TaxTMI 
TaxTMI 
2017 (11) TMI 452
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....umstances of the case and in law, the AO, based on directions of DRP has; GENERAL 1. erred in assessing total income of the Assessee at Rs. 3,41,36,600/- as against returned income of Rs Nil; Taxability of freight charges of Rs. 43,94,25,340/- from transportation of cargo through feeder vessels 2. erred in holding that freight income from transportation of cargo through feeder vessels is not eligible for benefit under Article 8 of India- Germany DTAA; 3. erred in holding that while income from feeder vessels would fall within the ambit of section 44B of the Act whereas the same shall not eligible for benefit under Article 8 of India-Germany DTAA; 4. erred in not taking cognizance of the decision of jurisdictional Bombay HC/ ITAT the assessees own case for AY 2005-06 to AY 2011-12, wherein the Hon'ble HC/Hon'bIe ITAT has held that freight income from transportation of cargo through feeder Vessels is eligible for benefit under Article 8 of the India-Germany DTAA; Taxability of service tax of Rs. 1,57,29,380/- collected on freight income 5. erred in including service tax, amounting to Rs. 1,57,29,380/- on frei....
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....assessee would transport cargo on vessels owned/chartered/pooled by it as well as on slot arrangement. That in the normal course of the business the vessels of the assessee or its consortium partners would on certain occasions not call at the Indian ports on account of various reasons, viz. the size of the vessels is too large to enter the Indian ports which have shallow draft, or the depth of the Indian ports would not be enough for the vessels to be anchored. The assessee under the aforesaid circumstances would transport the cargo on feeder vessels from the origin port to the hub port (i.e the intermediary port where vessels owned/chartered/pooled by the assessee could be anchored), and then the cargo would be transported from the hub port to the destination port on the vessels owned/chartered or pooled by the assessee. The assessee persuaded by commercial requirements would at times transport cargo on slot arrangement from origin port to destination port. The assessee would issue bill of lading to the exporters for transportation of cargo for the entire journey (i.e from the origin port to the destination port). 4. That during the course of the assessment proceedings the A.O ....
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.... consideration had restored the matter back to the file of the Tribunal to decide the same in view of the decision of the High Court in the case of DIT(IT) vs. Balaji Shipping U.K Ltd. (supra) [77DTR 361](Bom). It was further submitted by the assessee that pursuant to the aforesaid directions of the Hon'ble High Court, the Tribunal had vide its order dated. 14.08.2013 disposed of the appeal of the assessee for A.Y. 2007-08 and had concluded that the freight earned by the assessee from transportation of cargo through use of feeder vessels was entitled to relief provided in Article 8 of Indo- Germany tax treaty, and hence, would not be taxable in India. 5. However, the A.O being of the view that as the case of Balaji Shipping U.K. Ltd. (supra) pertained to India-UK treaty, which specifically provided that income from the operation of the ships included income derived from the rental on a bareboat basis of ships, if such rental income is incidental to the income described in paragraph 1 of the Article 9, therefore, reliance placed by the assessee on the same was misconceived. The A.O observed that as there were no such alike provisions in Article 8 of India-Germany tax treaty, ther....
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....). the freight earned from the entire journey on feeder vessel of Rs. 25,52,37,990/-, therein aggregating to Rs. 43,94,25,340/- [i.e Rs. 18,41,87,350/- (+) Rs. 25,52,37,990/-] were not eligible for relief under Article 8 of the India-Germany treaty. The A.O further on the basis of his aforesaid observations raised the amount by the Service tax of Rs. 1,57,29,380/- and added back the same to the taxable receipts of the assessee. Thus, on the basis of his aforesaid deliberations the A.O held that the amount of Rs. 45,51,54,720/- [i.e Rs. 43,94,25,340/- (+) Rs. 1,57,29,380/-] would not be eligible for relief under Article 8 of the India-Germany DTAA. 10. The assessee assailed the draft assessment order passed by the A.O under Sec. 143(3) r.w.s 144C(13) of the 'Act' before the DRP. The DRP dealt with the contentions of the assessee, as under: (A). The DRP at the very outset observed that the issue as to whether the freight earned by the assessee from feeder vessels would be covered by Article 8 of the India-Germany DTAA was decided in favour of the assesses in A.Y. 2011-12 by following the order passed by the Tribunal in the assessees own appeal for A.Y. 2007-08 (after the ....
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....a conviction that as the provisions of Sec. 44B and Sec. 44BB were similar and the position of law on the issue had not attained finality, therefore, to keep the issue alive observed that as the Hon'ble High Court of Uttarakhand in the case of Halliburton Offshore Services Inc. Vs. ACIT, had referred the issue under consideration to a larger bench, therefore, the service tax on the freight income was liable to be considered as part of the amounts specified in Sec. 44B(2). (C). The DRP further upheld the observations of the A.O that Hapag Llyod India Ltd. was not an independent agent under Article 5 of India-Germany DTAA. The DRP observed that the aforesaid agent was working solely for the assessee. Thus, on the basis of his aforesaid observations the DRP held that Hapag Llyod India Ltd. constituted an agency PE of the assessee. The DRP was also not persuaded to accept the contention of the assessee that as the remuneration paid by assessee to Hapag Llyod India Ltd. was at arm's length, therefore, no further income could be subjected to tax in India. The DRP observed that what were being taxed in the case were the receipts of the assessee from the activities carried out in ....
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....ngement basis. It was thus submitted by the ld. A.R that the issue involved in the present appeal was squarely covered by the aforesaid order of the Tribunal in the assesses own case for A.Y. 2007-08. Per Contra, the ld. D.R relied on the order of the A.O/DRP. 14. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that the core issue involved in the case of the present assessee which is a Foreign company engaged in the business of operation of ships internationally, is as to whether the portion of freight income earned by the assessee in the course of its business of transportation of cargo to ports outside India and vice versa, to the extent the same is attributable to feeder vessels which were neither owned, chartered or leased by the assessee, would also fall within the sweep of Article 8 of the 'Double Taxation Avoidance Agreement' (for short 'DTAA') between India and Germany, or not. We find that the Hon'ble High Court while disposing of the assesses own appeal for A.Y. 2007-08 in Hapag-Llyod AG vs. Additional Director of Income-tax (International Taxation) (2013) 84 CC....
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....ned from the feeder vessels obtained by the assessee by slot hire arrangements. We further find that again the Tribunal in the revenues appeal in the assesses own case for A.Y. 2005-06, had vide its order passed in ITA No. 1776/Mum/2014, dated. 21.09.2016, by referring to the earlier orders of the Tribunal in the case of the assessee for A.Y. 2007-08, dated. 14.08.2013 in ITA No. 8854/Mum/2010, as well as the consolidate order for A.Y. 2006-07 and 2008-09 to 2011-12, in ITA No. 1624-1628/Mum/2015; dated. 22.07.2016, had taken the same view. We have perused the aforesaid orders and find ourselves to be in agreement with the view taken by the Tribunal in the aforesaid preceding years in the case of the assessee. We thus, finding no reason to take a different view, thus, are of the considered view that the benefits of Article 8 of the DTAA between India and Germany would also be available to the assessee in respect of the revenue earned from the feeder vessels obtained by the assessee by slot hire arrangements. The Grounds of appeal No. 2 to 4 raised by the assessee before us are allowed. 16. We are of the considered view that as we have concluded that the benefit of Article 8 of t....