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TMI Blog2014 (11) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... e and decide the issue afresh in the light of the provisions of Article 5(6) of Indo French DTAA – Decided in favour of assessee. Levy of interest under section 234B – Held that:- In DIT Vs NGC Network Asia LLC 2009 (1) TMI 174 - BOMBAY HIGH COURT] wherein it has been held that when a duty was cast on the payer to deduct the tax at source, on failure of the payer to do so, no interest could be imposed on the assessee - the AO is directed to delete the interest levied u/s. 234B of the Act. - I.T.A. No. 1955/Mum/2011 - - - Dated:- 19-11-2014 - Shri D. Manmohan And Shri N. K. Billaiya,JJ. For the Appellant : Shri F. Irani For the Respondent : Shri Vivek Perampurna ORDER Per N. K. Billaiya, AM: This appeal by the assessee is preferred against the order of the Ld. CIT(A)-10, Mumbai dt.31.12.2010 pertaining to A.Y.2001-02. 2. The assessee has raised 5 substantive grounds of appeal which read as under: 1. Relief under Article 9 of the India - France Double Taxation Avoidance Agreement (DTAA) The learned Commissioner of Income-tax (Appeals)-l0, Mumbai [hereinafter referred to as the CIT(A)] erred in rejecting the appellant's claim for relief und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the tax rate applicable to the appellant would be 35% as is applicable to a domestic company as against the rate of 48% as is applicable to a foreign company. The appellant prays that the AU be directed accordingly. 3. At the outset, the Ld. Counsel for the assessee stated that issues raised vide ground No. 2 3 relates to the existence of a Permanent Establishment which issue has been decided by the Tribunal in assessee's own case in A.Y. 2006-07 vide ITA No. 9001/M/2010. Therefore, issue raised vide ground No. 1 does not arise. 4. The Ld. Departmental Representative fairly conceded to this. 5. The assessee is a non resident company. Return of income for the year was filed on 30.10.2001. The assessee claimed exemption under Article 9 of the Double Taxation Avoidance Agreement with France. The claim of the assessee was examined by the AO vide its order dt. 30.3.2004. In so far as the issue relating to the Permanent Establishment in India, the AO following the decision of the Tribunal, Mumbai Bench in the case of ACIT Vs DHL Operations B.V. Netherlands in ITA Nos 7987 7988/Bom/92 came to the conclusion that M/s. Barwil Forbes Shipping Services Ltd is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in the first-mentioned Contracting State subject to fulfilment of certain other conditions which are admittedly fulfilled in the present case. Therefore, as long as the agent is of independent status, the provisions of Article 5(5) cannot be invoked. It is also important to bear in mind that since provisions of Article 5(5) override the provisions of Article 5(1) and 5(2), no permanent establishment under article 5(1) and (2) can be said to come into existence, so far agency situations are concerned, until the conditions of Article 5(5) are also satisfied. Learned Departmental Representative fairly does not dispute, and rightly so, that the permanent establishment in the present case will be governed by Article 5(5) read with Article 5(6). Learned Departmental Representative's only objection is that since an important aspect, i.e. aspect relating to the transactions having been done in arm's length conditions, has not been examined by the Assessing Officer, the matter should be restored to the file of the Assessing Officer for specific adjudication on the transactions between principal and agent having been done in arm's length conditions. We are unable to see any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DAPE situations. As regards the reference to the OECD Model Convention commentaries or other standard literature in the context of DAPE, it cannot be of any help in interpretation of DAPE provisions in Indo French DTAA because of a somewhat peculiar provision in Article 5(5) read with Article 5(6), which is not part of OECD or UN Model Convention, and which provides that However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that 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 arm's length conditions. . We have also noted that the DRP has held that there is a PE on the short ground that assessee's claim for applicability of Article 9 presupposes existence of a PE, but it is difficult to comprehend as to how existence of a PE can be inferred merely because the assessee has made a particular claim, which is rejected anyway. The onus of establishing that there is a PE, as we have noted earlier in the discussions, is on the revenue authorities and there is no room for inference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the issue raised vide ground No. 3 relating to the taxability of ancillary charges inter alia inland haulage charges. 8. Ground No. 4 relates to levy of interest u/s. 234B of the Act. 8.1. This issue has been decided in favour of the assessee by the Hon'ble Jurisdictional High Court of Bombay in the case of DIT Vs NGC Network Asia LLC in 313 ITR 187 wherein the Hon'ble High Court has held that when a duty was cast on the payer to deduct the tax at source, on failure of the payer to do so, no interest could be imposed on the assessee . Respectfully following the decision of the Hon'ble Jurisdictional High Court, the AO is directed to delete the interest levied u/s. 234B of the Act. 9. Ground No. 5 relates to the rate of tax. The Ld. CIT(A) at para- 6.2. of his order has held as under: 'I have considered the facts and submissions of the appellant. The Finance Act, 2001 inserted an Explanation to section 90 of the Act which was further amended by Finance Act, 2004 providing retrospective amendment with effect from April 1, 1962. This Explanation reads as : Explanation - For the removal of doubts, it is hereby declared that the charge of tax in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 90(2), it is held that there is no discrimination in application of higher rate of tax to foreign company. Therefore, this ground of appeal is dismissed. 10. Though the Ld. Counsel stated that once the PE issue is decided in favour of the assessee, this grievance would be only of academic interest. However, to complete the adjudication, we have given a thoughtful consideration to this issue. It is a settled position of law and the judicial Consensus in India has been that section 90 is specifically intended to enable and empower the Central Government to issue a notification for implementation of the terms of a double taxation avoidance agreement. When that happens, the provisions of such an agreement, with respect to cases to which where they apply, would operate even if inconsistent with the provisions of the Income-tax Act. If it was not the intention of the Legislature to make a departure from the general principle of chargeability to tax under section 4 and the general principle of ascertainment of total income under section 5 of the Act, then there was no purpose in making those sections 'subject to the provisions of the Act. The very object of' grafting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context otherwise requires: (k)- the term tax means Indian tax or French tax as the context requires. 2. As regards the application of the Convention by the Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that Contracting State concerning the taxes to which the Convention applies. 14. Since no specific tax rate have been provided in Indo French DTAA, there appears to be no conflict between the domestic law and the DTAA. We, therefore, do not find any error in the findings of the Ld. CIT(A). 15. The Ld. Counsel for the assessee had strongly placed reliance on the decision of the Hon'ble Bombay High Court in the case of Siemens Aktionesellschaft 310 ITR 320. 16. We have considered the decision of the Hon'ble Bombay High Court. We find that the said decision is not applicable to the case in hand. In the said decision, the Hon'ble Bombay High Court has held that by a unilateral amendment it is not possible for one nation which is party to an agreement to tax income which otherwise was not subject to tax. Such income would not be subject to tax under the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X
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