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TMI Blog2023 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... , Sr. Adv., Sh. Aditya Vohra, Adv. and Sh. Hardeep Singh Chawla, Adv. For the Respondent : Sh. Anshuman Pattnaik, CIT (DR) ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order dated 19.07.2022 passed by the AO u/s 143(3) r.w.s. 144C (13) of the Income Tax Act, 1961. 2. The assessee has raised the following grounds of appeal: 1. That the order passed by the Ld. Deputy Commissioner of Income-tax (International Tax), Circle 3(1)(1), Delhi (Ld. AO) under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (Act') and the directions of the Ld. Dispute Resolution Panel (Ld. DRP) is contrary to the provisions of law and erroneous on the facts of the case and hence liable to be quashed. 2. That the order passed under section 143(3) 144C(13) of the Act, being barred by limitation, is bad in law and void-ab- initio. 3. The Ld AO and Ld DRP erred on facts and in law to bring to tax the amount of INR 926,69,08,621 as income from royalty alleging that: (a) there was no commercial rationale for incorporation of the appellant company in Singapore; (b) the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferring to Place of Effective Management (PoEM). 5. We find that the similar allegations have been made by the revenue and also during the proceedings concluded u/s 263 by the ld. CIT (Intl. Taxation)-3, New Delhi. During the hearing of that case, arguments have been put forward by Sh. Ajay Vohra, Sr. Adv. and by Sh. Gangadhar Panda, CIT DR. The Tribunal passed an order dated 09.03.2023 in ITA No. 1067/Del/2022 wherein the merits of the issue which is akin to the issue before us has been examined and adjudicated. For the sake of ready reference, the operative part of the order is as under: 21. Even otherwise also, learned CIT has misconceived the facts and misapplied the legal position while concluding that the assessee is not entitled to treaty benefit as it has been interposed as a conduit company for treaty shopping purpose. In this regard, the allegation of learned CIT is 75% of assessee s receipts from shipping business is centered around India. Further, the assessee is a JV of Indian company and a Netherlands based company, which is a subsidiary of Japanese company. Therefore, there was no commercial rationale for incorporating Assessee Company in Singapore. Learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el are based in Singapore and were holding National Registration Identity Card issued by the Government of Singapore. It is also relevant to observe, whether the assessee is a tax resident of Singapore or not is a highly debatable issue and has to be decided based upon evidence gathered through proper investigation. Conclusion on these issues cannot be reached on conjectures, surmises, doubts and suspicion. Therefore, not only they are outside the scope of limited scrutiny, but, based on such debatable issues proceedings under section 263 of the Act cannot be invoked. Further, learned CIT has observed that the assessee cannot be treated as tax resident of Singapore as it is not liable to tax in Singapore. Reason being, shipping income is exempt from taxation in Singapore. In this context he has referred to Article 4(1) of the India-Mauritius DTAA. However, he has completely ignored the fact that unlike India-Mauritius Treaty, there is no such condition that a person liable to tax can only be a resident as per definition of resident under Article 4 of India-Singapore DTAA. In any case, whether a particular person is a resident of a particular country or not is a highly debatable iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certainly it is one of the possible views under the given facts and circumstances. 25. In any case of the matter, whether the assessee is entitled to treaty benefit or not is a highly debatable issue, hence, on such an issue an order cannot be considered to be erroneous and prejudicial to the interest of Revenue. 26. Lastly, we will deal with the decision of learned CIT in treating the receipts from operation of ships in international traffic to be in the nature of royalty income. As discussed earlier, the assessee owns substantial number of vessels for transportation of goods from the ports outside India to ports in India and vice versa. Invoices raised by the assessee demonstrate that the assessee charged fee for transportation of goods and not towards leasing of the vessels. Therefore, the finding of learned CIT that the receipts from the shipping business is in the nature lease rental, hence royalty, appears to be contrary to facts on record. At this stage, we must observe, the assessee had three types of shipping income in the year under consideration, viz., income from coastal shipping, income from inward freight and income from outward freight. Insofar as, incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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