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TMI Blog2017 (11) TMI 1474X X X X Extracts X X X X X X X X Extracts X X X X ..... and income is to be computed as per Article-7. Thus the rest of the grounds of appeal are treated as academic in nature. - ITA.No.574/MUM/2015 - - - Dated:- 22-11-2017 - SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI G. MANJUNATHA, HON'BLE ACCOUNTANT MEMBER For The Assessee : Shri Dhanesh Bafna Shri C.S. Shah For The Revenue : Shri Samuel Darse ORDER PER C.N. PRASAD (JM) 1. This appeal is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-11, Mumbai dated 14.08.2013 for the Assessment Year 2008-09. 2. Assessee in its appeal has raised the following grounds: - 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [CIT(A)'] erred in confirming the action of the learned Additional Director of Income-tax (International Taxation) - 4 [ADIT] in denying the benefit of Article 8 of the India- Malaysia Double Taxation Avoidance Agreement (Tax Treaty) on freight income earned by the appellant from shippers for transporting cargo loaded on feeder vessels for onward transportation by vessels owned, leased or chartered by the Appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore, the freight attributable to the feeder voyage ought to have been computed by applying the rate 7.5% to the cost of feeder voyage. 5(b) without prejudice to Ground NO.5(a) above, the learned CIT(A) erred in not appreciating that the freight attributable to the feeder voyage should have been computed by applying the rate of 10% to the cost of feeder voyage even though this rate has been used by the learned ADIT himself for computing the taxable shipping income. 6. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned ADIT, in computing the taxable shipping income at ₹.15,502,690/- by applying deemed income rate of 10% (instead of 7.5% given under section 44B) to the freight attributable to feeder voyage. 3. There is a delay of 471 days in filing the appeal by the assessee and the assessee in its petition supported by the affidavit explained the reasons for the delay in filing the appeal as under: 1. The appellant is shipping company incorporated in Malaysia and is, inter alia, engaged in business of operation of container ships in international traffic through owned/charte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplex, Near Shah Industrial Estate, Deonar, Govandi, Mumbai - 400 088. The concerned person who receives the correspondences at such address, on account of good faith, subsequently delivers the same to the appellant in Malaysia. Hence, there is always a delay in receiving the documents by the appellant. 4.3 In June 2014, the authorized representative of the appellant, was made aware by the Assessing Officer that the learned CIT(A) has disposed off the appeal for AY 2008-09 vide order dated 14 August 2013. Immediately thereafter, a copy of the same was obtained by the authorized representative and provided to us. 4.4 We understand from the office of the learned CIT(A) that the said order was served on 14 August 2013 at the agent s address in India. The Appellant, subsequently checked with the erstwhile agent in this regard, but they denied of receipt of any such order. Your Honours may please note that, till date, the appellant/agent has not received the original order passed by the learned CIT(A). 4.5 From the above, Your Honours will appreciate that there is a sufficient cause which resulted in this delay of 471 days in filing of the appeal. As such, the delay in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he runs a serious risk. It must be grasped that the judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so. 7. In support of our submission, we also wish to place reliance on the merits of the following citations: Babulal Jain vs ITO [2008] 205 Taxation 43 (HC Andhra Pradesh) Bharat Auto Center vs CIT [2005] 282 ITR 366 (HC Allahabad) Special Tehsildar, Land Acquisition, Kerala vs K.V.Ayisumaa, [1996] AIR (SC 2750) N.Balakrishnan vs. M.Krishnamurthy (1998] 7SCC 123 O.P.Kathpalia Vs. Lakhmir Singh (1984) AIR (SC 1744) CIT vs. West Bengal Infrastructure Development Finance Corporation Ltd [2010] 334 ITR 269 (Supreme Court) 8. In view of the above factual and legal petition, it is humbly submitted that a liberal approach be adopted by your Honours as laid down by the Hon'ble Supreme Court in the citations referred above, in exercising the powers conferred on your Honours under section 253(5) of the IT Act. the expression sufficient cause used in Section 253(5) of the IT Act, is adequately elastic to en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: 23. We will now independently examine Article 8(1) and Article 8(2) of Indo Malaysia DTAA. The crucial phrase or words which need to be analysed here are operation of ships , transportation by the owner or lessees or charterers of ships. First of all, the word operation is different from the word operate or operator . The word operate means to control the functioning of machine, process or system. Here, the person in control is important. The word operator means, a person who operates the equipment or a machine. Here for our purpose operator of ship. Whereas, the word operation connotes the fact or condition of functioning or being active i.e., some kind of activity. The operation of ships cannot be understood