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TMI Blog2021 (9) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... as legally erred in holding that under Article 8 of the Double Taxation Avoidance Agreement between India and Mauritius ('DTAA1), the place of effective management may be a state other than India or Mauritius. c) On the facts and in the circumstances of the case, the Learned CIT(A) has legally erred in holding that the place of effective management of the Appellant is not In Mauritius and consequently denying the benefit of Article 8 of the DTAA. Without prejudice to ground no. 1 above and on the facts and in the circumstances of the case, the Learned CIT(A) has legally erred in holding that the Appellant had a Permanent Establishment ('PE'} in India in the form of Agents and thereby has erred in charging to tax the Business Profits of the Appellant in India under Article 7 of the DTAA b) Without prejudice to ground no. 1 above and on the facts and in the circumstances of the case, the Learned C1T(A) has legally erred in holding that the Agent's do not fall within the category of exclusions as referred to in Article 5(5) of the DTAA. He further erred in law in not considering the fact that the activities of the agents wore not exclusively or almost exclusively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd has also claimed 100% relief under Article 8(1) of India- Mauritius Double Taxation Avoidance Agreement (DTAA). After verifying the return of income and other documents, the assessing officer issued a show cause notice to the assessee to demonstrate that effective management of the company is in Mauritius and if the assessee fails to so demonstrate, the income from operation of ships would be computed as per Article 7 of the DTAA and brought to tax in India. In reply, assessee made its submission justifying its claim of benefit under Article 8(1) of the tax treaty, as according to the assessee, its place of effective management is in Mauritius. The assessing officer, however, did not accept the submissions of the assessee. The assessing officer observed that two of the shareholders of the assessee company are located in UAE and they have issued letters of authority in the name of the assessee. He also observed that board meetings are attended by the shareholders located in UAE. Thus, he ultimately concluded that the place of effective management of the assessee is not in Mauritius but in UAE. Thus, ultimately he concluded that the assessee is not eligible to get the benefit of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer, after referring to various clauses of agency agreement between M/s Samsara Shipping Pvt Ltd and Parekh Marine Agency Pvt Ltd has held that both these entities are exclusively working on behalf of the assessee and are not providing services to the assessee in regular course of their business. The assessing officer referring to Article 5(5) of India-Mauritius tax treaty held that both the aforesaid entities cannot be considered to be agents having independent status and are acting in the ordinary course of their business. Thus, he has held that the exceptions provided under Article 5(5) are not applicable to M/s Samsara Shipping Pvt Ltd and Parekh Marine Agency Pvt Ltd. Thus, the assessing officer concluded that the assessee has a PE in India. Learned Commissioner (Appeals), as stated earlier, endorsed the aforesaid view of the assessing officer. 8. The learned counsel for the assessee submitted, neither M/s Samsara Shipping Pvt Ltd nor Parekh Marine Agency Pvt Ltd can be considered as agents of the assessee as their activities are not devoted exclusively for the assessee. Drawing our attention to various facts and materials on record, he submitted that in the year under co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim under Article 8 of the tax treaty, it goes out of the treaty benefits altogether and assessee's income has to be taxed as per the provisions contained under the domestic law, since, the assessee accepts that it does not have effective place management in Mauritius. Without prejudice, he submitted, different clauses of the shipping agency agreement between the assessee and M/s Samsara Shipping Pvt Ltd and Parekh Marine Agency Pvt Ltd clearly establish that they are exclusively working for the assessee. Drawing our attention to the specific observations of the assessing officer and learned Commissioner (Appeals) he submitted, these two entities are doing the agency work for and on behalf of the assessee in most of the Indian ports. He submitted, the agents are responsible for obtaining all clearances from the government departments; they are looking after all functions such as dividing brokers, contracting with parties for loading cargo, dealing with labours for loading and unloading, collecting the freight on behalf of the assessee, etc. Thus, he submitted, the specific conditions of the shipping agency agreement are determinative whether M/s Samsara Shipping Pvt Ltd and