TaxTMI 
TaxTMI 
2011 (6) TMI 145
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....al experience in dealing with them. ACM UK is a tax resident of the United Kingdom. A copy of the Tax Residency Certificate was also filed before the Assessing Officer. 3. According to the appellant, it needs contact information/details of international ship owners for arranging international shipments. The appellant therefore entered into a service agreement dated 1-4-2008 with ACM UK. As per the agreement, ACM UK was required to provide the following services to ACM India outside India. - Identifying potential international ship owners outside India and referring them to ACM India. - Facilitate interaction of ACM India with the international ship owners. - Extend help by way of assistance with establishing contact with ship owners regarding availability of ships on requisite dates and freight charges. 4. The appellant approached the Assessing Officer for issue of a Nil deduction of tax at source certificate under section 195(2) of the Income-tax Act, 1961 for remitting payments to ACM, UK for the financial year 1-4-2008 to 31-3-2009. It was submitted that the aforesaid comm....
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....e commission is paid to the appellant which in turn is shared between the appellant and the foreign company. The CIT(A) relied on Circular No. 23, dated 23-7-1969 wherein it has been clarified that where there are transactions with the non-resident on a principal to principal basis there will be no liability on accrual basis to the non-resident on the profits made by him. It has further been clarified that the real relationship between the parties has to be looked into on the basis of the agreement existing between the resident and the non-resident. Thus the CIT(A) held that there is no accrual of income to the non-resident in India. (b) ACM Shipping Ltd., UK does not carry on any business in India. They do not have any place of business in India. Further, the appellant company, though it is a wholly owned subsidiary of ACM Shipping Ltd., UK but is independently and completely managed by different set of employees. All the decisions of the appellant company are independently taken by its employees. Also, the Board of Directors are common, other than one director who is appointed by the U.K. Company and the other two directors are not related to ACM Shipping Ltd., UK....
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....e provisions of Article 5(4)(c) and Article 5(5) of the DTAA will be applicable. In this regard it was pointed out by the ld. D.R. that the appellant habitually secures orders for ACM UK. It was further submitted that the appellant is a subsidiary of ACM UK. In this regard ld. D.R. also pointed out that the appellant cannot be considered as a person acting independently. It was further submitted that since CIT(A) has not examined the issue from this perspective, the CIT(A) should be directed to examine the same. 9. The ld. counsel for the appellant reiterated the stand of the appellant as put forth before the CIT(A). 10. We have considered the rival submissions. The agreement between appellant and ACM UK is at pages 10 to 13 of the appellant's paper book. The other terms of the agreement have already been narrated in the earlier part of this order and they are not repeated. It will be worthwhile to refer to the clause of the agreement regarding remuneration. The same reads as follows : "Commission and Mode of Payment : It is agreed that on occasions where the first party utilizes the second party's services in establishing contact with international ship owners and bene....
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....Circular No. 23 which has already been withdrawn by the CBDT. 11. As far as the existence of PE in India is concerned, the CIT(A) has not examined the applicability of Article 5(4)(c) and 5 of the DTAA between India and UK in proper perspective. The same is as follows : "5. Permanent establishment.-(1) For the purposes of this Convention, the term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on, ** ** ** 4. A person acting in a Contracting State for or on behalf, of an enterprise of the other Contracting State other than an agent of an independent status to whom paragraph 5 of this article applies shall be deemed to be a permanent establishment of that enterprise in the first mentioned State if : (a) he has, and habitually exercises in that State, an authority to negotiate and enter into contracts for or on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or (b) he habitually maintains in the first mentioned Contracting State a stock of goods or merchandise from which he regularl....