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TMI Blog2016 (5) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... ingh ORDER 1. By way of this appeal, the appellant has challenged correctness of the order dated 10th March 2014 passed by the learned CIT(A) in the matter of assessment under section 172(4) of the Income Tax Act, 1961, in respect of various vessels sailing during the previous year relevant to the assessment year 2012-13. 2. None appeared for the assessee. However, having regard to the fact that the appeal involves a short point of law, which is very well settled in favour of the assessee, and, therefore, the appeal can be disposed of in favour of the assessee, even in his absence, I consider it appropriate to proceed ex parte qua the assessee. I have heard the learned Departmental Representative, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 3. To adjudicate on this appeal, on merits, only a few material facts need to be taken note of. There is no dispute that the assessee is a tax resident of Indonesia and that he has earned income from slot chartering in certain vessels sailing from the port of Mundra during the relevant previous year. During the course of the scrutiny of returns filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r transport 1. Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State. 2. The provisions of paragraph 1 of this Article shall also apply to profits from participation in a pool, a joint business or an international operating agency. 3. For the purposes of this Article, interest on funds connected with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft and the provisions of article 11 shall not apply in relation to such interest. 4. The term operation of ships or aircraft shall mean business of transportation of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of ships or aircraft, including the sale of tickets for such transportation on behalf of other enterprises, the incidental lease of ships or aircraft and any other activity directly connected with such transportation 6. A plain look at article 9(1) shows that that the profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pped at a port in India 1631[* * *]. (2) Where such a ship carries passengers, livestock, mail or goods shipped at a port in India, 1632[seven and a half per cent] of the amount paid or payable on account of such carriage to the owner or the charterer or to any person on his behalf, whether that amount is paid or payable in or out of India, shall be deemed to be income accruing in India to the owner or charterer on account of such carriage. (3) Before the departure from any port in India of any such ship, the master of the ship shall prepare and furnish to the 1632a[Assessing Officer] a return of the full amount paid or payable to the owner or charterer or any person on his behalf, on account of the carriage of all passengers, livestock, mail or goods shipped at that port since the last arrival of the ship thereat : Provided that where the 1632a[Assessing Officer] is satisfied that it is not possible for the master of the ship to furnish the return required by this subsection before the departure of the ship from the port and provided the master of the ship has made satisfactory arrangements for the filing of the return and payment of the tax by any other person on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt referred to in sub-section (2) shall include the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature.] 1631. The words unless the Income-tax Officer is satisfied that there is an agent of the non-resident from whom the tax will be recoverable under the other provisions of this Act omitted by Finance Act, 1975, s. 19 (w.e.f. 1-6-1975). 1632. Subs. for one-sixth by Finance Act, 1975, s. 19 (w.e.f. 1-6-1975). 1632a. See Abbreviations used . 1633. Subs. by Finance (No. 2) Act, 1967, s. 29 (w.e.f. 1-4-1967), for rate or rates for the time being . 1633a. Ins. by Finance Act, 2007, s. 51 (retrospectively w.e.f. 1-4-2007). 1633b. Collector of Customs has been designated as Commissioner of Customs by Finance Act, 1995, s. 50, but no corresponding amendment has been made in the IT Act. 1633c. Circular No. 730, dated 14-12-1995 [(1995) 129 CTR (St) 45] clarifies that non-resident assessees engaged in the business of carriage by shipping of passengers and goods, etc., shall neither be liable to pay interest under sections 234B and 234C nor entitled to interest under section 244A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be greatly hampered in its business in relation to international traffic, carriage of goods by sea. Enterprises operating in any mode or manner, do not always ply their ships all over the globe. Even if they do, their ships may not be readily available when required on a particular route in connection with a contract of carriage of goods. It is necessary, therefore in such cases for them to resort to slot hire agreements. This enables them to transport the goods not on behalf of the owner of the vessel which has granted them a slot hire facility, but in their own name on behalf of their clients. The contract of carriage of goods by sea is thus performed by such enterprises on a principal to principal basis with their clients and not as agents of the owners of the ships and/or their clients . [Emphasis, by underlining, supplied by us] 10. In view of the above discussions, as also bearing in mind entirety of the case, I am of the considered view that the assessee is entitled to treaty protection, under article 9, from source taxation of income arising from transportation of goods by operation of ships in international traffic- irrespective of whether or not such ships were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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