9911796707
TMI Blog2014 (11) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciated that it may not be necessary to establish the mother vessel - feeder vessel connectivity for each and every voyage as the claim for relief under Article 9 ought to be examined with reference to the 'business' of operation of ships. The appellant prays that the Assessing Officer (AO) be directed to allow relief under Article 9 of the DTAA in respect of the freight earnings of Rs. 4,20,47,559. 2. Existence of a Permanent Establishment (PE) The learned C{T(A) erred in holding that the freight earnings of Rs. 4,20,47,559 are assessable as business profits under Article 7 of the DTAA as there exists a PE of the appellant in India. The appellant submits that the CIT(A) ought to have appreciated that Barwil Forbes Shipping Services Ltd (BFSSL) was acting in the ordinary course of its business and rendered similar services to other foreign shipping lines besides the appellant. BFSSL therefore cannot constitute a dependent agent of the appellant. The appellant prays that the AO be directed accordingly. 3. Taxability of ancillary charges interalia inland haulage charges (IHC) The learned CIT(A) erred in holding that the ancillary charges interalia IHC are liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Indo French DTAA. Article 5(5) provides the situations in which business being carried on through a dependent agent results in creation of PE in the source state. The provisions of Article 5(6) are, however, slightly at variance with standard tax treaty provisions, and need to be analysed in some detail . The significant feature of Article 5(6) of Indo French DTAA, which is somewhat unique in the sense that this provision is in clear deviation from the standard UN and OECD Model conventions, is that even when an agent is wholly or almost wholly dependent on the foreign enterprise, he will still be treated as an independent agent unless additional condition of the transactions being not an arm's length conditions is fulfilled. It is so for the reason that Article 5(6) provides that even when an agent is wholly or almost wholly dependent on the principal, i.e. foreign enterprise, "he will not be considered an agent of an independent status within the meaning of this paragraph if it is shown that the transactions between the agent and the enterprise were not made under at arms length conditions" ( emphasis by underlining supplied by us). In other words, as long as it is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of DAPE in accordance with provisions of Indo French DTAA, the onus is even greater inasmuch the very foundation of DAPE rests on a negative finding with respect to the wholly dependent or almost wholly dependent agent i.e. "if it is shown that the transactions between the agent and the enterprise were not made under at arms length conditions". Unless this negative finding is on record, it cannot be inferred that the agent is not of an independent status. No such finding was given by the Assessing Officer, or even by the Dispute Resolution Panel. Even in the proceedings before us, no material has been brought on record which at least prima facie demonstrates, or even indicates, that the transactions between the principal and agent are not under arm's length conditions. Once this onus is not discharged by the revenue authorities at any of these stages, and in accordance with the law laid down by Special Bench decision in the case of Motorola Inc 10, we have to hold that the assessee did not have any PE in India. We are not inclined to grant a fresh inning to the Assessing Officer for making roving and fishing enquiries on the aspect of transactions not having been done in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcise is not even conducted in this case. The Assessing Officer's reliance on OECD Commentary, therefore, is of no avail either. In view of these discussions, as also bearing in mind entirety of the case, we set aside and vacate the Assessing Officer's findings with regard to existence of assessee's PE in India. We may, at the cost of repetition, clarify that these conclusions are arrived at in the light of the factual position that there are no findings by the Assessing Officer, or the Dispute Resolution Panel, to the effect that the transactions between the agent and the assessee are not at an arm's length price, and that, in view of the provisions of Article 5(6) of Indo French DTAA, such a finding by the revenue is a sine qua non for existence of DAPE. To this extent, our decision is confined to the facts of this case for the particular assessment year before us. 6. We have given a thoughtful consideration to the findings of the Tribunal. The Tribunal has gone with the factual matrix that there are no findings by the AO or the Dispute Resolution Panel to the effect that the transactions between the agent and the assessee are not at an arm's length price whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its Income in India." Thus this Explanation has explicitly laid down and clarified the doubts that after insertion of this Explanation with retrospective effect from 1.4.1962 that the charge of tax in respect of a foreign company at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such foreign company. It is further seen that after insertion of this explanation, the hon'ble Tribunal Kolkata has ruled in the case of ABN Amro Bank (99 TTJ 1041) [Second ABN Ammo Ruling'].The ruling of the First ABN Amro (ITA 692/CA/2000) cannot be applied after the introduction of the Explanation to section 90 of the Act. Further the jurisdiction hon'ble Tribunal in Chouhang Bank v DDIT (2006) (6 SOT 44) Mum) has elaborately dealt with the issue and has considered that the non discrimination clause in DTAA between India and South Korea. It has also considered the explanation introduced with retrospective effect from 1.4.1962 to section 90. The hon'ble Tribunal has held that foreign bank and the Indian banks are not similarly placed. There is no discrimination in application of differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he terms of the DTAA. 11. Section 2(37A)(iii) provides as under: "Sec. 2(37A) "rate or rates in force" or "rates in force", in relation to an assessment year or financial year means - Sec. 2 (37A) (iii) for the purposes of deduction of tax under section 195, the rate or rates of income tax specified in this behalf in the Finance Act of the relevant year or the rate or rates of income-tax specified in [an agreement entered into by the Central Government under section 90, or an agreement notified by the Central Government u/s. 90A, whichever is applicable by virtue of the provisions of Section 90, or section 90A, as the case may be]" 12. Let us now see whether any rate of tax is specified in the agreement for Avoidance of Double Taxation with France. Article 2 of Indo French DTAA reads as under: ARTICLE 2 TAXES COVERED 1. The taxes to which this convention shall apply are: (a) in India: (i) the income tax including any surcharge thereon; (ii) the surtax; and (iii) the wealth-tax (hereinafter referred to as 'Indian tax') (b) in France: (i) the income-tax (1 'impot sur le revenu') including any withholding tax, pre-p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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