9911796707
TMI Blog2022 (2) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... ,959/- from transportation of cargo through feeder vessels 2. erred in holding that freight income from transportation of cargo through feeder vessels is not eligible for benefit under Article 8 of India-Germany DTAA, 3. erred in holding that while income from feeder vessels would fall within the ambit of section 44B of the Act whereas the same shall not eligible for benefit under Article 8 of India-Germany DTAA: 4. erred in not taking cognizance of the decision of jurisdictional Bombay HC/IT AT in the Assessees own case for AY 2005-06 to AY 2011-12, AY 2013-14, AY 2014-15, AY 2015-16 and AY 2016-17 wherein the Hon'ble HC/Hon'ble IT AT has held that freight income from transportation of cargo through feeder vessels is eligible for benefit under Article 8 of the India-Germany DTAA; Hapag Lloyd India Private Limited (HLIPL') held to be agency permanent establishment ('PE') of the Assessee in India 5. erred in holding that HLIPL constitutes an agency PE of the Appellant in India, without providing cogent reasons for the same; 6. without prejudice to the above, erred in not appreciating that HLIPL is not a dependent agent of the Appellant as per Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermany DTAA with respect to the income from Feeder Vessel. The assessee was asked to show whether it has a permanent establishment in India or not. The assessee replied on 22.11.2019, submitted that it books space and slots on feeder vessels and transport cargo through such vessels. It also said that it is necessary for slot hire agreement, which are directly connected and inter linked with an integral part of the enterprise business of operation of ships. It is therefore, submitted that if DTAA is construed to include activity directly or indirectly connected with the operations of the ship, income from slot charters and feeder vessels are also covered for benefit. It also relied on the decision of Hon'ble Bombay High Court in the case of Balaji Shipping (UK) Ltd. (77 DTR 361) and decision of the co-ordinate Bench in CGM France [27 SOT 367 (Mum)]. The assessee also submitted that identical issue in case of the assessee has been decided by the ITAT in favour of assessee, which has been confirmed by the Hon'ble Bombay High Court, where in appeal filed by the Assessing Officer is dismissed. Therefore, issue is squarely covered in favour of the assessee. 5. The learned Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Assessing Officer passed a final assessment order under section 143(3) read with section 144C(13) of the Act on 19.04.2021 determining the total income of the assessee at Rs. 1,29,14,697/-. The directions with respect to the grant of credit of tax deducted at source in the name of subsidiary company to the assessee was not at all dealt with by the assessing officer. Therefore, the assessee is aggrieved with that order has preferred the appeal before us. 8. The learned Authorized Representative submitted that whether assessee is eligible for the benefit of article 8 of India Germany Double Tax Avoidance Agreement for its slot charter income is covered in favour of the assessee in assessee's own case for earlier years starting from Assessment Years 2006-07 to 2015-16. For Assessment Year 2007-08, the appeal against the order of the coordinate Bench filed by the learned Assessing Officer before Honourable High court has also been dismissed. In view of this, it was submitted that issue on taxability of freight charges of Rs. 17,21,95,959/- which has been taxed under section 44B determining the income of the assessee at Rs. 1,2,14,700/- is covered in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 the coordinate bench vide its order dated 31st of January 2020 has set-aside the issue back to the file of the learned assessing officer as per paragraph number 16 of that order. He therefore submitted that with similar direction to the learned assessing officer this ground of appeal be allowed. 11. The learned Departmental Representative vehemently supported the orders of the lower authorities. He specifically submitted that the decision of the Hon'ble Bombay High Court in case of Balaji Shipping (supra) issue was on India UK Double Taxation Avoidance Agreement, whereas the issue involved in this case is India German DTAA. It was submitted that Article 8 in case of India Germany Double Taxation Avoidance Agreement does not give any exemption as has been considered by the honourable High Court based on India UK Double Taxation Avoidance Agreement. He referred to both Double Taxation Avoidance Agreements to support his contentions. 12. The learned Authorised Representative submitted that issue has been considered and decided by the co-ordinate Bench in assessee's own case for earlier years. 13. We have carefully considered the rival contentions and perused the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... com 229, per paragraph number 2, in appeal filed by the assessee against the order of the coordinate bench which held that the agreements among consortium members were not cool/joint men's business arrangements but were merely slot arrangements and that the freight income received on account of transportation of cargo on feeder vessel would be ineligible for benefit of article 8, the honourable High Court set aside the order of the coordinate bench and remanded the matter back to the coordinate bench for fresh consideration in the light of decision of the honourable court in case of Balaji sipping UK Ltd. (supra). 