TaxTMI 
TaxTMI 
2018 (3) TMI 1832
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.... filed appeal for assessment year 2012-13. The assessee has filed cross objection for AY 2012-13 and appeals for AY 2013-14 & 2014-15. All appeals are directed against the orders passed by the assessing officer u/s 144C(13) r.w.s. 143(3) of the Act in conformity with the directions given by Ld Dispute Resolution Panel (DRP). 3. In AY 2012-13, the Ld DRP decided certain issues in favour of the assessee and hence the revenue has filed appeal for that year challenging those decisions. However, in AYs 2013-14 & 2014-15, the Ld DRP decided very same issues against the assessee and hence the assessee has filed appeals for those years. The assessee has also filed Cross objection for AY 2012-13 in respect of one issue, viz., existence of PE. 4. As stated earlier, M/s CMA CGA SA is a company incorporated in France and it is engaged in the business of operation of Ships in International traffic, i.e., it transports cargos between ports located in India and to ports located outside India. Accordingly India-France DTAA is applicable to the assessee. It filed its return of income declaring NIL income by claiming benefit of Article 9 of India-France DTAA. 5. The assessee claimed freight co....
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....nsportation of cargo through feeder vessel. The assessee had also placed its reliance on the decision rendered by Hon'ble Bombay High Court in the case of Balaji Shipping UK Ltd (253 CTR 440). (c) In respect of the issue of including Service tax in Gross receipts, the Ld DRP held that the issue is covered in favour of the assessee by the decision rendered by Hon'ble Delhi High Court in the case of Mitchell Drilling International Pty Ltd (380 ITR 130) and held that the Service tax would not form part of Gross receipts. The revenue has filed appeal for AY 2012-13 challenging the above decisions rendered by Ld DRP. 8. However, the Ld DRP took diagonally opposite view in respect of the above said three issues in AY 2013-14 and 2014-15, and accordingly decided all of them against the assessee. The reasoning given by Ld DRP is summarized below:- (a) In respect of Inland Haulage Charges, the Ld DRP took the view that the decision in the case of Safmarine Container Lines N.V (supra) was rendered by Hon'ble Bombay High Court under India- Belgium treaty, whereas the issue under consideration is required to be examined in the context of India-France treaty. The ld DRP observed that ....
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....t of the assessee under Clause 6 of Article 5 of India-France DTAA. Accordingly the Ld DRP held that CMA CGM Agencies (India) Private Limited shall constitute Agency PE of the assessee. 10. Though the assessee has got relief on merits in AY 2012-13, yet it has filed Cross objection contesting the above said decision of ld DRP on availability of PE in India. In other two years, the assessee is contesting all the decisions rendered by Ld DRP including the issue relating to PE. 11. The first issue relates to taxability of Inland Haulage charges received by the assessee. We have noticed earlier that the Ld DRP has held it to be part of shipping income from international traffic in AY 2012-13, but held to be not part of shipping income from international traffic in AY 2013-14 and 2014-15. The reason given by ld DRP is that the India-France DTAA does not state that the "Income derived from operation of ships" would include, inter alia, "any other activity directly connected with such transportation", while it was so provided in India-Belgium DTAA. Since the decision rendered by Hon'ble Bombay High Court in the case of Safmarine Containers Lines NV (supra) has been rendered in the con....
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....ofits from operations not directly connected with the operation of ships as long as they are ancillary to such operation. He submitted that the "Inland Haulage Charges" collected by the assessee is ancillary to operation of ships and hence it is eligible for exemption from taxation in India as per Article 9 of India- France DTAA. 13. The Ld A.R submitted that the Article 9 of India-Denmark treaty also states that the profits derived from operation of ships in international traffic is taxable only in the Contracting State in which the place of effective management is situated. The definition of "international traffic" is also identically worded in both France treaty and Denmark treaty, i.e., it does not specifically include the expression "any other activity directly connected with such transportation". The question of taxability of Inland Haulage Charges came to be considered in the case of a Denmark Company named A.P.Moller Maersk A/S by the ITAT on several occasions. In its order dated 15-02-2017 passed in ITA No.1798/Mum/2015, the co-ordinate bench has decided this issue in favour of the assessee as under:- "6. Apropos ground no. 2-4 On this issue also Ld. Counsel of the as....
