TaxTMI 
TaxTMI 
TaxTMI 
2020 (1) TMI 1555
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the case, Hapag-Lloyd AG. (hereinafter referred to as the 'Appellant') respectfully craves leave to prefer an appeal against the order dated 8 August 2019 passed by Deputy Commissioner of Income - tax (International Taxation) - 2(2)(2) ('AO') in pursuance of the directions issued by Dispute Resolution Panel - I ('DRP'), Mumbai on the following grounds: On the facts and in the circumstances 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. 1,82,92,050/- as against returned income of Rs Nil: Taxability of freight charges of INR 24,38,94,026/- 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 in the Assessee's own case for AY....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... treated as defective by the CPC Bangalore, therefore, the assessee in response to the notice issued under Sec. 139(9) of the Act filed a return declaring total income of Rs. Nil on 30.03.2018. The case of the assessee was thereafter selected for scrutiny assessment under Sec. 143(2) of the Act. 3. As observed by us hereinabove, the assessee is engaged in transportation of cargo to ports outside India and vice versa. The assessee would transport cargo on vessels owned/chartered/pooled by it as well as on slot arrangement basis. In the normal course of its 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 would be too large to enter the Indian ports which had a 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 destinat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Vs. CMA CGM SA France (2009) 27 SOT 367 (Mum). Also the assessee took support of the OECD commentary on Article 8. Relying on the aforesaid judgment of the Hon‟ble High Court it was submitted by the assessee that in its case also the income from slot arrangement did form part of the income from operation of ships in international traffic. The assessee further submitted that the Hon‟ble High Court of Bombay in its own case for A.Y 2007-08 viz. Hapag- Llyod AG vs. Additional Director Of Income-tax (International Taxation) (2013) 84 CCH 0073 (Bom), vide its order dated. 01.02.2013, had after deliberating on the issue under consideration restored the matter back to the file of the Tribunal with a direction 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 off 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 vessel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee had a PE in India, even otherwise as there were special provisions in the Income-tax Act, 1961 in the form of Sec. 44BB and Article 8 of the DTAA between India and Germany, therefore, the income earned by the assessee on slot hire basis which did not qualify for exemption under Article 8 of the DTAA was inescapably liable to tax as per Sec. 44BB of the Act. Thus, out of the total freight income of Rs. 2480,19,46,913/- earned by the assessee, the A.O held that (i). the freight income earned by the assessee from feeder to feeder vessel of Rs. 21,39,12,837/-; and (ii). the freight earned from the entire journey on feeder vessel of Rs. 2,99,81,189/-, therein aggregating to Rs. 24,38,94,026/- [i.e Rs. 21,39,12,837/- (+) Rs. 2,99,81,189/-] was not eligible for relief under Article 8 of the India-Germany treaty. On the basis of his aforesaid deliberations, the A.O inter alia held that the freight amounting to Rs. 24,38,94,026/- [i.e Rs. 21,39,12,837/- (+) Rs. 2,99,81,189/-] was not eligible for relief under Article 8 of the India-Germany DTAA. 8. 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 was being taxed in the case were the receipts of the assessee from the activities carried out in India or activities attributable to India which were not covered by Article 8 of the treaty between India and Germany. The DRP thus concluded that while for the receipts on account of transport of goods etc. by ship in international traffic was not taxable in India in view of Article 8 of the India- Germany treaty, any other receipt of the nature referred to in sub-section (2) in the case of the assessee being a non-resident engaged in the business of operations of ships was liable to be brought to tax in India as per the provisions of Sec. 44B. 9. The A.O on receipt of the directions of the DRP gave effect to the same and vide his order passed under Sec. 143(3) r.w.s 144C(13), dated. 08.08.2019 assessed the income of the assessee at Rs. 1,82,92,050/-. 10. The assessee being aggrieved with the order ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 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 of Bombay while disposing of the assesse‟s own appeal for A.Y. 2007-08 in Hapag-Llyod AG vs. Additional Director of Income-tax (International Taxation) (2013) 84 CCH 0073 (Bom) had restored the matter to the Tribunal for fresh adjudication on the same terms and observations which were recorded by the Hon‟ble High Court on the issue under consideration in the case of Director Of Income-tax (International Taxation) Vs. Balaji Shipping U.K Ltd. (2012) 211 Taxman 0535 (Bom). We find that the Hon‟ble High Court while disposing of the appeal of the assessee for A.Y. 2007-08 and restoring the matter to the Tribunal had observed as under: "2. Counsel for the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....2016, had taken the same view. Also, a similar view had been taken by the Tribunal while disposing off the appeals of the assessee for A.Y. 2013-14 (ITA No.1441/Mum/2017), A.Y. 2014-15 (ITA No.7331/Mum/2017 and A.Y. 2015-16 (ITA No.4939/Mum/2018). We have perused the aforesaid orders and find ourselves to be in agreement with the view taken by the Tribunal in the aforesaid years in the case of the assessee. On the basis of our aforesaid observations, we are of the considered view that the benefits of Article 8 of the India-Germany DTAA would also be available to the assessee in respect of the revenue that was earned by the assessee from the feeder vessels obtained on slot hire arrangement basis. Accordingly, we set aside the order of the CIT(A) in terms of our aforesaid observations. The Grounds of appeal No. 2 to 4 raised by the assessee before us are allowed. 14. We are further of the view that as we have held that the benefit of Article 8 of the India- Germany DTAA would also be available to the assessee in respect of the revenue earned by it from the feeder vessels obtained on slot hire arrangements, therefore, the Grounds of appeal Nos. 5 to 7 as to whether the assessee had ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... taken into consideration to determine the liability to pay the interest under s. 215. In that case, the assessee had not paid advance tax on interest income. The payer of interest had not deducted the tax. The learned Bench of the Madras High Court was of the view that levy of interest under s. 215 on assessee was not justified. 8. We are in respectful agreement with the view taken in the case of CIT & Anr. vs. Sedco Forex International Drilling Co. Ltd. (supra), by the Uttaranchal High Court. We are clearly of the opinion that when a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the payee assessee. 9. Considering the submissions of both parties and the provisions of law, consequently the appeal is dismissed." We thus respectfully following the order of the Hon‟ble High Court decide the issue in favour of the assessee. The Ground of appeal No. 9 is allowed. 16. We find that the assessee had also assailed before us the failure on the part of the A.O to grant credit for TDS of Rs. 60,06,811/-, for the reason, that the same was wrongly deposited in the PAN Number of the agent of the assessee. It was submitted by the ld. A.R ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pts of INR 29,05.19,061/- on which the aforesaid tax has been deducted has been considered for claim of exemption under section 90(2) read with Article 8 of the India - Germany DTAA and forms a part of the total income of INR 1,86,01,46,018/- (which is 7.5% of the total gross receipts of INR 24,80,19,46,907/- as computed under section 44B of the Act); 3. erred in denying the benefit of TDS on the ground that the said TDS credit is not reflected in Form 26AS of the Appellant and not appreciating the fact that the same is already been reflected in the Form 26AS of the Agent (i.e. HLIPL): Opportunity of being heard: - 4. erred in passing the order without providing any opportunity to the Appellant of showing cause against such non-grant of TDS credit and accordingly, is in violation of principle of natural justice and bad in law; Levy of interest under section 234B of the Act: - 5. erred in levying interest of INR 29,82,996/ - under section 234B of the Act to the Appellant. The above grounds of appeal are mutually exclusive and without prejudice to one another. The Appellant craves leave to add/ alter/ amend/ delete/ withdraw any or all of the grounds at or before the he....