TaxTMI 
TaxTMI 
2018 (2) TMI 1524
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....consolidated order is being passed for the sake of convenience and brevity. 3. First of all we have decided to take up appeals filed by the revenue as well as cross objection filed by assessee for AY 1998-99 bearing ITA No. 1181/Mum/2002 and CO No. 52/2003. 4. At the very outset, the Ld. AR appearing on behalf of the assessee filed an application for raising additional ground of cross objection in CO No. 52/Mum/2003 vide letter dated 14th June 2007 and the same is reproduced below: - " Without prejudice to Ground no. 1 of cross objection and in the alternative, the Ld. CIT(A) having held the place of effective management to be in Dubai (UAE) and neither in India nor in Mauritius, has erred in law in not carrying his finding to its logical conclusion by applying the Double Taxation Avoidance Agreement (DTAA) between India and UAE and holding the shipping profits to be not taxable in India by virtue of Article 8 of DTAA between India and UAE. Vide above application, assessee seeks admission of additional ground/cross objection on the basis of reasons mentioned in the application. 5. On the other hand, the Ld. DR refuted the claim of the assessee and submitted tha....
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....ly the case was selected for scrutiny and after serving statutory notices and providing opportunity of hearing, assessment order u/s 143(3) of the I.T. Act was passed by AO thereby holding that the effective management of the assessee is situated at a place which is other than India and Mauritius and thus denied the benefit of Article 8 of the DTAA and further hold that the assessee's income is chargeable to tax in India. Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties partly allowed the appeal of the assessee. Now before us, the revenue has preferred the present appeal by raising the above grounds. 10. The sole ground raised by the revenue relates to challenging the order of Ld. CIT(A) in holding that assessee is not having any PE in India and therefore it is not taxable as per Article 7 of the DTAA between India and Mauritius. 11. Ld. DR appearing on behalf of the revenue relied upon the orders passed by AO and submitted that the assessee has an exclusive agent in the form of M/s Freight Connection India Pvt. Ltd. (FCIPL) and the agreement for same was entered into by the assessee ....
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....ven if, the agent has transacted business with other entities, the assessee was required to terminate the appointment as agent which the assessee has not done. In this respect, Ld. DR also relied upon the decision of the Hon'ble Tribunal in the case of M/s DHL Operations B.V. Netherlands (in ITA No. 7987 and 7988/Bom/92) wherein the concept of Agency PE has been discussed at threadbare. 14. We have heard counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A) which is contained in para no. 4 & 5 in its order. The operative portion of the order of Ld. CIT(A) contained in para no. 5 of its order and the same is reproduced below:- I have considered the submission of the appellant counsel based on the commentaries by different writers and the fact that the agent having income from other four principles indicate that the agent is independent. The AO has only seen the agreement with the appellant and he has not tried to examined whether FCIPL is having income only from the appellant or ....
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....f the following: a. Oxford Dictionary defines exclusively to mean 'so as to exclude all except some particular object, subject, etc.; solely.' b. Oxford Dictionary defines solely to mean (i) 'as a single person (or thing); without any other as an associate, partner, sharer, etc.; alone; occas. without aid or assistance' (ii) 'apart from or unaccompanied by others; solitarily (iii) only, merely, exclusively; also (contextually), entirely, altogether. The dictionary meanings were handed over separately in the course of the hearing. c. The dictionary meanings of the term 'exclusively' clearly suggest that the agent should earn 100% or something near to 100% from this principal so as to be dubbed as a dependant agent which is not the fact in the present case. d. Mumbai ITAT in the case of Shardul Securities Ltd. v. JCIT (115 lTD 345) at Pg 15 has extracted the definition of 'exclusively' and has held that the term 'exclusively or almost exclusively' means 100% or something nearer to 100%. e. In the present case, it is clear that the activities of Freight Connection are not devoted exclusiv....
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....ai ITAT in B4U also relied on the decisions of the AAR in Morgan Stanley & Co. (272 ITR 416) (Pg 10 of 134U decision), Fidelity Advisor Series VIII (271 ITR 1) (Pg 11 of B4U decision). Reliance was also placed on the decision of the Delhi HC in Rolls Royce Singapore (P) Ltd. v. ADIT (347 ITR 192) (Pg 12 of B4U decision) where the HC held that an agency PE would not exist if the assessee principal could show that it was not the sole client of the agent and that the activities of the agent were not devoted wholly or almost wholly on behalf of the asses see. b) The Hon'ble Bombay HC in DIT(IT) v. B4U International Holdings Ltd. (374 ITR 453) while dealing with the Revenue's appeal from the aforesaid order of the ITAT on the aspect as to whether the ITAT was correct in holding that B4U cannot be treated as a dependant agent of the assessee, in view of Art. 5(5) of the India Mauritius Treaty, dismissed the revenue's appeal holding that ITAT's order did not give rise to any substantial question of law. c) The Hon'ble Mumbai ITAT in the case of International Global Networks BV v. ADIT (84 taxmann.com 188) has also held the agent to be an independent agent where it acts i....
