TaxTMI 
TaxTMI 
2011 (11) TMI 300
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....siness of Cargo Consolidation commonly known in the business as Non Vessel Owners Cargo Carriers (NVOCC). WSA Shipping (Bombay) Pvt.Ltd. is registered as a Multimodal Transport Operator (MTO) with the Ministry of Shipping; Directorate General of Shipping, Govt. of India. WSA Shipping (Bombay) Pvt.Ltd., receives cargo from various shippers/consignors at Mumbai Port/Container Freight Station Mumbai/JNPT for shipments to various destinations worldwide. Once the cargo is received a document called Bill of Lading (B/L) is issued by WSA Shipping (Bombay) Pvt.Ltd., to the shipper. The B/L specifies the consignor, the consignee, cargo description, Destination of the cargo where the delivery has to be made to the consignee. Based on the volumes of the cargo and business experience WSA Shipping (Bombay) Pvt.Ltd. obtains containers from Agents of Shipping Lines or Shipping Lines. In the process of Cargo Consolidation, the containers obtained from the agents of Shipping Lines or Shipping Lines cannot be stuffed fully for a particular destination. As the delivery schedule of the cargo has to be strictly adhered to, WSA Shipping (Bombay) Pvt.Ltd., stuffs the cargo of various destinations on a pa....
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....business associates for these charges in respect of services rendered outside Indian territorial waters. It was also claimed that WSA Shipping (Bombay) Pvt.Ltd. was not bound to send the Cargo only to the listed business associates and it was free to send the Cargo for onward movement to anyone who offer better quotation for onward movement. WSA Shipping (Bombay) Pvt.Ltd. submitted that the business associate, viz., the Assessee did not having Permanent Establishment (PE) in India. WSA Shipping (Bombay) Pvt.Ltd. submitted that the recipients of payment from it viz., the Assessee was a non-resident, and income had not accrued or arisen or deemed to have accrued or arisen to them in India. WSA Shipping (Bombay) Pvt.Ltd. thus submitted that the receipts from it by the Assessee were not chargeable to tax under the Act in the hands of the non-residents. Therefore it was not required to deduct tax at source in respect of remittances made to them. 6. The AO did not accept the explanation of WSA Shipping (Bombay) Pvt.Ltd. and he held that to treat a person as an agent u/s. 163, what is required is to prove that the representative assessee has business connection with the non-resident an....
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.... transshipment and the appellant utilizing the services of non-resident for onward movement of the cargo to the ultimate destination. In the absence of the terms of the agreement between the appellant and the non-resident it cannot be said that the non-resident had no control over the freight charges collected by the appellants or the terms of contract as between the appellant and the exporter from India. As per the conditions of transshipment as given by M/S. WNS 1994 PTE Ltd., Singapore, one of the non-resident, it is seen that the non-resident charges are ex-Singapore. Another condition is that because of regulations imposed at different ports, the clients are requested to check with the transshipper for acceptance of any hazardous cargo before accepting any shipment. Similarly the non-resident has imposed a condition that only certain categories of goods are allowed for transshipment and therefore one has to check with them as to whether the goods proposed to be sent for transshipment are acceptable for transshipment. These terms have been relied upon by the CIT(A) to give a finding that the non-resident's consent is required for accepting cargo by the appellant. It is also a f....
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....nection in India. The transaction as between the person in India and the customer in India, would not be complete unless the cargo reaches the final port of destination. All these facts in our opinion are sufficient to justify the conclusion that there was a business connection within the meaning of sec. 163(1)(b) as well as Sec.9(1)(i) of the Act. We uphold the conclusion of the income-tax authorities to this effect. 29. We are also of the view that the parameters laid down in Sec.163(1)(c) of the Act are satisfied. Under the above provisions agent includes a person from or through whom the non-resident is in receipt of any income, whether directly or indirectly. The appellants based on the debit notes raised by the non-resident make payment for transhipment of cargo. Thus the non-resident is in receipt of income from the appellant. It is not a case where the non-resident is in receipt of income "through" the appellant but "from" the appellant. We also do not find any qualification that income so received from the non-resident from the resident in India should be found to be chargeable to tax at the time when the person in India is treated as agent of the non-resident. We see n....
