TaxTMI 
TaxTMI 
2022 (4) TMI 1512
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....1) The provisions of this section shall, notwithstanding anything contained in the other provisions of this Act, apply for the purpose of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India unless the Income-tax Officer is satisfied that there is an agent of the non-resident from whom the tax will be recoverable under the other provisions of this Act. (2) Where such a ship carries passengers, livestock, mail or goods shipped at port in India, one-sixth of the amount paid or payable on account of such carriage to the owner or the charterer or to any person on his behalf, whether that amount is paid or payable in or out of India, shall be deemed to be income accruing in India to the owner charterer on account of such carriage. (3) Before the departure from any port in India of any such ship, the master of the ship shall prepare and furnish to the Income-tax Officer a return of the full amount paid or payable to the owner or charterer or any person on his behalf, on account of the carriage of all passengers, livestock, mail or goods shipped at ....
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....hall include the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature. 3. It was submitted by the ld. AR that there is no provision for filing of the appeal against the order passed by the Assessing Officer u/s 172 of the Act either before the Commissioner of Income Tax (Appeals) or before the Tribunal. He had drawn our attention to section 246 of the I.T. Act which provides as under : "Appealable orders. 246. (1) Subject to the provisions of sub-section (2), any assessee aggrieved by any of the following orders of an Assessing Officer (other than the Deputy Commissioner) may appeal to the Deputy Commissioner (Appeals) before the 1st day of June, 2000 against such order- (a) an order against the assessee, where the assessee denies his liability to be assessed under this Act, or an intimation under sub-section (1) or sub-section (1B) of section 143, where the assessee objects to the making of adjustments, or any order of assessment under sub-section (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of l....
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....(Appeals) before the 1st day of June, 2000 against such order- (a) an intimation or order specified in sub-section (1) where such intimation is sent or such order is made by the Deputy Commissioner in exercise of the powers or functions conferred on or assigned to him under section 120 or section 124; (b) an order specified in clauses (a) to (e) (both inclusive) and clauses (i) to (l) (both inclusive) of sub-section (1) or an order under section 104, as it stood immediately before the 1st day of April, 1988 in respect of any assessment for the assessment year commencing on the 1st day of April, 1987 or any earlier assessment year made against the assessee, being a company; (c) an order of assessment made after the 30th day of September, 1984, on the basis of the directions issued by the Deputy Commissioner under section 144A; (d) an order made by the Deputy Commissioner under section 154; (da) an order of assessment made by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or after the 1st day of ....
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....2) Act, 1977 (29 of 1977); (b) "status" means the category under which the assessee is assessed as "individual", "Hindu undivided family" and so on." 4. Ld. DR had also drawn our attention to section 253 of the Income Tax Act whereby the power to the Tribunal was provided to hear and adjudicate the appeal if arise out of the various orders passed by the Assessing Officer / Commissioner of Income Tax (Appeals). For completeness of the record, we are reproducing section 253 of the Act which reads as under : "Appeals to the Appellate Tribunal. 253. (1) Any assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order- (a) an order passed by a Deputy Commissioner (Appeals) before the 1st day of October, 1998 or, as the case may be, a Commissioner (Appeals) under section 154, section 250, section 270A, section 271, section 271A, section 271J or section 272A; or (b) an order passed by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June....
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....e Commissioner (Appeals), has been preferred under sub-section (1) or sub-section (2) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the order of the Commissioner (Appeals), and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3). (5) The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if it is satisfied that there was sufficient cause for not presenting it within that period. (6) An appeal to the Appellate Tribunal shall be in the prescribed form55 and shall be verified in the prescribed manner and shall, in the case of an appeal made, on or after the 1st day of October, 1998, irrespective of the date of initiation of the assessment proceedings relating thereto, be accompanied by a fee of,- (a) where the total income of the as....
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....the present set of appeals are not maintainable. 6. The ld.DR seeks time to file the written submissions and it was submitted as under : 1. On the issue of maintainability of appeal, the revenue has not preferred an appeal or cross objection as the case was covered under low tax effect, it is prayed that the learned CIT(A) erred in admitting appeal filed against the order passed u/s.172(4) as this is not an appealable order before CIT(A) as per section 246A of the ITAct and by extension of the same, not appealable before ITAT. 2. The logic behind this is that the assessee is eligible to question the order under section 172(4) under section 172(7) and the AO is bound to pass an order under section 143(3) which is an appealable matter. Accordingly, there is no prejudice caused to the assessee by considering an order section 172(4). This understanding is line with the judgement of Hon'ble Supreme Court in the case of A.S. Glittre (1997) 91 Taxman 286, wherein it was held that the proceedings u/s 172(4) are summary or adhoc proceedings. It is a right conferred upon the AO to levy and recover tax on the freight paid towards ship belonging to non-resident. Another ri....
