TaxTMI 
TaxTMI 
2019 (9) TMI 1407
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....9;) between India and Mauritius, 2. Without prejudice to Ground 1, on the facts and circumstances of the case, the Ld. CIT(A) has factually and legally erred in holding that Freight Connection India Private Limited is a 'Dependent Agent' of the Appellant Company, thereby constituting a permanent establishment of the Appellant Company under Article 5 of the DTAA between India and Mauritius. 3. Without prejudice to Ground 1, on the facts and circumstances of the case, the Ld. CIT(A) has factually and legally erred in holding that the Appellant Company maintains a fixed place of business in India, and hence constitutes a permanent establishment of the Appellant Company under Article 5 of the DTAA between India and Mauritius. 4. Without prejudice to all the aforesaid grounds, on the facts and circumstances of the case and in law, the Ld. CIT(A) has legally erred in computing profits of the Appellant Company under section 44B of the Act, thereby disregarding the profits actually earned by the Appellant Company from its Indian operations, ignoring the decision of the Hon'ble Supreme Court in the case of Union of India v. Sanyasi Rao 219 ITR 330(SC). 3. Briefly stated, the ....
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....ent is not located in India or in Mauritius. The Tribunal in assessee's own case for AYs 1998-99 to 2012-13 (supra) observed that this issue has been decided against the assessee by the Co-ordinate Bench vide order dated 20.02.2018 in the case of M/s Baylines (Mauritius) in ITA No. 1181/Mum/2002 and others. The operative portion of the above order as extracted by the Tribunal reads as under : "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 theconvention shall apply to a person who are resident of one or bothof the contracting state. The Article 4 defines resident. The Article4(3) provides a formula where there is a tiebreaker i.e. if theperson is resident in both the contracting state his status-of his....
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....m M/s Baylines addressed to A.O. alsooriginated from Dubai. All these indicate that though the companywas registered in Mauritius but the major policy decisions weretaken at the UAE. Thus., in my opinion, the place of effectivemanagement is the place where the key and commercialdecisionsthat are necessary for the business or in substance theplace of effective management will originally be a place where themost senior person or a group of persons make its decisions, theplace where the action to be taken is an entity as a whole ordetermined. In view of the above fact, I too, feel that the effectivemanagement of the appellant is neither in Mauritius nor in India.Mr. Klaus Vogel in his book-of International Taxation, who is aneminent authority of International taxation has stated that if theeffective management of enterprise is not in one of the ContractingStates, 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 ofeffective management is situated in a contracting State. Wheneverit is situated in a third 'State: the relationship between the twocontrac....
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....nch in Bay Lines (Mauritius) (supra) which is produced below : "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 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 ....
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....om 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 suggestthat 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 exclusively or almost exclusively onbehalf 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 paperbo....
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....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 assessee. 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 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 disposa....
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....fixed place PE also and in this regard, the Bench has referred to the discussions extracted above. 6.2 The facts in the present case are identical in nature and further the very same agent M/s Freight Connection India Pvt. Ltd. has acted as the agent of the assessee herein also. The Co-ordinate Bench in the case of Bay Lines (Mauritius) (supra) has held that M/s Freight Connection India Pvt. 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 instant case and accordingly, we hold that M/s Freight Connection India P. Ltd. shall not constitute Agency PE of the assessee. 7. The Tribunal in assessee's own case for AYs 1998-99 to 2012-13 (supra) further held : "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 ....