the management fees received by the appellant is chargeable to tax in India without appreciating that such management fees do not accrue or arise to the appellant in India. 1a. The learned CIT(A) erred in observing that the issue has been decided against the appellant in the original proceedings without appreciating that as per the beneficial provisions of India-Denmark Tax Treaty, management fees received by the appellant outside India is not chargeable to tax in India. Revenue s grounds: 1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the reassessment proceedings are not valid when there was a failure on the part of assessee to make full and true disclosure of all material facts necessary for his assessment. 2. The Appellant prays that the order of the Ld. CIT (A) on the above ground(s) be set aside and that of the Assessing Officer be restored. 5. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that in the assessment com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these two companies issued by the competent Danish authorities. From these documents, it can be deduced that shipping income is that of two companies and the assessee firm is only a representative of these two companies. Based on these documents, the assessee has been given DIT relief certificate from the Department and on that basis, it has been claiming its income from shipping operation as non taxable by virtue of Article 9(1) of the DTAA. In the return of income filed, the assessee firm had declared the gross receipts from shipping business of these two companies from India and the same have been claimed as not liable for tax in India and accordingly, Nil income is offered from shipping business. It has also been brought on record before us that in the subsequent years fle., from the assessment year 2004 05 to the assessment year 2010 11, the income from shipping business has been held to be non taxable in India and the benefit of the treaty has been given. In the year under appeal before us, the Assessing Officer held that this shipping income belongs to the assessee firm, as the assessee firm has been filing the return of income in its own name and under the Permanent A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes obligations on behalf of the two companies. All THE DOCUMENTS referred to before us also goes to show that the assessee is only representative and the actual shipping business and freight receipts belong to these two companies. Thus, we hold that the assessee firm is separate and distinct from two companies and any income accruing on account of shipping operations does not belong to the assessee, but to these two companies only. Insofar as the allegation of the Department that the return of income was filed by the assessee firm wherein the shipping income has been disclosed, we are of the opinion that such an income has been disclosed as a representative of the companies and income per-se cannot be taxed in the hands of the assessee as a partnership firm but as a representative of these two companies. That is the reason why all throughout such a shipping income has been held to be non-taxable by the Department in the subsequent years and benefit of the treaty has been given. Even in the earlier years also, when such a shipping income was offered for tax, the same was in the capacity of the representative of these two companies only. The status in the return of income as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd such a fee is determined on the basis of GRT i.e., the carrying capacity of the ships per annum. The main contention before us is that firstly such an income cannot be taxed in India by virtue of Article 13(6) and, secondly, the scope of section 9(1)(i) also does not cover such kind of a payment. Article-13 of the Indo Denmark DTAA provides for the scope of taxability/nontaxability of the royalty and fees for technical services. Article 13(6) carves out an exception that the royalty and fees for technical services shall be deemed to arise in a contracting State when such non resident has a P.E. or fixed base in the other contracting State and the liability to pay royalty or fees for technical services has been incurred in connection with such P.E. and such royalty or fees for technical services are borne by such P.E. The relevant portion of Para 6 of Article 13 is reproduced hereunder for the sake of ready reference:- 13(6) Royalties and fees for technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying their royalties or f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, we are not dealing with the arguments raised by the either party on sections 9(1)(i) or 9(1)(vii). Thus, the third issue is also decided in favour of the assessee that the management fee cannot be taxed in India in the hands of the assessee. 7. Both the issues involved in this case in respect of which additions were made by the A.O. in the reassessment completed u/s 143(3) r.w.s. 147 for A.Y. 2003-04 thus are squarely covered in favour of the assessee by the decision of the Tribunal in assessee s own case for the earlier years and respectfully following the same, we hold that both the additions made by the A.O. in the reassessment made for A.Y. 2003-04 are not sustainable. 8. Keeping in view the decision rendered above deleting both the additions made by the A.O. in the reassessment completed u/s 143(3) r.w.s. 147 of the Act, the issue raised by the Revenue in its appeal relating to validity of the said assessment made by the A.O. has become infructuous/academic. We therefore do not consider it necessary or expedient to adjudicate upon the same. The appeal of the assessee for A.Y. 2003-04 is accordingly allowed whereas the appeal of the Revenue for A.Y. 2003-04 is dism ..... X X X X Extracts X X X X X X X X Extracts X X X X
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