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....arged and there should be a strict interpretation of the scope of jurisdiction as per statute. 4. On jurisdiction, the assessee has placed reliance on the order of Income Tax Appellate Tribunal - Chennai in the case of Msc Agency (India) P Ltd. vs Department Of Income Tax vide I.T.A. No. 871/Mds/2010for Assessment Year :2007-08, however, the said judgement did no take into consideration the judgements of Raghunath Rai Bareja and Another vs Punjab National Bank and Others on 6 December, 2006 vide CASE NO.: Appeal (civil) 5634 of 2006 and the case of A.S. Glittre (1997) 91 Taxman 286. 5. On merit, it is seen that the assessee is contesting the order under section 172(4) on the question of interplay between article 8 and article 24 of DTAA. This ground of appeal is not sustainable as Hon'ble Supreme Court in the case of A.S. Glittre (1997) 91 Taxman 286, has held that the proceedings u/s 172(4) are summary or adhoc proceedings, it further stated that it is a right conferred upon the AO to levy and recover tax on the freight paid towards ship belonging to non-resident. The right given to the assessee u/s 172(7) is to opt for the regular assessment, in this case, the a....
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....er or the charterer. Under Section 172(3), before departure of ship, a return is required to be filed by the Master of the ship specifying the amount paid or payable. The proviso provides and states that return may not be filed under Section 172(3), where the Master of the ship has made satisfactory arrangements for filing of the return and payment of tax by any other person on his behalf. On the return being filed under Section 172(3), the Assessing Officer has to assess the income referred to in sub-section (2) and pass an order under Section 172(4) of the Act determining the tax payable. The said sum is payable by the Master of the ship, unless arrangement has been made under Section 194. For the purpose of the said determination, the Assessing Officer can call for documents and/or accounts as he may require. Port clearance cannot be granted unless the Collector of Customs or other officer authorized, is satisfied that the tax assessable under the said Section has been duly paid or satisfactory arrangements have been made for payment thereof. 14. A reading of the said Section would show that Section 172(4) postulates a summary assessment of payment of tax payable under ....
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.... provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency engaged in the operation of ships or aircraft. 3. Interest on funds connected with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft, and the provisions of Art.11 shall not apply in relation to such interest. 4. 4. For the purposes of this Article, profits from the operation of ships or aircraft in international traffic shall mean profits derived from the transportation by sea or air of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of the ships or aircraft, including profits from : (a) the sale of tickets for such transportation on behalf of other enterprises; (b) the incidental lease of ships or aircraft used in such transportation; (c) the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) in connection with such transportation; and (d) any other activity directly connected with such transpor....
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....ission and remitted only net freight. 12. The Ld. AR had also drawn our attention to paragraph 8 of the remand report wherein the assessing officer had mentioned as under:- " 8. In view of the above elaborate discussions it is clear that article 24 squarely applicable to the facts of the present case. The claim made by the local agent part of the freight was not remitted to received in Singapore due to adjustment of the same to the commission do not come to its rescue and hence it cannot be entertained/acceptable. Here in this case the local evidence failed to prove that short remitted freight in question had been remitted to or received in Singapore and of the same to tax there. Therefore the local agent M/s J.M. Baxi & Co is not eligible for for relief under DTAA as per its claim .........." 13. Per contra, the ld.DR had submitted that the Assessing Officer as well as ld.CIT(A) had rightly applied the DTAA in the present case and our attention was drawn to Paras 3 to 8 of the assessment order which are to the following effect : 14. Ld.DR. had further drawn our attention to Paras 10.2 to 10.6 of the order of CIT(A) which are to the following effect: 15. We hav....
