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TMI Blog2020 (1) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle 9(1) of the India France Tax Treaty, hence, not taxable in India. In fact, the aforesaid view of the Tribunal was upheld by the Hon ble Jurisdictional High Court while dismissing Revenue s appeal in assessee s own case in Assessment Year 2002 03 Agency PE in India - Tribunal has held that if the Indian agent has been remunerated at arm s length, it cannot be considered as agency PE of the assessee. It is further relevant to observe, in the advance pricing agreement between the CMA CGM Agencies India Pvt. Ltd. and CBDT entered on 24th November 2015, it has been agreed that remuneration @ 18% between the assessee and its Indian agent has to be considered to be at arm s length. In the facts of the present case, it has been factually demonstrated before us that the payment made by the assessee to its Indian agent is at the arm s length price of 18%. That being the case, following the aforesaid decision of the Co ordinate Bench, we hold that the Indian Agent of the assessee cannot be considered as an agency PE. Thus, grounds are decided in favour of the assessee. Error in calculating tax on interest on External Commercial Borrowing (ECB) - as per section 115A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance and engaged in shipping business in International Waters. During the year under consideration, it has carried out its business activity in India through its agent CMA CGM Agencies India Pvt. Ltd. For the assessment year under dispute, the assessee filed its return of income on 30th November 2015, declaring total income of ₹ 339,11,13,801, and as per the provisions of section 44B r/w section 172 of the Act. In the return of income filed, the assessee claimed benefit under Article 9 of the India France Double Taxation Avoidance Agreement (DTAA) insofar as it relates to revenue earned from the shipping business in International Waters. The aforesaid benefit claimed by the assessee also included revenue earned from IHC. In the course of assessment proceedings, the Assessing Officer after verifying the materials on record observed that IHC is received on account of transportation in domestic traffic and not in international traffic as envisaged under Article 9 of India France Tax Treaty. Therefore, he called upon the assessee to explain why the benefit claimed under Article 9 of the Tax Treaty in respect of IHC should not be disallowed. In response, the assessee submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e due to some confusion. Thus, the DRP ultimately concluded that the decision of the Tribunal and the decision of the Hon'ble Jurisdictional High Court in SAF Marine Container Lines NV (supra) would not be applicable as IHC is not covered by the definition of International Traffic. Learned DRP observed, as per Article 9 of the Tax Treaty, only income from operation of ships in International Traffic is exempt. That being the case, the activity of Inland Transportation cannot be considered as International Transport. Thus, learned DRP upheld the decision of the Assessing Officer. 7. Having heard the parties, we find that while deciding identical issue in assessee s own case in the assessment year 2012 13, learned DRP had categorically held that the revenue earned from IHC is part of shipping business in International Waters, hence, covered under Article 9 of the Tax Treaty. However, subsequently, while deciding the identical issue in assessee s own case for the assessment years 2013 14 and 2014 15, learned DRP took a contrary view and decided the issue against the assessee. When the appeals preferred by the Revenue and the assessee for the aforesaid assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for technical services. 18. Before the Hon ble High Court, the assessee has also taken a plea that the communication system is very much an integral part of shipping business and therefore, the income received by the assessee from the agents, did in fact, amount to income from the shipping business of the assessee and therefore, not chargeable to tax. The Hon ble Bombay High Court held that the amount received by the assessee for using the communication system by the agents is part of shipping business and could not be captured under any other provisions of the Income tax Act except DTAA. The High Court further held that it does not amount to technical service. Finally the High Court held that the amounts paid by the agents for using the communication system arose out of the shipping business and cannot be brought to tax. 19. The decision so rendered by Hon ble Bombay High Court in the context of India-Denmark DTAA clearly shows that the ancillary activities connected with the shipping business are also included in the shipping business. The above said decision has been followed by the co-ordinate bench in the case of same as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting income under section 44B of the Act. Holding that service tax is an integral part of accrued income for computing profit under section 44B of the Act, the Assessing Officer included the service tax collected of ₹ 46,42,15,427, in the gross receipts for the purpose of computing the income and the tax thereon as per section 44B r/w section 172. 11. Learned DRP also upheld the decision of the Assessing Officer. 12. Having considered the submissions of the parties, we find that identical issue concerning taxability of service tax came up for consideration before the Tribunal in assessee s own case in assessment years 2012 13, 2013 14 and 2014 15, the Tribunal while deciding the issue in the order referred to above has held as under: 26. The next issue relates to the inclusion of Service tax as part of Gross receipts. The assessee has collected service tax also on Inland haulage charges collected from its clients. Since we have held that the Inland Haulage Charges received by it is part of income from operation of ships in International traffic and is eligible for relief under Article 9(1), the question of assessing the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Rejecting the aforesaid submissions of the assessee, the Assessing Officer held that the income earned from the transportation in Feeder Vessels is taxable in India. The aforesaid decision of the Assessing Officer was also upheld by the DRP. 16. Having considered the submissions of the parties, we find that identical issue arising in assessee s own case for the assessment years 2012 13, 2013 14 and 2014 15 came up for consideration before the Tribunal. While deciding the issue in the order referred to above, the Co ordinate Bench held as under: 23. We heard the parties on this issue. We notice that the Hon ble Bombay High Court has decided an identical issue in the assessee s own case referred supra) in AY 2002-03. We notice that the High Court has noted the facts as under:- 8(A) It was not disputed that the respondent owned or chartered or otherwise actually operated ships though not within the Indian territorial waters. In this appeal, the respondent arranged for the carriage of goods of its clients by sea from ports in India to foreign ports. As the respondent s vessels did not ply in Indian territorial waters, it avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, hence, not taxable in India. In fact, the aforesaid view of the Tribunal was upheld by the Hon ble Jurisdictional High Court while dismissing Revenue s appeal in assessee s own case in Assessment Year 2002 03 in Income Tax Appeal no. 2175 of 2009, vide judgment dated 6th August,2012. Accordingly, these grounds are allowed. 18. The next issue raised in grounds no.15 to 17, is contesting the decision of the Revenue authorities that the assessee has an agency PE in India. 19. Having heard the parties, we find that identical issue came up for consideration before the Tribunal in assessee s own case in assessment years 2012 13, 2013 14 and 2014 15. While deciding the issue in the order referred to above, the Tribunal has held as under: 27. In the cross objection filed by the assessee for AY 2012-13 and in the appeals filed for AY 2013-14 and 2014-15, the assessee is challenging the decision of Ld DRP in holding that its Indian Agent, viz., M/s CMA CGM Agencies (India) P Ltd shall constitute Agency PE of the assessee. The question relating to existence or otherwise of Permanent Establishment shall arise only if any part of its i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of non grant of TDS credit as appearing in Form no.26AS. Whereas, in grounds no.20 and 21, the assessee has challenged levy of interest under section 234A of the Act. 24. As could be seen, in respect of the issues raised in the aforesaid grounds, the assessee has already moved an application for rectification under section 154 of the Act before the Assessing Officer which, as stated before us, is still pending. Considering the nature of dispute, we direct the Assessing Officer to verify assessee s claim with regard to grounds no.18 to 21 along with the rectification application pending before him and decided as per law after providing reasonable opportunity of being heard to the assessee. Grounds are allowed for statistical purposes. 25. Grounds no.22 and 23 on the issue of levy of interest under section 234B of the Act is consequential in nature, hence, does not require adjudication at this stage. 26. Ground no.24, is against initiation of penalty proceedings under section 271(1)(c) of the Act. This ground being pre mature is dismissed. 27. In the result, assessee s appeal is partly allowed. Order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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