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....ded by the Ld.CIT (A). Moreover, there are no reasons for us to deviate from the findings recorded by the Ld. CIT (A). Therefore, we are of the considered view that the findings recoded by the Ld. CIT (A) are judicious and are well reasoned. Accordingly, we uphold the same. Resultantly, this ground raised by the Revenue stands dismissed. Ground No. 2 & 3 15. These grounds are general in nature and in view of our findings on ground no. 1, these grounds requires no specific adjudication. Hence the same stands dismissed. 16. In the net result, the appeal filed by the revenue stands dismissed. Cross Objection No. 52/Mum/2003 (AY 1998-99) 17. Now we take up Cross Objection No. 52/Mum/2003 (AY 1998-99) filed by the assessee on the grounds mentioned herein below:- 1. On the facts and in the circumstances of the case, the learned Commissioner of Income- tax (Appeals) erred in holding that the place of effective management of the respondent is neither in Mauritius nor in India but in a third country. It is prayed that the learned Assessing Officer be directed to hold that the place of effective management of the respondent is in Mauritius. 2. Withou....
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....ng profits are taxable only in Mauritius and cannot be taxed in the hands of the assessee in India. 4. The view expressed by Mr. Klaus Vogel to which the AO refers has not, with respect, considered that as per the DTAA shipping profits, and the assessee undisputedly earns shipping profits, can be taxed in one of the Contracting States only (India or Mauritius) and as between the two such places, it is Mauritius in which the assessee has a place of management. His view is also contrary to the view categorically expressed by an Indian judicial authority viz., the AAR in Ruling No. P-9 of 1995 (220 ITR 377) and DUMB Mauritius Investment Company v. CIT (228 ITR 268). Apart from the AAR's view being the better view, if there is a conflict between the view of a private commentator and a judicial Indian Authority the view of the latter must be preferred particularly where the latter was presided over by a retired Chief Justice of the Supreme Court of India as in the AAR rulings referred to above. 20. On the contrary Ld. DR appearing on behalf of the revenue relied upon the orders passed by Ld. CIT(A) and submitted that the AO on the basis of the documents submitted by the ....
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....rt while deciding the issue of permanent establishment in the case of Formula One World Championship Ltd Vs CIT(IT)-3, Delhi [2017] 80 taxmann.com 347 (SC) has made reference to the commentary of Klaus Vogel (para-32). Thus, the Hon'ble Supreme Court has settled the issue of fixed place of business with regard to PE in favour of Revenue. 21. We have heard counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A) which is contained in para no. 2 & 3 in its order. The operative portion of the order of Ld. CIT(A) contained in para no. 3, 3.1 & 3.2 of its order and the same is reproduced below:- 3. I have considered the submission of the appellant counsel carefully and the order of the A.0 The first limb of the argument of Mr. Dinesh Kanabar is about the effective management which is based on Article 4 of the DTAA. According to Article 1 the convention shall apply to a person who are resident of one or both of the contracting state The Article 4 defines resident. The Article 4(3) provides ....
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....found that the main agent M/s Freight Connection (I) Pvt. Ltd. in India was appointed as an agent on 20-6-1995 on a letter head showing its address as Dubai, UAE. A letter dated 12-4-2000 from M/s Bay lines addressed to A.O. also originated from Dubai All these indicate that though the company was registered in Mauritius but the major policy decisions were taken at the UAE. Thus., in my opinion, the place of effective management is the place where the key and commercial- decisions that are necessary for the business or in substance the place of effective management will originally be a place where the most senior person or a group of persons make its decisions, the place where the action to be taken is an entity as a whole or determined.. In view of the above fact, I. too, feel that the effective management of the appellant is neither in Mauritius nor in India. Mr.Klaus Vogel in his book-of International Taxation, who is an eminent authority of International taxation has stated that if the effective management of enterprise is not in one of the Contracting States, but is situated in the third state, the benefit of the article & cannot he extended. The same is reproduced as below: ....
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....ion in ground no. 1, this ground stands dismissed. 24. In the result, the cross objections filed by the assessee stands dismissed. 25. In the net result, the appeal filed by the revenue as well as Cross Objections filed by the assessee for AY 1998-99 stands dismissed. Now we take up the following appeals filed by the assessee:- I.T.A. No. 5512/Mum/2006 (AY 1999-00) I.T.A. No. 5513/Mum/2006 (AY 2000-01) I.T.A. No. 2454/Mum/2005 (AY 2001-02) I.T.A. No. 5514/Mum/2006 (AY 2002-03) I.T.A. No. 5515/Mum/2006 (AY 2003-04) I.T.A. No. 834/Mum/2010 (AY 2004-05) I.T.A. No. 835/Mum/2010 (AY 2005-06) I.T.A. No. 8857/Mum/2010 (AY 2007-08) I.T.A. No. 385/Mum/2012 (AY 2008-09) I.T.A. No. 2340/Mum/2012 (AY 2009-10) I.T.A. No. 6703/Mum/2014 (AY 2010-11) I.T.A. No. 6704/Mum/2014 (AY 2011-12) I.T.A. No. 6716/Mum/2016 (AY 2012-13) 26. In all the above appeals, assessee filed an application for admitting additional ground of appeal. 27. We have gone through the contents of the application and after hearing the counsels of both the parties and while keeping the principl....