TaxTMI 
TaxTMI 
2008 (11) TMI 421
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.... Rs. 89,10,680 was declared applying profit rate at the rate of 7.5 per cent. The tax on the above income was computed at Rs. 42,77,126 applying tax rate of 48 per cent against which relief of Rs. 32,07,845 was claimed being 75 per cent of the tax in view of Article 9(2) of the DTAA between India and France. In the course of assessment proceedings, the Assessing Officer asked the assessee to file copies of the ship registration certificates and the charter party agreements of all the ships operated by it from India. Despite various opportunities given, the assessee could not file the same. However, the assessee vide letter dated 17-2-2004 stated - (1) that none of the ships owned/chartered by it called at Indian ports and (2) that all the vessels shown in the freight statement were feeder vessels which were owned by other shipping lines with whom the assessee had slot arrangements. In view of the above reply, the Assessing Officer asked the assessee to link the feeder vessels with the mother vessels in respect of all the voyages to establish that the particular feeder vessel was linked with particular mother vessel. The assessee was also asked to file copies of the ship registratio....
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....t was unjustified and (iii) that it is not necessary to establish that the cargo collected by feeder vessels from India was transshipped to mother vessels of the assessee for further transportation in international traffic. However, on sample basis the assessee had produced two examples of such transshipment to prove the linkage between the feeder vessel and mother vessel. 5. After considering the additional evidence and the material produced before the Assessing Officer, the CIT(A) noted that the assessee had been able to file the ship registration certificate in respect of four ships, namely, Caroline Delmas, Blandine Delmas, Adeline Delmas and Therese Delmas to establish that the assessee is the owner of the ships. Further, it was noted that the assessee had filed ship registration certificates before the Assessing Officer in respect of three vessels, namely, Roland Delmas, Veronique Delmas and Saint Roch. Accordingly, it was held by him that the Assessing Officer was not justified in observing that the assessee had not been able to produce the ship registration certificates. Thereafter, the CIT(A) examined the provisions of Article 9 of the said DTAA in the light of the OECD C....
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.... in ascertaining the scope of the expression 'operation of ships' appearing in Article 9 of the DTAA since Article 9 of DTAA and Article 8 of OECD Model Convention are not similarly worded. She has pointed out that article 9 of the DTAA refers to the profits derived from the operation of ships while in the OECD Model Convention the word 'derived' is not there. Secondly the provisions contained in Article 9(2) of the DTAA are missing from Article 8 of the OECD Model Convention. Similarly, the provisions contained in Article 9(3) of the DTAA are missing from Article 8 of the OECD Model Convention. We are unable to accept the above contention of the learned Departmental Representative for the reasons given hereafter. It would be appropriate to reproduce Article 9 of the DTAA which reads as under: ARTICLE 9: SHIPPING: "1. Profits derived by an enterprise of a Contracting State from the operation of ships in international traffic shall be taxable only in that Contracting State. 2. Notwithstanding the provisions of paragraph 1, such profits may be taxed in the other Contracting State from which they are derived, provided the tax so charged shall not exceed: (a )During the subsequent ....
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.... case of Balaji Shipping (UK) Ltd. (supra) it is held that the CIT(A) was justified in ascertaining the scope of expression "operation of ships" by looking into the OECD Commentary by Klaus Vogel. 9. On merits, the contention of the learned Departmental Representative is that the CIT(A) was not justified in holding - (i) that benefit of Article 9 would be available if it is shown that the assessee is engaged in the business of transportation in the international traffic; (ii) that benefit would be available with reference to the entire voyage if use of the feeder vessel is incidental to the main business; (iii) that each and every activity of the business need not be directly linked with the main business of the assessee and (iv) that it was not necessary to link the transportation of cargo by the feeder vessel with the transportation of the same by mother vessel. It has been strongly contended by her that if the claim of the assessee is to be allowed without establishing such nexus then it would amount to allowing the claim of the assessee even in a case where the entire transportation from Indian Port to the ultimate destination in the world is by a ship which is neither owned o....
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....roposition laid down by the CIT(A) that benefit would be available under Article 8, even if it is established that the assessee is engaged in business of shipping. Klaus Vogel in his commentary nowhere says that entire voyage through ships belonging to other enterprise would be considered by such expression. The relevant portion of the commentary by Klaus Vogel has been reproduced by us in the case of Balaji Shipping (UK) Ltd. (supra) in para 22 of the order. It provides that in the first place, it would cover profits directly obtained by the enterprise from the transportation of passengers or cargo by ships or aircraft (whether owned, leased or otherwise at the disposal of the enterprise). Thereafter, it says that this would also cover profits from activities not directly connected with such operation as long as they are ancillary to such operation. Therefore, CIT(A) is not justified in holding that there is no need to link the transportation of cargo by feeder vessel with transportation by the mother vessel owned/leased/chartered by the assessee. Transportation of cargo by feeder vessel can be said to be ancillary activity only if it can be linked with the main voyage by mother s....
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....tantiated by any material on record. Further, no arguments were advanced regarding linkage of feeder vessels with mother vessels. Therefore, the said decision would not cover the present case. 13. In the present case, the assessee could not furnish the relevant details before the Assessing Officer. However, it filed additional evidences before the CIT(A) to establish the linkage between the feeder vessel and the mother vessel on sample basis. That shows that the entire evidence was not furnished before the CIT(A) in this regard. In our opinion, the relief cannot be allowed on the basis of sample evidence. If relief is allowed on sample basis then it would give the absurd results as benefit could be obtained even when the cargo is transported by mother vessels belonging to other enterprises. Hence, the approach of the CIT(A) for granting relief on the basis of sample evidence has to be rejected. The interest of justice would be met if one more opportunity is provided to the assessee to establish such linkage. 14. It may also be mentioned that the CIT(A) has referred to certain ships namely, Caroline Delmas, Blandine Delmas, Adeline Delmas and Therese Delmas which are stated to be ....