TaxTMI 
TaxTMI 
2018 (4) TMI 1421
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.... 2007-08, wherein the revenue is challenging the decision of Ld CIT(A) in deleting the penalty levied u/s 271(1)(c) of the Act. All these appeals were heard together and hence they are being disposed of by this common order, for the sake of convenience. 2. We shall first take up the appeals filed by the assessee. The assessee is a shipping company incorporated in Mauritius. In all the years under consideration, the assessee declared income from shipping activities, but claimed it as exempt under provisions of DTAA by taking support of Article-8 of DTAA entered between India and Mauritius. The Assessing Officer, however, held that Article-8 of Indo Mauritius DTAA will apply only if place of effective management is situated either in India or Mauritius. The Assessing Officer gave finding that the place of effective management is located in gulf countries and hence Article-8 will not apply. In this regard he took support of the view expressed by Learned Expert on International Taxation Mr. Klaus Vogel. 3. The Assessing Officer further noticed that the assessee had appointed an Indian company named M/s. Freight Connection (India) Pvt. Ltd. as its agent. The Assessing Officer took the....
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....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 a formula where there is a tiebreaker i.e. if the person is resident in both the contracting state his status-of his residence in a particular contracting state is to be decided as per article 4(3) of the DTAA. The article 4(3) does not define the effective management i.e. not vice versa, in the present case relying' on different decisions, Mr. Dinesh Kanabar had tried to prove that the effective management of the appellant is in Mauritius because the appellant is a resident of Mauritius. In my opinion, it is not a correct definition nor proper way to come to....
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....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:- "Article 8 furthermore applies only when the enterprises place of effective management is situated in a contracting State. Whenever it is situated in a third 'State: the relationship between the two contracting States is governed by the permanent establishment principle laid down in Article 7. In a case in which the OTC article corresponding to Article 8 MC established that an exemption of income was dependent on the airplane being registered in the other contracting State, but where it was registered in the USA, the I.R.S. likewise applied the treaty provision/Corresponding to Ar....
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....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 principals indicate that the agent is independent. The AO has only seen the agreement with the appellant and he has not tried to examine whether FCIPL is having income only from the appellant or from any other persons (principals). From the Profit and loss Account and Balance sheet filed before me, it is clear that the agent FCIPL is having commission from 4 different principals. Therefore, it is not an exclusive agent of the appellant and, accordingly, it does not come under the purview of the definition of the dependent agent as defined in Article 5(5) of DTAA between India and Mauritius. Accordingly, appellant is not having any PË in India and therefore, he is not taxable as per Article 7 of the DTAA between India and Mauritius. Accordingly, this ground of appeal is allowed." After having gone through the facts of the present case, arguments addressed by the parties, judgment cited before us, material ....
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.... 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 exclusively or almost exclusively on behalf of the assessee as it also does work on behalf of other principals and earns a substantial part of its income from them as clearly found by the CIT(A) in his appellate orders as mentioned above. f. During the course of the hearing, the learned DR placed reliance on Clause 11 of the Agency Agreement between the Assessee and Freight Connection (Page 21 of the paperbook for AY 2001-02) and submitted that Freight Connection cannot act as an agent for any other person apart from the assessee, as the same would be in contravention of the Agency Agreement. Towards the same, it is submitted that Clause 11 only restricts Freight Connection from acting as an agent for any other principal carrying on business 'in competition' with tha....
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....ing 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 in its ordinary course of business and the activities of the agent are not wholly or exclusively devoted to the assessee. We have also considered the judgments relied by Ld. AR and the same are discussed below:- a. The Hon'ble Supreme Court in the case of ADIT v. E-Funds IT Solution Inc. (Civil Appeal No. 6082 of 2015) observed that the assessee must have a fixed place of business in India which is at its disposal through which it carries on its business. SC held that there was no specific finding in the assessment or the appellate orders that any fixed place of business was put at the disposal of the assessee. SC held that the assessee did not have a Fixed Place PE in India and observed that the lower authorities had adopted an erroneous approach in holding that the asse....
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....eight Connection India P Ltd is an agent of independent status and hence it cannot be considered as constituting Agency PE of that assessee. The decision so rendered shall also apply to the assessee herein and accordingly, we hold that M/s Freight Connection India P Ltd shall not constitute Agency PE of the assessee. 11. The co-ordinate bench has placed reliance on the decision rendered by Hon'ble Supreme Court in the case of ADIT Vs. E-Funds IT Solution Inc. (Civil Appeal No.6082 of 2015) and also the decision rendered by Mumbai bench of Tribunal in the case of Delmas France Vs. ADIT (49 SOT 719) to hold that where a foreign enterprise carries on business in a country through an agent, the provisions of Article 5(1) relating to Fixed place PE does not come into play. The co-ordinate bench has also noted that the appeal filed by challenging the decision so rendered by the Tribunal in the case of Delmas France has been dismissed by Hon'ble Bombay High Court in its decision reported in 232 Taxman 40). The facts, being identical, following the decision of the coordinate bench rendered in the case of Bay lines (Mauritius)(supra), we hold that the assessee does not have Fixed place PE ....