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....dia, the same has to be construed as Business Income. Business income that arises in India cannot be brought to tax since as per the DTAA between India and Singapore (the Assessee is a tax resident of Singapore) income from business is chargeable to tax only if the Assessee has a Permanent Establishment (PE) in India. Since the Assessee did not have a PE in India income that accrues or arises to it in India cannot be brought to tax. Alternatively it was submitted that even if it is held that the Assessee had a PE in India, only income attributable to the PE in India can be brought to Tax. Since none of the activities were carried on by the Assessee in India, no income can be attributed to the PE in India and therefore the receipts in question cannot be brought to tax in India. 10. The AO however rejected the contention on behalf of the Assessee and relying on the findings in the proceedings u/s.163 of the Act, he held that the Assessee had business connection in India and therefore income accrued and arose to the Assessee in India. The AO further held that the Assessee viz., WSA 1994 Pte. - Singapore was in the business of shipping, however, it is NVOCC. It does not own any ship....
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.... of the non-resident and the activity in the taxable territory. A mere relation between the business of the nonresident and the activity in India which facilitates or assists the carrying on of the business of the non-resident would result in a business connection. We are of the view that applying these tests to the present case, it must be held that there was a business connection. The business of the non-resident was transhipment of cargo and the appellant engaged their services for shipment of cargo from India to a destination which the appellant could not reach without the assistance of the transhipment through the non-resident. The appellant cannot segregate the business activity of shipment of cargo as one upto the port of transhipment and the other from the port of transhipment to the port of final destination. Both these activities are integrated activities. The absence of privity of contract between the customer in India and the non-resident will not be a ground to hold that the non-resident did not have business connection in India. The transaction as between the person in India and the customer in India, would not be complete unless the cargo reaches the final port of de....
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....iness in that other State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly for the enterprise or for the enterprise and other enterprises controlling and controlled by or subject to same common control, as that enterprise, he will not be considered to be an agent of an independent status within the meaning of this paragraph. (10) The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other." 13. It was the submission of the ld. counsel for the assessee that as far as the AO is concerned despite a plea taken by the assessee that there was no PE of the assessee in India, the AO without giving any finding about the existence of the PE of the assessee in India, proceeded to hold that the assessee ac....
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....e revised commentary on the OECD model and has relied on the same in support of his argument that the agents in the present case are not independent agents within the meaning of article 5.5 of the DTAA. The commentary discusses what in general are the tests to be applied to ascertain whether the agent is an independent agent or not. The extent of legal dependence or control, the undertaking of risks, the fact whether the agent is subject to the control of the principal for the manner in which the work is to be carried out etc. have been discussed. Much of the discussion loses relevance to the controversy before us where we have to apply article 5.5 which requires that the activities of the agent must be wholly or almost wholly devoted to the foreign enterprise. This is the test laid down in the article. Even on this aspect, paragraph 38.6 of the revised commentary has this to say : 'Another factor to be considered in determining independent status is the number of principals represented by the agent. Independent status is less likely if the activities of the agent are performed wholly or almost wholly on behalf of only one enterprise over the lifetime of the business or a long p....
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....g that the appellant charges its customers freight payable inclusive of the freight from the port of transshipment to the ultimate destination and this is done with the tacit understanding with the non-resident who does transshipment outside India. According to the CIT(A), the affairs of the appellant and the non-resident appear to be in a way that the tariff charged by the nonresident business associate for transshipment does not include the tariff from the Indian Port to the transshipment port. It has been the stand of the appellant that the non-resident is not a party to the terms of contract between the Appellant and the exporter. Similarly the exporter is not a party to the terms of the contract between the Appellant and non-resident for transshipment of the cargo. From these facts it cannot be said that there was only a principal to principal relationship as between the appellant and the non-resident. This is because the terms of the agreement between the appellant and the non-resident have not been brought on record. Further we also do not know the shareholding pattern of the appellant. This could be material for ascertaining the control that the non-residents might exercise....
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.... placed strong reliance on the fact that the assessee did not file the agreement with WSA Shipping (Bombay) Pvt. Ltd. 18. The ld. Counsel for the assessee in his rejoinder submitted that the assessee had categorically taken a stand before the revenue authorities in the present assessment proceedings that there was no written agreement between the assessee and WSA Shipping (Bombay) Pvt. Ltd. In this regard our attention was drawn to the submission made before the CIT(A), wherein specific stand was taken by the assessee that there was no formal written agreement between the assessee and the non-resident. The arrangement between WSA Shipping (Bombay) Pvt. Ltd. and the assessee was explained before the AO and that arrangement has not been found to be false. It was, therefore, submitted by him that the observation of the Tribunal in the proceedings under section 163 of the Act would not be relevant for a decision in the present appeal. 19. We have considered the rival submissions. At the outset we make it clear that the accrual of income to the assessee in India will give a right to the tax authorities in India to tax the income of the non-resident based on Source Rule. The assess....