Parekh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the miscellaneous application filed by the assessee challenging some of the observations of the Tribunal in the appellate order, in M.A. 184/Mum/2004 dated 17-06-2006, the bench has held as under:- "5. The case of the assessee before the Tribunal was two fold- first that the income of the assessee company is not taxable in India by the virtue of Article 8 of the India Mauritius DTAA, and second that, in case his case fails on the touchstone of Article 8 and accordingly provisions of Article 7 are to be applied, the income is to be taxed on net basis and only in case the assessee can be said to have a permanent establishment (PE) in India. It was also the assessee's contention that the assessee did not have any PE in India in terms of the definition of that expression under the India Mauritius DTAA. When the Tribunal came to the conclusion that Article 8 is not applicable, corollary to this conclusion was that taxability under Article 7 was to be adjudicated upon. However, the Tribunal declined to go into that question by observing that "......... articles 4, 5,7 of DTAC have no application and relevance under the facts of the present case' and by observing that "the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gency PE in India in terms of Articles 5(4) and 5(5) of the tax treaty. While the assessee has submitted that both M/s Samsara Shipping Pvt Ltd and Parekh Marine Agency Pvt Ltd are agents of independent status rendering services to the assessee in the ordinary course of their business, it is the revenue's case that both these entities are exclusively working for the assessee; hence, do not have independent status of an agent. As could be seen from record, during the year under consideration, M/s Samsara Shipping Pvt Ltd has rendered services to various shipping companies and earned commission income as under:- Name of the Principals Amount in Rs. Mediterranean Shipping Co. 30,008,193 Seven Seas Container Line Ltd 2,36,638 Overseas Transport Company Limited 4,653,998 Singapore Soviet Shipping Company Pte. Ltd 1,348,517 Integrated Container Feeder Services 859,253 Ethiopian Shipping Line 1,214,207 Total 38,320,806 15. As could be seen from the aforesaid, M/s Samsara Shipping Pvt Ltd is providing services to various companies relating to shipping activities and for providing such services has earned income from a number of shipping companies. Out of Rs. 3,83,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracting State in the other contracting State, there must be place of business in the other contracting State, the place of business must be at the disposal of the enterprise, the place of business must be fixed and through this fixed place of business the enterprise either wholly or partly carries on its business. Facts on record clearly indicate that the assessee does not possess a fixed place of business to either wholly or partly carry out its business. There is no permanent infrastructure, office, supervisory staff, tangible and intangible assets in India to constitute a fixed place PE. There is nothing on record to establish that the assessee carries on its core business activities in India through fixed place of business.Though, the Assessing Officer has alleged that the effective place of management is in India, however, he has miserably failed to prove such fact through cogent evidence. The allegation of the Assessing Officer that the directors of the assessee company are staying in UAE and are exercising their control over the affairs of the company from UAE, under no circumstances, creates a fixed piace PE in India as none of the conditions of Article-5(l) of the Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency Pvt. Ltd. and Samsara Shipping Pvt. Ltd., were not exclusively working for the assessee and are having their independent status. Further, the services provided to the assessee by them are in the ordinary course of their business. That being the case, the exceptions provided under Article-5(5) of the Tax Treaty would be clearly appliable. Hence, neither Parekh Marine Agency Pvt. Ltd. nor Samsara Shipping Pvt. Ltd. can be considered as dependent agents so as to constitute PE in India, The Co-ordinate Bench in Bay Lines Mauritius (supra) while deciding identical issue involving more or less similar facts, has held that if the agent was not exclusively acting on behalf of the assessee enterprise, it cannot be considered as dependent agent so as to constitute a PE. Thus, the ratio laid down in the aforesaid decision would also support assessee's case. The other decisions relied upon by the learned Counsel for the assessee also express similar view. In view of the aforesaid, we do not find any infirmity in the order of learned Commissioner (Appeals) holding that the assessee does not have a PE in India even under Article-5(5) of the Tax Treaty, hence, is eligible to avail the be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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