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.... used by the agents of the assessee entailed certain costs reimbursement to the assessee. It was part of the shipping business and could not he captured under any other provisions of the Income Tax Act except under DTAA." "Our attention is also drawn to the decision of this Court in the case of Commissioner of Income-tax V/s. Siemens Aktiongeselleschaft reported in [2009] 310 ITR 320 (Bom), wherein this Court has held that once there is a treaty between two sovereign nations, though it is open to a sovereign Legislature to amend its laws, a DTAA entered into by the Government, in exercise of the powers conferred by section 90(1) of the Act must be honoured. The provisions of Section 9 Income Tax Act were applicable and the provisions of DTAA, if more beneficial than the IT Act, the provisions of DTAA would prevail. Thus, in the instant case also, it is not possible for the revenue to unilaterally decide contrary to the Provisions of the DTAA. We are informed that the agreements inter A.P. Moller Maersk A/S ITAT No. 1798/Mum/2015 parties had been performed and the payments were made by the agents to use Maersk Net for the Maersk group's global shipping business and for no ....
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.... lies upon the assessee. In this regard, he placed reliance on the decision rendered by the co-ordinate bench in the case of APL Director Co. P Ltd Vs. ADIT (Int. Taxation) (2017)(167 ITD 603)(mum). 15. We have heard rival contentions on this issue and perused the record. We notice that the ld DRP has mainly declined to follow its own order passed in AY 2012-13 in the subsequent two years for the reason that there is difference between Article 8 of India-Belgium DTAA and Article 9 of India- France DTAA. According to Ld DRP that the India-Belgium DTAA contains specific provisions to include "any other activity directly connected with such transportation", whereas the same is absent in the India-France DTAA. The Ld A.R, on the contrary, submitted that the presence or absence of the above said provision will not make any difference. In support of this proposition, the Ld A.R placed reliance on OECD model conventions and the Commentary thereon, which are extracted above. 16. We notice that the decision in the case of Safmarine Container Lines N.V (supra) has been rendered by Hon'ble Bombay High Court in the context of India-Belgium DTAA. However, in the case of DIT Vs. A.P.Moller M....
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....1-12 to hold that the Inland Haulage charges received by that assessee shall also form part of shipping income from international traffic. The decision so rendered for AY 2011-12 was followed by the coordinate bench in the above said assessee's case in AY 2012-13 in ITA No.1743/Mum/2016 dated 07-02-2018. 20. Before us, the ld A.R demonstrated that the Article 9 of India-France DTAA and Article 9 of India-Denmark DTAA are identically worded. Since the decision rendered by Hon'ble Bombay High Court in the case of Safmarine Containers Lines N.V (which was rendered in the context of India-Belgium DTAA) was held to be applicable to India-Denmark DTAA also by the Hon'ble Bombay High Court in the case of A.P.Moller Maersk A/S (ITA No.1306 of 2013), the ld A.R submitted that the absence of the expression "any other activity directly connected with such transportation" in the India-France DTAA will not make any difference. We notice that the contentions of the assessee also get support from the OECD model convention discussed supra. 21. In view of the foregoing discussions, we agree with the contentions of the Ld A.R on this issue. Accordingly we hold that Inland Haulage Charges receive....
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.... nature. In the case of Balaji Shipping UK Limited (supra), the Hon'ble High Court had held that where the goods are transported by an enterprise by availing of the slot hire facility obtained by it on the ship of another from a port in India up to a hub port abroad and from there transporting the goods further to their final destination upon a ship owned or chartered or otherwise controlled by it, would be covered by Article 9(1) of India-UK DTAA. Since the India-France DTAA is similar thereto, the Hon'ble High Court held that the decision rendered in the case of Balaji Shipping UK Limited (supra) would apply to the assessee also. 25. Accordingly, by following the decision rendered by Hon'ble Bombay High Court in the assessee's own case (referred supra), we hold that the freight charges received for transportation of Cargo through feeder vessels is part of shipping income eligible for relief under Article 9(1) of India-France DTAA. Accordingly we uphold the view taken by the Ld DRP in AY 2012-13 on this issue and reverse its decision rendered in AY 2013-14 and 2014-15 on this issue. 26. The next issue relates to the inclusion of Service tax as part of Gross receipts. The assesse....
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....nt shall be construed as agent of independent status and accordingly no agency PE would exist in the case of the assessee in India. The case of the ld A.R is that the Indian agent of the assessee has been remunerated at arms length and hence there do not exist any Agency PE for the assessee in India in terms of India-France DTAA. Accordingly we hold that the Indian agent of the assessee cannot be considered as agency PE of the assessee, if the agent has been remunerated at arms length in all the three years under consideration. 28. In the cross objections filed by the assessee for AY 2012-13, the assessee is supporting the order of Ld DRP in grounds 1 to 5. The Ground no.6 to 8 relates to the issue of Permanent Establishment, which we have dealt in the preceding paragraph. The Ground No.9-10 relates to computational error in the income computed by the AO. Since we have decided other issues in favour of the assessee, no income shall be liable to be taxed from out of those receipts. Hence these grounds shall become infructuous. 29. Other grounds urged by the assessee are either consequential in nature or not pressed. 30. We shall now take up the appeals filed in the case of M/s....