TaxTMI 
TaxTMI 
2016 (7) TMI 744
X X X X Extracts X X X X
X X X X Extracts X X X X
....") read as under:- "The appellant objects to the order dated 14 November 2014 passed by the Commissioner of Income-tax (Appeals) - 10, Mumbai, [CIT(A)] on the following among other grounds: Chargeability of income under section 44B of the Act 1. The learned CIT(A) erred in confirming the action of the DDIT (Int. tax. ) in holding that the income of the appellant from operation of ships in international traffic ought to be taxed as per domestic tax law under section 44B read with section 5(2) and section 9 of the Act. 2. The learned CIT(A) ought to have appreciated the fact that the appellant was not engaged in the operation of ships during the relevant year under review and therefore, the provisions of section 44B are not applicable to the appellant's case. Business Connection 3. The learned CIT(A) erred in confirming the action of the DDIT (Int. tax. ) in holding that the appellant had business connection in India under the provisions of section 9(l)(i) of the Act. Fixed Place PE 4. The learned CIT(A) erred in confirming the action of the DDIT (Int. tax. ) in holding that the appellant is established to ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....demerged its shipping agency division into its holding company F&CL with effect from 1st April, 2008. The assessee company submitted that in terms of the approved scheme during the financial year under consideration VFSSL had carried on business activities in relation to its demerged division for the account of resulting company viz. F&CL. In short, the assessee company is the principal as well as subsidiary company of F&CL and appointed its holding/parent company i. e. F&CL as its agent in India. The assessee company is a Non Vessel Operating Common Carrier incorporated in Singapore. The AO observed that as per Article 8 of DTAA between India and Singapore, income from shipping business could be taxed only in contracting states with certain conditions. The exemption benefit only can be claimed by the resident of that contracting state who had ownership or lessee right or charter right of vessel, ships or aircraft was the observation of the AO. The AO observed that the assessee company being a NVOCC is not eligible to claim exemption under Article 8 of DTAA. The A. O. observed that the assessee company has NOVCC status which is incorporated in Singapore. The assessee company does n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and other important matter for the assessee company as well agent a parent company. Although, both company has separate legal entities in the eyes of laws but their control mechanism is common that is in the India only. " The A. O. further held that vide Article 7 of the DTAA between India and Singapore, the assessee company is established to have carried on part of its business through a fixed place of business in India, the assessee company falls within the definition of Permanent Establishment under paragraph 1 of Article 5 and in this case assessee company has fixed and permanent place in India from where it secured the business from India. It was further held that the effective management of the assessee company is in India and not in Singapore. The assessee company is incorporated in Singapore and is 100% subsidiary of Indian company F&CL. The assessee company has entered into an agency agreement in India with VFSSL w. e. f. 1st January, 2007 whereby VFSSL was appointed as its agent in India . VFSSL is also 100% subsidiary of Forbes & Company Ltd. which is an Indian company. VFSSL has demerged its shipping agency division into its holding company Forbes & Company with effe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and to avoid an impression that the real control of the company lies in Singapore. iv) The facade of one and two board meetings in a year in Singapore do not support the assessee's case in any way. In the case of Unit Construction company V Bullock [1961] 42 ITR 340 (HL)" IA Kenyan subsidiary was held to be resident in England because, though its Board meetings were always held in Kenya, it was managed, in branch of its articles, but its UK parent company. " v) The OECD commentaries clarify that place of management does not necessarily mean office and can be said to be the control and co-ordination centre where all significant decision relating to the Management of an enterprise as a whole are taken. vi) The mind and brain of the organization of the assessee company are situated in India. It is a normal business practice that the Governing law in any agreement would be with relation to the place of control and management of the principle. vii) In this instant case, there is no material evidence filed by assessee which shows that key and commercial decision that for the business were taken in India nor in Singapore . There is no good reason f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orders passed by the learned CIT(A) in assessee company's own case for the assessment year 2009-10 as the facts in the instant assessment year 2011-12 were found to be identical by the learned CIT(A) as were prevailing in the assessment year 2009-10, vide appellate orders dated 14. 11. 2014. 5. Aggrieved by the appellate orders dated 14-11-2014 passed by the ld. CIT(A), the assessee company filed second appeal with the Tribunal. 6. The ld. Counsel for the assessee company, at the outset, submitted that the instant appeal is squarely covered in favour of the assessee company in assessee company's own case by the decision of the Tribunal for the assessment year 2009-10 in ITA No. 1607/Mum/2014 vide orders dated 11th March, 2016 whereby the Tribunal has adjudicated the appeal in favour of the assessee company whereby it was held that the income of the assessee company was liable to be taxed as business income and in the absence of Permanent Establishment no income was taxable in India and that the provisions of section 44B of the Act were wrongly invoked by the A. O. The learned counsel stated before us that facts in the instant assessment year are identical to the facts prevail....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t eligible for claiming exemption under Article 8 of DTAA. He further held that income of the assessee was arising out of operation of ships in International traffic, that income arising /accruing to it was taxable in India as per the provisions of section 5(2) of the Act, that the provisions of Section 44B of the Act were applicable for the income earned by the assessee during the year under consideration. He referred to various case laws and held that the assessee had entered into agency agreement with associated concerns regarding business from India, that there remained an element of continuity, that it had real and intimate connection, that the holding company secured the business from India for the assessee, that the principal and agent had common control mechanism, that the promoters of holding company created the assessee as a 100% subsidiary in Singapore, that one of the directors of the company was also director of the India parent company, that he was permanently residing in India and was looking after the policy matters of the assessee, that the control mechanism of both the entities was in India , that the assessee had business connection in India. The AO referred to A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e management was with parent company located in India. He further held that AO had correctly applied the provisions of section 44B of the Act, that it did not qualify for the exemption of Article 8 of the DTAA. Finally, he upheld the order of the AO. 4. Before us, the Authorised Representative(AR)argued that the assessee was not holding any bank account in India, that it had no fixed place of business in India, that the assessee was a subsidiary of the Indian company, that as per the provisions of DTAA there was no PE in India. He referred to paragraph 10 of the Article 5 of the DTAA. With regard to Agency-PE, he referred to page No. 63 and 65 of the PB and stated that only 2. 29 % of the revenue was received from Indian company, that the substantial portion of income for the year under consideration was not from parent company. He further contended that the assessee was an independent entity, that it would take its own decision at Singapore that HO had no role in deciding the policies of the assessee, . He referred to case of Radha Rani Investment (16SOT 495). With regard to chargeability of income, he stated that he had not claimed exemption under Article 8, that AO hims....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y was in India. We have gone through the e-mails placed by the assessee at pg No. 96 to 127 of the paper book which clearly prove that business activities were carried out by the Singapore office. In our opinion, factors like staying of one of the directors in India or holding of only one meeting during the year under consideration or the location of parent company in India in themselves would not decide the residential status of the assessee. The assessee had received substantial portion of its income from the operation carried out in Middle East and other countries. It was handling its business from Singapore. We have gone through pg-65 of the paper book which gives details of income of parent company. A perusal of the said page makes it clear that the claim, made by the assessee about earning substantial income from the entities other than the holding company, was factually correct. We find that assessee had not claimed exemption of Article 8 of the DTAA as it was not in the shipping business. Therefore, the income of the assessee had to assessed as per the provisions of tax treaty which deals with business income. Here, we would like to mention that FAA was not justifi....