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TMI Blog2019 (9) TMI 1407X X X X Extracts X X X X X X X X Extracts X X X X ..... o new facts or contrary judgments have been brought on record before us by the Ld. AR in order to controvert or rebut the findings recorded by the Ld.CIT (A). Moreover, there are no reasons for us to deviate from the findings so recorded by the CIT (A). Therefore, we are of the considered view that the findings recoded by the Ld. CIT (A) are judicious and are well reasoned. Accordingly, we uphold the same. Whether there exists any Agency PE or fixed place PE in India? - HELD THAT:- Co-ordinate Bench in the case of Bay Lines (Mauritius) [ 2018 (2) TMI 1524 - ITAT MUMBAI ] has held that M/s Freight Connection India Pvt. Ltd. is an agent of independent status and hence it cannot be considered as constituting Agency PE of that assessee. The decision so rendered shall also apply to the instant case and accordingly, we hold that M/s Freight Connection India P. Ltd. shall not constitute Agency PE of the assessee. Assessee does not have PE in India and its income being business income, it cannot be brought to tax in India. - SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) For the Assessee : Mr. Dharsh Kothari, Mr. Kunal Shah Mr. Arpit Jain, ARs For the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly only if place of effective management is situated either in India or Mauritius. The AO gave a finding that the place of effective management is located in Gulf Countries and hence Article-8 will not apply. In this regard, he took support of the view expressed by Mr. Klaus Vogel on International Taxation. The AO further noticed that the assessee had appointed an Indian company named M/s Freight Connection (India) Pvt. Ltd. as its agent. He took the above Indian company as agency PE of the assessee. The AO also held that the business premises of M/s Freight Connection (India) P. Ltd. also constitute fixed place PE of the assessee. Accordingly, he held that the assessee is having PE in India within the meaning of Article-5 of DTAA and therefore, brought income of the assessee to tax under Article-7 of the Indo-Mauritius DTAA under the head business . In appeal, the Ld. CIT(A) confirmed the same and hence the assessee has filed the present appeal. 4. Before us, the Ld. counsels for the assessee submit that identical issues were considered by ITAT L Bench, Mumbai in assessee s own case in ITA No. 5122/Mum/2003 for AY 1998-99 and other related ITAs for AYs 1999-2000 to 2012-13. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of effective management of the company. In the presentcase there is no dispute that the appellant is a resident ofMauritius and as per Indian Income tax Act, non-resident in India.Therefore there is no necessity to consider the different ruling ofthe Advance Authority-Ruling as cited above, The AdvanceRulings are not binding to other assessee except the case in whichthe AAR Ruling have given their findings. There is a separatearticle in convention which indicates that there can be effectivemanagement other than two contracting state. Article 8(1) and 8(2)read as: (1) Profits from the operation of ships or aircraft ininternational traffic stall be taxable only in Contracting Statein which the place of effective Management of the enterprise issituated. (2) If the place of effective management of a shippingenterprise is aboard a ship, then it shall be deemed to besituated in the Contracting State in which the home harbour ofthe ship is situated or, if there is no such home harbour, in theContracting State of which the operator of the ship is aresident. 3.1. Thus there is a possibility of effective management otherthan the contracting state. In the earlier paragraph, Mr. DineshKanab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that the effectivemanagement can be only in between two contracting state is notcorrect. Accordingly, I hold that the effective management of theappellant is neither in Mauritius nor in India but in a thirdcountry. Accordingly, the appellant is not entitled for the benefit ofArticle 8 of the DTAA. After having gone through the facts of the present case,arguments addressed by both the parties, judgment cited before us andorders passed by the revenue authorities, we find that the effectivemanagement can be only in between two contracting state is not correctand as per the facts narrated above, we are of the considered view thatthe effective management of the assessee is neither in Mauritius nor inIndia and we are in agreement with the views of Mr. Klaus Vogel, whois an eminent authority of International Taxation, that if the effectivemanagement of an enterprise is not in one of the contracting state, but issituated in the third state, the benefit of article-8, cannot be extended. No new facts or contrary judgments have been brought on recordbefore us by the Ld. AR in order to controvert or rebut the findingsrecorded by the Ld.CIT (A). Moreover, there are no reasons for us todeviate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the DTAA executed between India and Mauritius and as per the terms /Article contained in DTAA, we find the following proposition:- i) Article 5(4) of the DTAA provides that a person of a Contracting State acting for or on behalf of an enterprise of the other Contracting State (other than an agent of an independent status) shall be deemed to be a PE if the conditions laid down therein are satisfied viz. the agent (i) has and habitually exercises an authority to conclude contracts in the name of the enterprise or (ii) habitually maintains a stock of goods or merchandise belonging to the enterprise from which he regularly fulfils orders on behalf of the enterprise. ii) Article 5(5) of the treaty states that an enterprise shall not be deemed to have a PE merely because it carries on business in the other State through an agent of an independent status acting in the ordinary course of its business. Art. 5(5) further states that when the activities of the agent are devoted exclusively or almost exclusively on behalf of the foreign enterprise, the agent will not be considered to be an agent of an independent status. Thus, one has to see whether Freight Connection can be regarded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the argument of the learned DR is without any basis. We find that on a plain reading of Art. 5(5), it is clear that for determining the independence, one should look at the agent and as to whether the agent has only one principal for whom the agent works exclusively. The fact that the principal has only one agent in India who undertakes all the activities for the principal is not relevant. In this respect, we draw strength from the decision of the Mumbai ITAT in ACIT v. DHL Operations BV Netherlands (supra)which was relied upon by Ld. CIT(A) in AY 2001 -02 in assessee s own case for departing from the decision of Ld. CIT(A) in AY 1998 99 is no longer good law in view of the following:- a) Mumbai ITAT in the case of DDIT(IT) v. B4U International Holdings Ltd. (137 lTD 346) while departing from the ratio laid down in DHL Operations held that one has to look at the activities of the agent and its devotion to the non-resident principal and not the other way round i.e. the perspective should be from the angle of the agent and not that of the non-resident principal. Therefore, if an agent exclusively works for one principal he may be said to be dependant agent resulting in Agency PE but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19) held that where a foreign enterprise carries on business in a country through an agent, the provisions of Article 5(1) - Fixed Place PE do not come into play. Bombay HC in DIT(IT) v. Delmas France (232 Taxman 401) dismissed the revenue's appeal against the order of the ITAT. Considering the above legal proposition and as well as facts of the present case we find that the Hon ble Bombay High Court has affirmed the Tribunal's decision in B4U International Holdings which had held that the conclusion in DHL Operations was erroneous. Therefore, we hold that the Freight Connection is an independent agent who acts in its ordinary course of its business and whose activities are not devoted exclusively or almost exclusively on behalf of the assessee. Therefore, it is held that the assessee does not have an Agency PE in India and the CIT(A) was right in so holding for the AY 1998 - 99 and the successor CIT(A) was wrong in taking a contrary view for the subsequent assessment years. Accordingly, we further hold that even if the assessee's case is not covered by Article 8, the business profits would not be chargeable to Indian tax as it does not carry on business in India throug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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