2022 (9) TMI 1388 - AT - Income Tax

Assessee's Appeal Partly Allowed: Tribunal Orders Re-examination

The appeal by the assessee was partly allowed, with several grounds being decided in favor of the assessee based on precedents and the India-France DTAA. ... Taxability of Inland Haulage Charges (‘IHC’) - HELD THAT:- Tribunal following the order of Coordinate Bench in assessee's own case [2018 (3) TMI 1832 - ITAT MUMBAI] decided the issue in favour of the assessee. Taxability of Freight Charges for Transportation of Cargo through Feeder Vessels - assessee submitted that the Assessing Officer and DRP have erred in holding that freight charges for transportation of cargo through feeder vessels is income taxable in the hands of assessee under section 44B - HELD THAT:- The transportation of cargo through feeder vessels is inextricably linked to the international transportation of cargo. Therefore, freight charges for transportation of cargo through feeder vessels are covered by Article -9 of India-France DTAA. Assessee pointed that the issue is squarely covered by the order of Tribunal for the assessment years 2012-13 to 2014-15 and the order for assessment year 2015-16. The ld.Authorized Representative of the assessee further submitted that the Hon'ble Bombay High Court in assessee's own case in appeal filed by Department in Income Tax Appeal [2012 (8) TMI 1211 - BOMBAY HIGH COURT] has decided this issue in favour of assessee and has dismissed the appeal of Revenue. Permanent Establishment of the assessee in India - No material is brought on record to suggest that the transaction with Indian entity is not at arm’s length. On the contrary assessee has demonstrated that transaction is as per APA therefore, no further adjustment is required. Respectfully following the decision of Co-ordinate Bench in assessee’s own case for assessment year 2015-16 grounds No.11 to 13 are allowed. Taxing interest on ECB @ 10% instead of tax rate of 5%(+ surcharge @5% and cess @3%) - assessee pointed that rectification application has already been filed before the AO on 25/02/2021, which is still pending for final disposal - HELD THAT:- AO is directed to decide the rectification petition of the assessee dated 25/02/2021 expeditiously, preferably within a period of six months from the date of receipt of this order. The ground No.15 of appeal is allowed for statistical purpose. Claim made in additional grounds of appeal - assessee in its return of income has offered to tax FTS @ 10% + surcharge and educational cess - The income which has been offered to tax by the assessee in return of income, now by way of additional ground assessee is claiming it non-taxable. It is a well settled principle that true income of the assessee should be taxed and only legitimate taxes should be collected from the assessee. [ Re: Balmukund Acharya Vs. DCIT [2008 (12) TMI 88 - BOMBAY HIGH COURT]]. The assessee by way of additional evidences has supported the contentions raised in additional grounds of appeal. It is not a case where the assessee has raised altogether a fresh issue which was neither part of the income tax return or assessment proceedings. The assessee has changed its stand from offering income to tax in the return of income to claim the income as non- taxable under the provisions of DTAA. In the light of above, we are inclined to admit additional grounds of appeal, as well as additional evidences to substantiate additional grounds. Since, this issue require fresh determination from a different dimension, we deem it appropriate to restore the same to Assessing Officer for de-novo examination considering the additional evidences filed by the assessee and after affording reasonable opportunity of hearing/opportunity to make submissions, in accordance with law. The additional grounds of appeal are allowed for statistical purpose. Issues Involved:1. Taxability of Inland Haulage Charges (IHC)2. Taxability of Freight Charges for Transportation of Cargo through Feeder Vessels3. Permanent Establishment (PE) of the assessee in India4. Error in computing Fees for Technical Services under the head 'Income from Other Sources'5. Error in calculation of Tax on interest on External Commercial Borrowings (ECB)6. Initiation of Penalty proceedings u/s. 271(1)(c) of the Act7. Additional Grounds of Appeal regarding non-taxability of IT support fees (Fees for Technical Services - FTS)Detailed Analysis:1. Taxability of Inland Haulage Charges (IHC):The assessee contested the addition of IHC, arguing that it should not be taxable in India as per Article 9 of the India-France DTAA. The Tribunal had previously ruled in favor of the assessee in similar cases for assessment years 2012-13 to 2015-16. The Tribunal reiterated that IHC is part of the income from the operation of ships in international traffic and is covered under Article 9 of the India-France DTAA, thus not taxable in India. The Tribunal allowed grounds 2 to 4 based on this precedent.2. Taxability of Freight Charges for Transportation of Cargo through Feeder Vessels:The assessee argued that freight charges for transportation through feeder vessels should be considered part of international transportation and thus covered under Article 9 of the India-France DTAA. The Tribunal agreed, citing previous rulings and a decision by the Hon'ble Bombay High Court in the assessee's favor. Consequently, grounds 6 to 10 were allowed.3. Permanent Establishment (PE) of the assessee in India:The assessee argued that CMA CGM Agencies (India) Pvt. Ltd. should not be considered a dependent agent PE in India. The Tribunal had previously ruled in favor of the assessee for assessment years 2012-13 to 2015-16, stating that if the Indian agent is remunerated at arm's length, it cannot be considered a PE. The Tribunal noted that the transaction was as per the Advance Pricing Agreement (APA) and thus upheld the assessee's contention for grounds 11 to 13.4. Error in computing Fees for Technical Services under the head 'Income from Other Sources':The assessee did not press ground 14, and it was dismissed accordingly.5. Error in calculation of Tax on interest on External Commercial Borrowings (ECB):The assessee argued that interest on ECB should be taxed at 5% instead of 10%. The Tribunal directed the Assessing Officer to resolve the rectification petition filed by the assessee expeditiously. Ground 15 was allowed for statistical purposes.6. Initiation of Penalty proceedings u/s. 271(1)(c) of the Act:The Tribunal dismissed ground 16 as premature, stating that the challenge to penalty proceedings at this stage was not appropriate.7. Additional Grounds of Appeal regarding non-taxability of IT support fees (Fees for Technical Services - FTS):The assessee raised additional grounds claiming that FTS should not be taxable under the India-France DTAA. The Tribunal admitted these additional grounds and evidences, noting that the issue emanates from the proceedings before the lower authorities. The Tribunal restored the issue to the Assessing Officer for a de-novo examination, considering the additional evidences. The additional grounds were allowed for statistical purposes.Conclusion:The appeal by the assessee was partly allowed, with several grounds being decided in favor of the assessee based on precedents and the India-France DTAA. The Tribunal directed specific issues for re-examination by the Assessing Officer, ensuring compliance with legal standards and prior rulings.