2022 (6) TMI 1370

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....8 of the India -UAE DTAA. The Assessing Officer rejected the contentions of assessee and held that since the assessee has a Permanent Establishment in India, the benefit of Article -8 of DTAA is not available to the assesseein respect of gross receipts of the shipping business. Hence, made addition by applying Rule-10 of the Income Tax Rules, 1962 [ herein after referred to 'the Rules'] Aggrieved by the draft assessment order dated 03/12/2019 the assessee filed objections before the Dispute Resolution Panel (in short 'DRP'). The DRP vide directions dated 25/03/2021 rejected the objections. The Assessing Officer passed the impugned assessment order in accordance with the direction of the DRP. . The Assessing Officer made addition of Rs.12,39,99,720/- i.e. 7.5% of gross receipts from shipping business. Further the Assessing Officer made addition of Rs.3,12,71,900/- on account of Inland Haulage Charges (in short 'IHC') received by the assessee. Hence, the present appeal by the assessee. 3. The assessee in appeal has raised nine grounds. In ground No.1 to 7 of appeal, the assessee has assailed the addition made by the Assessing Officer in respect of gross receipts from shipping busine....

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....ndisputedly, the facts in the present case are identical to the facts in Assessment Year 2016-17. It is also evident from the observations made by DRP in para 8.2 of the directions. The DRP while deciding the issue in impugned assessment year placed reliance on the directions of DRP for Assessment Year 2016-17. The assessee assailed the findings of DRP before the Tribunal in ITA No.7133/Mum/2019(supra) . The Co-ordinate Bench after examining the facts and the decision rendered in the case of CIT vs. Balaji Shipping (UK) Ltd. (supra) held as under:- "5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 6. The short question we are now required to adjudicate is whether benefit of article 8 can be declined in respect of freight collections earned from cargo/containers loaded on slot of other vessels that the OEL, FZCO was entitled to under the joint business/pooling arrangements. 7. As learned DRP fairly accepts the issue is covered, in favour of the assessee, by Hon'ble jurisdictional High Court's judgement in the case of Balaji Shipping (supra). The mere fact that a....

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....ontention that 'IHC' are part of income derived from operation of ships in international traffic and is covered by DTAA. 11. On the other hand, the ld. Departmental Representative strongly supported the findings of Assessing Officer and the DRP. The ld. Departmental Representative submitted that Article -8 of the DTAA only refers to the shipping business in international traffic. Inland Haulage services are not covered by Article -8. 12. Both sides heard. Before we proceed to decide this issue it would be imperative to refer to the provisions of Article -8 of India-UAE DTAA. "ARTICLE 8 - Shipping - 1. Profits derived by an enterprise 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 passengers, mail, livestock or goods and shall include : (a) the charter or rental of ships incidental to such transportation ; (b) the rental of containers and related equipments used in connection with ....

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....) 253 CTR 460 (Bom) the issue was whether receipts from slot chartering can be considered as shipping income eligible to the beneficial provision of the Tax Treaty between India and UK. The Hon'ble High Court observed that the slot hire agreements are at least indirectly, if not directly connected and interlinked with and is an integral part of the enterprise's business of operating ships. The High Court further observed that the slot hire agreements also have a nexus to the main business of the enterprise of operation of ships. They are ancillary to and complement the operations of ships by the enterprise. Accordingly, Hon'ble Bombay High Court upheld the view that the benefit of the Tax Treaty would even be extended to income from such activities. Noting the OECD commentary the High court held as follows:- "35. Paragraph 4of the commentary indicates that Article applies to profits directly obtained from the transportation of passengers or cargo by ships owned, leased or otherwise at the disposal of a person as well as the profits from the activities which are not directly connected with the acquisition of the assessee's ships. In the latter case however, the ac....