merely as an operator of ships or a person who operates the ships. The word operation of ships has to be understood in a broader sense of carrying out shipping activity. The carrying of shipping activity could be as an owner of a ship or as a lessee of a ship or as a charterer of a ship. Here, the word owner has to be inferred as a person who owns a ship and the word lessee as a person who owns the ship for a given lease period. The word c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip owner agrees to let an entire ship or part thereof, to a merchant, for the carriage of goods on a specified voyage, or during a specified period, for a sum of money which the merchant agrees to pay as freight for their carriage. iv) Concise Law Dictionary by P. Ramanatha Aiyar (Year 2005), defines the term charterer as under: One who charters or hires or engages the whole or part of a ship under an agreement of charter party for a voyage. v) Chamber s 20th Century dictionary defines the term charterer as under: to establish by charter: to let or hire, as a ship, on contract. vi) Modern legal usage dictionary defines the term charterer as under: a person to whom a vessel is chartered in a charter party. vii) Oxford dictionary defines the term charterer as under: A contract to hire an aircraft, ship, etc. for a special purpose. viii) Maritime and Shipping Dictionary 2012, defines the term charter as under: A voyage charter whereby the ship owner agrees to place a certain number of container slots ( TEU and/or FEU) at the charterer s disposal. 24. From the above definitions of the term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing only for a limited inference for understanding the concept that charterer of ships includes even a part of the ship in an arrangement such as slot charter, space charterer or joint charter. The slot charterer or space charterer in a ship cannot be read in isolation or separate from the meaning of charterer. As held earlier by us, though the decision of the Hon'ble Jurisdictional High Court in Balaji Shipping U.K. Ltd. (supra), cannot be applied in a blanket manner in the present case, however, for the purpose of understanding the meaning of charter or charterer or slot charterer , the said decision gives in depth analysis which can be adopted in the present case also only for the purpose of assigning the true meaning of the word charterer . 28. Another very important observation made by the High Court which is quite relevant to note is, how the slot charterer agreements or space charterer agreement are inextricably linked with the shipping business in the present day shipping business. The said observations are as under: 26. An enterprise may not ply the ships owned or chartered or otherwise controlled or managed by it in respect of certain routes. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has been able to establish before the A.O. which is evident from the observations of the A.O. in Para 7 8, wherein he held that the freight earned from carriage of goods in international traffic by operation of ships including feeder vessels operated by 3rd party operator, the assessee has furnished documentary proof to substantiate the linkage between the voyage performed on feeder vessels and mother vessels. The Assessing Officer s case rests upon the premise that voyage carried on by the feeder vessels has to be segregated for the purpose of allowing benefit under Article 8, because chartering of some space i.e., slot chartering, feeder vessels cannot be equated with chartering of complete ship. By this, the Assessing Officer means that the assessee must have complete control of such ships even under the charter agreement. Thus, the view taken by the Assessing Officer for denying the benefit under the present Article 8 is not tenable as per our discussion in the forgoing paragraphs, that chartering of some space or slot charterer in a ship is actually a part and parcel of charter of a ship. Under the charterer agreement, there is no ownership or control of entire ship beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indo U.S. treaty. Similarly, the decision of M/s. Simatech Shipping Forwarding LLC, as relied upon by the learned Departmental Representative, will not apply because in this case also, the matter was set aside to the file of the Assessing Officer to decide the case in the light of the decision of the Federal Express Corp. (supra). Similar was the case in United Parcel Service (supra) also. In none of the decisions, the true import or meaning of the word charterer has been taken into consideration as adopted by the subsequent decision of the Hon'ble Jurisdictional High Court. 31. Thus, in our conclusion, we hold that transportation of cargo in the container belonging to the assessee from Indian Port i.e., Port of booking to the Hub Port through feeder vessel by way of space charter / slot charter arrangement, falls within the ambit of the word charterer and, therefore, it cannot be segregated form the scope of operation of ships as defined in Article 8(2) of the Indo Malaysian treaty. In the present case, the voyage between the Indian Port to the Hub Port through feeder vessel and from Hub Port to final destination port through mother vessel owned / leased by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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