2020 (10) TMI 503 - AT - Income Tax

Appeals Dismissed Due to Monetary Limit; No Permanent Establishment in India Under India-Mauritius Tax Treaty.

The ITAT dismissed the Revenue's appeals for A.Y. 1998-99 and 2001-02 due to non-compliance with the monetary limit set by CBDT Circular no.17 of 2019. ... Income accrued in India - Permanent Establishment (PE) in India under Article–5 of the India–Mauritius Tax Treaty - bring the income earned by the assessee to tax net in India - HELD THAT:- Both Parekh Marine Agency Pvt. Ltd. and Samsara Shipping Pvt. Ltd., were not exclusively working for the assessee and are having their independent status - 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 [2018 (2) TMI 1524 - ITAT MUMBAI] 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. No infirmity in the order OF 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 benefits of the Tax Treaty. More so, considering the fact that the Tax Authorities in Mauritius have issued Tax Residency certificate in favour of the assessee. Decided against revenue. Issues Involved:1. Maintainability of Revenue’s appeal based on the monetary limit as per CBDT Circular no.17 of 2019.2. Determination of Permanent Establishment (PE) under Article-5 of the India-Mauritius Tax Treaty for the assessment year 1998-99.Issue-wise Detailed Analysis:1. Maintainability of Revenue’s Appeal for A.Y. 2001-02 (ITA no.7128/Mum./2004):The Revenue challenged the order dated 15th July 2004 by the first appellate authority. The learned Counsel for the assessee argued that the tax effect of the disputed amount is below the Rs. 50 lakh threshold as per CBDT Circular no.17 of 2019. This circular, dated 8th August 2019, sets the monetary limit for appeals before the Tribunal and applies to all pending appeals. The tax effect in this case was Rs. 3,93,116, which is below the threshold. The Departmental Representative agreed with this submission. Consequently, the Tribunal dismissed the Revenue’s appeal as it did not meet the monetary limit criteria.2. Cross Objection by Assessee for A.Y. 2001-02 (C.O. no.163/Mum./2005):Given the dismissal of the Revenue’s appeal, the cross objection filed by the assessee became infructuous and was dismissed.3. Determination of Permanent Establishment (PE) for A.Y. 1998-99 (ITA no.3129/Mum./2002):The Revenue's appeal questioned whether the assessee had a PE in India under Article-5 of the India-Mauritius Tax Treaty, thereby subjecting the income to tax in India. The assessee, a tax resident of Mauritius, engaged in shipping business, filed a return of income claiming the benefit of Article-8 of the Tax Treaty. The Assessing Officer (AO) contended that the assessee's place of effective management was in India, and it had dependent agents in India, constituting a PE under Article-5(1) and 5(5) of the Tax Treaty.The Commissioner (Appeals) concluded that the agents, Parekh Marine Agency Pvt. Ltd. and Samsara Shipping Pvt. Ltd., were independent entities with their own business activities and were not exclusively working for the assessee. Therefore, they could not be considered dependent agents under Article-5(5). The Tribunal upheld this view, noting that the assessee did not have a fixed place of business in India and the agents operated independently, thus not constituting a PE under Article-5(1) or 5(5).4. Cross Objection by Assessee for A.Y. 1998-99 (C.O. no.107/Mum./2003):With the Revenue’s appeal dismissed, the cross objection filed by the assessee was rendered infructuous and dismissed.Conclusion:The Tribunal dismissed both the Revenue’s appeals and the assessee’s cross objections for the assessment years 1998-99 and 2001-02. The order was pronounced through notice board under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, on 27.07.2020.