TaxTMI 
TaxTMI 
2021 (8) TMI 1355
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....s of Rs. 216,00,95,105) derived from operation of ships in international traffic. 2. Ground 2 - On the facts and in the circumstances of the case and in law, the learned DCIT has erred in not holding that above shipping income earned by the Appellant under its arrangement with OEL FZCO is also covered by Article 8(4) of the Tax Treaty and hence not liable to tax in India. 3. Ground 3 - On the facts and in the circumstances of the case and in law, the learned DCIT ought to have held that in the absence of any business connection or Permanent Establishment (PE) of the Appellant in India its income is not liable to tax in India even under Article 7 (Business Profits) of the Tax Treaty. 4. Ground 4 - On the facts and in the circumstances of the case and in law, the learned DCIT erred in holding that the Appellant has a fixed place PE in India under Article 5(1) of the Tax Treaty. 5. Ground 5 - On the facts and in the circumstances of the case and in law, the learned DCIT has erred in holding Albatross Shipping Ltd. (Albatross) and BSL Freight Solutions Pvt. Ltd. (BSL) as dependent agency PE of the Appellant in India under Article 5(4) of the Tax Treaty without appreciating that....
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....e 8, on these facts, is covered in favour of the assessee by Hon'ble jurisdictional High Court's judgement in the case of DIT vs Balaji Shipping (UK) Ltd. [(2012) 253 CTR 460 (Bom)], learned DRP rejected the claim of the Assessing Officer on the ground that the matter has not reached finality as a special Leave Petition, against the aforesaid judgment, is pending before Hon'ble Supreme Court. The relevant observations made by the DRP are as follows:- The DRP has considered the arguments of the assessee as above and the additional evidences filed. The remand report of the AO and the rejoinder filed by the assessee has also been considered. It is noted that as per the India UAE DTAA, (Article-8) the provisions for shipping read as under: ARTICLE 8 Shipping "1. Profits derived by an enterprises of a Contracting State from the operation by that enterprise of ships in international traffic shall be taxable only in that State. 2. For the purposes of this Article, profits from the operation of ships in international traffic shall mean profits derived by an enterprise described in paragraph (1) from the transportation by sea of passenger, mail, livestock or goods and shall include:....
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.... in ships which are not owned by the assessee and which had not been taken on a pool basis. In the case of Balaji Shipping (UK) Ltd (supra), the India-UK DTAA was under consideration and Article 9 of the said India-UK DTAA on shipping reads as under: "1. Income of an enterprise of a Contracting State from the operation of ships in international traffic shall be taxable only in that State. 2. The provisions of paragraph 1 of this Article shall not apply to income from journeys between places which are situated in a Contracting State. 3. For the purposes of this Article, income from the operation of ships includes income derived from the rental on a bareboat basis if such rental income is incidental to the income described in paragraph 1 of this Article. 4. Notwithstanding the provisions of Article 7 (business profits) of this Convention, the provisions of paragraph 1 and 2 of this Article shall likewise apply to income of an enterprise of a Contracting State from the use, maintenance or rental of containers (including trailers and related equipments for the transport of containers) used for the transport of goods or merchandise 5. The provisions of this Article shall app....
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....stand that the freight eared on account of Freight, THC and Detention charges earned from pooling arrangement which OEL, FZCO has with other pooling parties are not covered by the DTAA concerned and are not covered by the term 'pool or slot arrangement'. The DRP agrees that this view as the Article 8 of the Indo UAE Treaty only includes profits from operations of ships in international traffic and arrangement cannot not be said to be falling within the ambit of Article 8. Though the Mumbai High Court in the case of Balaji Shipping (UK) Ltd., (2012) 253 CTR (Bom) 460 has held that the feeder vessels are covered by the term 'pool or slot arrangement' but the SLP of the Department is pending before the Supreme Court in this case titled as 'Director of Income Tax (International Taxation) Mumbai vs. Balaji Shipping UK Ltd., C.A No. 009504/2013 Registered on 12-03-2013; SLP (C) No. 011148/2013 Registered on 21-10-2013. Since the income that it has no business connection or PE in India becomes academic and is rejected. For all the above reasons, the objections no. 2 & 3 of the assessee are dismissed. 4. The Assessing Officer thus proceeded to decline the Indo UAE tax treaty benefit in re....