17. Pursuant to above remand by the honourable High Court, the coordinate bench in ITA number 8854/MUM/2010 on 14/8/2013, while recording the fact of the order of the honourable High Court, as per para number 7 - 8.5 has held as Under:- "7. We have perused the records and considered the rival contentions carefully. The dispute is regarding allowability of exemption of income Under the provisions of double taxation avoidance agreement. The assessee is a sipping company engaged in the operation of ships in the international traffic and is a tax resident of Germany. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinations/port on the vessels used on slot arrangement basis. In some other cases goods had been transported through feeder vessels availed on slot higher facilities to the international hub port from where they had been shipped to final destination to the vessels owned/chartered by the assessee. The honourable High Court noted that the AO had taxed such income from federal vessels u/s. 44B of the income tax act which dealt with income from operation of ships, a provision similar to the provisions of article 9 (1) of the treaty which referred to profit and gains of business operation of ships. Therefore, the High Court held that the income arising from slot hire arrangement had to be considered as the income referred to Under article 9 (1) of the treaty as the phrase "operation of ship" not being defined in the treaty, it must be given the same meaning as described in Section 44B. The High Court also held that are availing of slot hire facility had a close nexus with the business operation of ships in the international traffic as an enterprise may not be able to carry on business at all in many situations. The enterprise may not ply ships owned or chartered by it in respect of cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/port through the slot hire facility as well as the case where the cargo had been transported through the slot hire facility to the hub point and, thereafter, through the vessels owned/chartered by the assessee were eligible for exemption Under the treaty provisions. Though the said judgement was in the context of Indo UK treaty but we find that provision of treaty relating to income from operation of ships in international traffic are similar to the provisions of Indo German treaty with which we are concerned in this case. 8.4 The learned DR pointed out that the judgement in case of Balaji sipping UK Ltd. (supra) was restricted to the facts of only those type of cases as held by the honourable High Court. In that case the revenue from slot hire arrangement was only 12% whereas in the present case revenue from slot hire arrangement was substantially high at a 29%. We have considered this aspect carefully. We find that in para 19 of the judgement, honourable High Court of Delhi clearly held that judgement would not apply to the assessee who are carrying on the business of shipping cargo only by availing slot hire facility is obtained by them. In the present case sipping revenue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther, for assessment year 2005 - 06 in ITA number 1776/2014 the coordinate bench wide order dated 21/9/2016 wherein the appeal was filed by the assessee was allowed as per paragraph number 7 holding that slot hire charges income is eligible for benefit as per article 8 of the treaty. Subsequently also for assessment year 2013 - 14 per order dated 31/10/2017, for assessment year 2014 - 15 per order dated 28/6/2019, for assessment year 2015 - 16 per order Dated 16/12/2019 and for assessment year 2016 - 17 per order dated 31/1/2020, the claim of the assessee for the benefit to the slot hire income Under article 8 of the treaty was allowed. 21. As per chart submitted by the learned authorized representative the percentage of income from feeder vessels to the total freight income for the impugned assessment year is merely 0.69%. All the arguments raised before us by the learned departmental representative has been considered in the decision of the coordinate benches as well as in the decision of the honourable High Court holding in favour of the assessee. Therefore, respectfully following the decisions of the honourable High Court and coordinate benches in assessee's own case, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption under section 90(2) read with Article 8 of Indo German Double Taxation Avoidance Agreement. The claim of the assessee is that the assessee has wholly owned subsidiary in India Hapag-Lloyd India Pvt. Ltd. This company collected the freight from the customers of the assessee and therefore, the customers while making payment to an Indian entity deducts tax at source and certificates are issued in the name of Indian entity. The Indian entity arranges for vendor payments and the balance amount collected is remitted to assessee. The assessee's claim is that the income involved in the TDS certificate does not pertain to Indian entity but to the assessee. The TDS is claimed as credit by the assessee. The Indian entity did not claim any credit of the above TDS. The Tax Deducted At Source (TDS) in form No. 26 AS is shown in the name of the Indian entity. As the assessee has shown the income involved in this TDS certificates and in turn also claimed benefit of Article 8 and the benefit of DTAA, the credit for such tax should be granted to the assessee. The claim of the assessee is that Rule 37BA is required to be complied with. It is also submitted that merely because the deductor ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
