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TMI Blog2016 (7) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals)- 10, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2011-12, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 22-04-2014 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 144(C) r. w. s. 143(3) of the Income Tax Act, 1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by the assessee company in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) read as under:- The appellant objects to the order dated 14 November 2014 passed by the Commissioner of Income-tax (Appeals) - 10, Mumbai, [CIT(A)] on the following among other grounds: Chargeability of income under section 44B of the Act 1. The learned CIT(A) erred in confirming the action of the DDIT (Int. tax. ) in holding that the income of the appellant from operation of ships in international traffic ought to be taxed as per domestic tax law under section 44B read with section 5(2) and section 9 of the Act. 2. The learned CIT(A) ought to have appreciated the fact that the appellant was not engaged in the operation of ships during the relevant y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company started its operations in the year 2006. The assessee company is subsidiary company of M/s Forbes and Company (in short F CL ) which is an Indian Company. The assesses entered into an agency agreement in India with Volkart Fleming Company Shipping and Services Limited (in short VFSSL ) with effect from 1st January, 2007 whereby VFSSL was appointed as its agent in India. VFSSL is an Indian company and is also 100 percent subsidiary of F CL. VFSSL demerged its shipping agency division into its holding company F CL with effect from 1st April, 2008. The assessee company submitted that in terms of the approved scheme during the financial year under consideration VFSSL had carried on business activities in relation to its demerged division for the account of resulting company viz. F CL. In short, the assessee company is the principal as well as subsidiary company of F CL and appointed its holding/parent company i. e. F CL as its agent in India. The assessee company is a Non Vessel Operating Common Carrier incorporated in Singapore. The AO observed that as per Article 8 of DTAA between India and Singapore, income from shipping business could be taxed only in contracting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciple. iii) Holding company habitually secured the business from India for principle subsidiary company. And here Income directly attributed. iv) Principle and agent have Common control mechanism. Promoters of F CL created the FCLPL as 100 percent subsidiary company in Singapore. One of Director of the FCLPL Mr. Amit Mittal also Director in the Indian parent company F CL. and he permanently reside in India and looking after the policy and other important matter for the assessee company as well agent a parent company. Although, both company has separate legal entities in the eyes of laws but their control mechanism is common that is in the India only. The A. O. further held that vide Article 7 of the DTAA between India and Singapore, the assessee company is established to have carried on part of its business through a fixed place of business in India, the assessee company falls within the definition of Permanent Establishment under paragraph 1 of Article 5 and in this case assessee company has fixed and permanent place in India from where it secured the business from India. It was further held that the effective management of the assessee company is in India an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pore the company is required to hold only one board meeting and it was accordingly held in relation to year under consideration at the office of company located in Singapore. Instant case it is observed that no significant decision regarding policy is taken. This clearly shows that faced of board meeting in Singapore is created with the full purpose to fulfill the requirement of Singapore law, to keep the certificate of incorporation alive and to avoid an impression that the real control of the company lies in Singapore. iv) The facade of one and two board meetings in a year in Singapore do not support the assessee's case in any way. In the case of Unit Construction company V Bullock [1961] 42 ITR 340 (HL) IA Kenyan subsidiary was held to be resident in England because, though its Board meetings were always held in Kenya, it was managed, in branch of its articles, but its UK parent company. v) The OECD commentaries clarify that place of management does not necessarily mean office and can be said to be the control and co-ordination centre where all significant decision relating to the Management of an enterprise as a whole are taken. vi) The mind and brain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order dated 22-4-2014 passed u/s 144C(3) read with section 143(3) of the Act. 4. Aggrieved by the assessment order dated 22-4-2014 passed by the AO u/s 144C(3) read with section 143(3) of the Act, the assessee company filed first appeal with the learned CIT(A) who upheld the assessment order dated 22-4- 2014 passed by the A. O. passed u/s 144C(3) read with section 143(3) of the Act by following the appellate orders passed by the learned CIT(A) in assessee company s own case for the assessment year 2009-10 as the facts in the instant assessment year 2011-12 were found to be identical by the learned CIT(A) as were prevailing in the assessment year 2009-10, vide appellate orders dated 14. 11. 2014. 5. Aggrieved by the appellate orders dated 14-11-2014 passed by the ld. CIT(A), the assessee company filed second appeal with the Tribunal. 6. The ld. Counsel for the assessee company, at the outset, submitted that the instant appeal is squarely covered in favour of the assessee company in assessee company s own case by the decision of the Tribunal for the assessment year 2009-10 in ITA No. 1607/Mum/2014 vide orders dated 11th March, 2016 whereby the Tribunal has adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Volkart Flemming Co. and Services Ltd. (VFSSL) w. e. f. 1. 1. 2007, that it was appointed as an agent in India by FCL. That VFSSL was 100% subsidiary of FCL, that VFSSL had demerged its shipping agency division into FCL w. e. f. 01. 04. 2008. The AO referred to the provisions of Article-8 of DTAA entered into between India and Singapore and observed that being a Non-Vessel Operating Common Carrier(NVOCC) it was not eligible for claiming exemption under Article 8 of DTAA. He further held that income of the assessee was arising out of operation of ships in International traffic, that income arising /accruing to it was taxable in India as per the provisions of section 5(2) of the Act, that the provisions of Section 44B of the Act were applicable for the income earned by the assessee during the year under consideration. He referred to various case laws and held that the assessee had entered into agency agreement with associated concerns regarding business from India, that there remained an element of continuity, that it had real and intimate connection, that the holding company secured the business from India for the assessee, that the principal and agent had common control mechan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnection in India, that management and control of the company was handled by the parent company, that the parent company was indulging in all kind of activities in India on behalf of the assessee, that it was collecting freight on behalf of the appellant and was maintaining bank account, that the assessee had a business connection in India and it is also an Agency-PE as well as fixed place of PE in India, that the management was with parent company located in India. He further held that AO had correctly applied the provisions of section 44B of the Act, that it did not qualify for the exemption of Article 8 of the DTAA. Finally, he upheld the order of the AO. 4. Before us, the Authorised Representative(AR)argued that the assessee was not holding any bank account in India, that it had no fixed place of business in India, that the assessee was a subsidiary of the Indian company, that as per the provisions of DTAA there was no PE in India. He referred to paragraph 10 of the Article 5 of the DTAA. With regard to Agency-PE, he referred to page No. 63 and 65 of the PB and stated that only 2. 29 % of the revenue was received from Indian company, that the substantial portion of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd any evidence to support their claim. On the other hand the assessee had proved that its books of accounts were maintained in Singaprore. Not only this, it was proved that it was maintaining a bank account in Singapore and all banking transactions were made from that account only. In our opinion, both the authorities were not able to establish that effective management and control of affairs of the company was in India. We have gone through the e-mails placed by the assessee at pg No. 96 to 127 of the paper book which clearly prove that business activities were carried out by the Singapore office. In our opinion, factors like staying of one of the directors in India or holding of only one meeting during the year under consideration or the location of parent company in India in themselves would not decide the residential status of the assessee. The assessee had received substantial portion of its income from the operation carried out in Middle East and other countries. It was handling its business from Singapore. We have gone through pg-65 of the paper book which gives details of income of parent company. A perusal of the said page makes it clear that the claim, made by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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