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TMI Blog2017 (1) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... ) ORDER Per Ashwani Taneja (Accountant Member): This appeal has been filed by the assessee against the order of Dispute Resolution Panel (DRP)-II, Mumbai passed u/s 144C(v) of the Act, as well as final assessment order passed by the AO dated 26.04.2013 passed u/s 143(3)/144C(13) of the on the following Grounds: The Joint Director of Income Tax (International Taxation), Range-4. Mumbai (hereinafter referred to as the AO) erred in holding that freight income of ₹ 1,68,39,328 (USS 3,66,070) earned by the Appellants from slots taken on hire ( slot hire charges ) during the year were not covered by the advance ruling dated 29.10.1997 obtained by the Appellants. The AO further erred in holding that the slot hire charges are not covered under Article 8 of the Double Taxation Avoidance Agreement between India and UAE (DTAA) and accordingly taxed 7.5% thereof amounting to ₹ 12,62,942 as the Appellants business income for the above year by treating the Appellants agents M/s. Samsara Shipping Private Limited as their Permanent Establishment (PE). The Appellants submit as under: i) that slot hire charges being covered by Article 8 of the DTAA, are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly considering the order of AAR. Subsequently, the DRP passed fresh order to again commit the same mistake, as was done in the order passed in the first round, in reading the order of AAR. It was submitted that the Tribunal has already explained the scope of order of AAR in its earlier order. Therefore, impugned order of DRP is erroneous on facts. Ld. Counsel also read before us the order of AAR to impress upon the point that the impugned income has been already covered by the AAR in its order, and therefore, this issue was no more open before the AO or DRP and their orders being illegal should be quashed. 3.2. Per contra, Ld. DR relied upon the orders of the lower authorities. 3.3. We have gone through the orders passed by the lower authorities, order passed by the Tribunal in the first round as well as order of the AAR. The brief background is that assessee is a limited company, incorporated in UAE and engaged in the business of shipping operations of running feeder line between India and Dubai. The assessee operates the feeder services using their own vessels as well as vessels taken on charter. During the year, the assessee had received slot hire charges of US $ 366070, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, it did not find any reason to interfere with the AO s action, and lastly, rate of 15% under Section 44B as applied by the Assessing Officer was correct. Following the directions of the DRP, the Assessing Officer, thus, treated the receipts of ₹ 1,68,39,200/- as business income to be computed under Section 44B and worked out the taxable income of ₹ 25,25,883/- by applying the rate of 15%. 3.3. The assessee was not satisfied with the directions of DRP and accordingly it approached the Tribunal and submitted during the course of hearing that the DRP has not properly understood and applied the order of AAR and wrongly taxed the impugned income. The Tribunal, vide its order dated 27th June 2012, accepted the submissions of the assessee principally, but sent the matter back to DRP for passing a speaking order afresh and observed as under: We have carefully considered the rival submissions and also perused the material placed on record. From the perusal of the DRP s direction, it is seen that the assessee s objection and submissions on various aspects have not been properly considered and have been summarily rejected. The assessee s main contention that its ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal but also by Hon ble High Courts. In the case of Gap International Sourcing India (P) Ltd. Vs. DCIT 113 TTJ (Del.) 627, the coordinate bench of this Tribunal came across a similar situation wherein voluminous submissions made by the assessee were found to be brushed aside by the DRP without even a whisper in the order. The order passed by the DRP, therefore, was held to be laconic by the Tribunal and the matter was remitted back to the DRP to consider the same again and to pass a proper and speaking order. A similar situation arose in the case of Vodafone Essar Ltd. Vs. DRP 196 Taxman 423 (Del.) wherein the order passed by the DRP was quashed by the Hon ble Delhi High Court and the matter was remanded for fresh adjudication observing that when a quasi judicial authority deals with a lis, it is obligatory on its part to ascribe cogent and germane reasons as the same is the heart and soul of the matter. The Hon ble Delhi High Court further observed that a well reasoned and well discussed order also facilitates appreciation when the same is called in question before the superior forum. Keeping in view the decision of the Hon ble Delhi High Court in the case of Vodafone Essar Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India and placed on record with the Authority and it has no intention of extending the ship agency business to India and that the company was contemplating to set up a separate division for engaging in the business of operation of ships which would include Indian ports such as Mumbai, cochin etc. This in turn would result in generation of income from India relating to the shipping activity in the form of freight earnings, rental of containers and related income, income by way of hire of slots etc. Item 10 of the notes to the Financial statements for the year ended 31.12.1996, indicates the gross operating and other income of the applicant which includes shipping agency and related income the breakup of the kind of services rendered under this head is not given . 3.7. After hearing both the parties in detail and after analysing the facts of the case the AAR held as under: On a careful perusal of Article 8 of the DTAA, the Authority does not find much merit in the Department s view and accepts the interpretation given by Shri Dinesh Kanabar that article 8 of DTAA is clearly applicable to the applicant s case. 3.8. Para 17 of the order of AAR is also relevant as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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