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TMI Blog2016 (4) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... er domestic law as its income exigible to tax thereunder, it follows that paragraph 2 of Article 3 of the convention is to be given an interpretation so as to benefit such a partnership based in the UK which since not taxed under the laws there might be treated as liable to tax in India. Mr. Chakraborty had fairly submitted that there was a subsequent amendment made to the treaty and duly notified whereby similar issue would not arise in future against the noticee. Thus the noticee is a person covered under the treaty and being an enterprise of the UK, the same has fiscal domicile in the UK where it is based. Its income from operation of ships in international traffic is not exigible to tax under domestic law. Consequently the impugned notices are set aside and the writ petitions disposed of. - Decided in favour of assessee - W. P. No.1295 of 2008, W. P. No. 272 of 2009 - - - Dated:- 22-12-2015 - Arindam Sinha, J. For the Petitioners : Mr. Porus Kaka, Sr. Adv. Mr. Vipul Kundalia, Adv. ,Mr. Manish Kanth, Adv. Ms. Sonal Saha, Adv For the Respondents : Mr. U. Chakraborty, Adv. Ms. Mamta Bhargava, Adv JUDGMENT The Court: These two writ petitions are at the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to levy tax on the corporation s worldwide profit. He relied on the following portions of the judgment: In our view, the contention of the respondents proceeds on the fallacious premise that liability to taxation is the same as payment of tax. Liability to taxation is a legal situation; payment of tax is a fiscal fact. For the purpose of application of article 4 of the DTAC, what is relevant is the legal situation, namely, liability to taxation, and not the fiscal fact of actual payment of tax. If this were not so, the DTAC would not have used the words, liable to taxation , but would have used some appropriate words like Pays tax . On the language of the DTAC, it is not possible to accept the contention of the respondents that offshore companies incorporated and registered under the MOBA are not liable to taxation under the Mauritius Income-tax Act; nor is it possible to accept the contention that such companies would not be residence in Mauritius within the meaning of article 3 read with article 4 of the DTAC . Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee firm for the assessment year 2002-03 which was negated by this Court in the case of P O Nedlloyd Ltd. Ors. vs. Assistant Director of Income-tax reported in (2014) 269 ITR 282 (Cal). Mr. Kaka submitted still further, fiscal domicile of the partnership based in the UK and constituted by the petitioners being offshore companies, was in that country. He relied on abstract of Section 12 (AA) of the Tax Management Act, 1970 of the UK which provides for partnership returns. He further relied on Article 3(1)(h) of the UK India DTAA for the definition of the term enterprise of a contracting State . The said definition provides that such an enterprise is one carried on by a resident of a contracting State. He then relied on Article 9 of the said convention in particular sub-Articles (1) and (5) to submit that the partnership being an enterprise of the UK was only taxable in that State. Mr. Chakraborty assisted by Ms. Mamta Bhargav, learned Advocates appeared on behalf of the Revenue and had initially submitted the matter should be adjourned pending decision of the Supreme Court in the Appeal by Special Leave preferred against P O Nedlloyd Ltd. Ors. (supra) which submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 98,1998-99,1999-2000,2000-01 and 2001-02. The assessments made of those years were of nil tax to be paid, reassessment by issuance of notices as aforesaid was sought and successfully challenged by the petitioners therein who are the petitioners herein also. In these two writ petitions the petitioners have challenged the said notices relating to assessment years 2005-06 and 2006-07. The respective assessment orders dated 31st October, 2007 and 10th November, 2008 relating to those assessment years are annexures P-8 and P-10 to the writ petitions. Assessments made by both the orders were that income tax payable on income from the operation of ships by the partnership for the years of assessment was nil. Hence, the notices seeking reassessment. Since the said assessment orders are not the subject matter of the appeal pending before the Supreme Court, this Court accepted the vehement opposition on the part of the petitioners to adjournment of hearing of the writ petitions and had proceeded with the same on their submission that the points arising out of the challenge made were partly covered by the said earlier decision of this Court, pending adjudication in appeal. The departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as a person for the purposes of this Convention. ARTICLE 9- Shipping 1. Income of an enterprise of a Contracting State from the operation of ships In international traffic shall be taxable only in that State. 2 .. 3 .. 4 .. 5. The provisions of this Article shall apply also to income derived from participation in a pool, a joint business or an international operating agency. 6 . The contention of the Revenue appears to be that the noticee is a fiscally transparent entity in the UK being outside the ambit of the treaty between India and that country as not being a person thereunder. Its income is exigible to tax in India under the Income-tax Act, 1961 while the partners thereof exempt under Section 10(2A) of the said Act. It follows that the Revenue has treated the noticee as a person within the meaning of Section 2(31) of the said Act to apply the charging Section 4 thereof which is reproduced below: 4.(1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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