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....rishnapatnam Port on 09.10.2014 to Houston, USA with a cargo of 7302.99 MT of Seamless Pipes. The total freight rate was USD 88 per MT which works out to total USD 642663. However, in the proceedings, the agent claimed that the entire freight earned by the freight beneficiary is exempt from tax in India in view of DTAA and therefore, the necessary benefit be given to the assessee. The agent of the assessee filed return on 07.11.2014 u/s 172(3) of the Act and along with return, the copy of the bank account in support of the remittance of freight was also placed on record. 18. It is an admitted case of the assessee as well as the Assessing Officer that there was short of remittance of USD 22,493 for the year under consideration and that was on account of commission @ 3.5% of the gross amount. In the additional evidence filed by the assessee before ld.CIT(A), the assessee has placed on record the invoices / receipts issued by Bertling at Pages 17 to 23 of the paper book to demonstrate that the money was advanced by the cargo commission agent and only the amount mentioned hereinabove i.e., USD 621169 was remitted to the assessee at Singapore. In our considered opinion, for the prese....
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....tage from this decision. Having said that we may add that we are in complete agreement with the coordinate bench that, in order to come out of the mischief of Article 24, the onus is on the assessee is to show that the amount is remitted to, or received in Singapore, but then such an onus is confined to the cases in which income in question is taxable in Singapore on limited receipt basis rather than on comprehensive accrual basis. However, in a case in which it can be demonstrated, as has been demonstrated in the case before us, that the related income is taxable in Singapore on accrual basis and not on remittance basis, such an onus does not get triggered." In the present case, as mentioned above, the assessee has not discharged his onus as no document was filled in this regard. 20. The second decision relied upon by the ld.AR in the paper book namely, Emirates Shipping Line, FZE Vs. ADIT (supra) is not relevant for the purposes of determining the present controversy as the judgment is relevant to whether the provisions of DTAA can be invoked for the purposes of determining at the stage of application of section 172(4) r.w.s 172(7) of the Act or not. 21. In the present c....
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....der passed in the present case is an order under s. 172(4) on the basis of a return filed by the assessee under s. 172(2) and the same is not appealable. It was the submission that as the order was not appealable, the order of the learned CIT(A) had to be quashed. 5. In reply, the learned Authorised Representative placed before us copy of the decision of the Hon'ble Supreme Court in the case of Union of India & Ors. vs. Arabian Express Line & Anr. in Civil Appeal No. 10328 of 1995, dt. 9th Nov., 1995 wherein under similar circumstances in respect of an order passed under s. 172(4) the Hon'ble Supreme Court had categorically held that the assessee had challenged its liability to be assessed under s. 172 and in view of the provisions of s. 246(1)(a) as it stood then, the assessee was entitled to file an appeal before the CIT(A), it was the submission that in view of the decision of the Hon'ble Supreme Court and in view of the fact that the words used in s. 246 and the words used in s. 246A(1)(a) are in pari materia, the assessee should be held to be entitled to file appeal before the learned CIT(A). 6. We have considered the rival submissions. We have....
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....e. 5. Thus, it is clear that the exemption of tax to be allowed under this DTAA in the first mentioned Contracting State I.e. India.shall apply to so much of the income as Is remitted to or received in the other Contracting State, i.e. Singapore. In the instant case, the whole of the freight was not received by the beneficiary in Singapore, leaving a balance of USD 21494. Accordingly, as per the Article 24 of DTAA, the beneficiary is not eligible to claim any relief on the balance freight which was not remitted to or received in Singapore. 6. Further, as per Article 24 of DTAA between Singapore & India, if income sourced in India is subject to tax in Singapore, by reference to the amounts remitted to or received in Singapore, then India is required to provide the benefit of the India- Singapore Tax Treaty. In other words, if income sourced In India has not been subject to tax in Singapore on receipt basis, then India shall be entitled to charge tax as per the provisions of Its domestic law. Document 4 10.2 The remand report was forwarded to the appellant for a rejoinder if any. The appellant vide ....
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....rriage of goods shipped at a port in India to the owner or a charterer or to any person on his behalf is deemed to be income accruing in India to the owner or charterer on account of such carriage. In this case it is clear that the goods were shipped from Krishnapatnam Port and whether or not the receipts are received in India or outside, the freight is deemed to be the income accruing in India as per the provisions of Sec. 172(2) of the I.T. Act. Therefore, the argument of the appellant that no receipt was received in India is not tenable. The Assessing Officer also has not charged entire amount of freight but only the Address Commission was charged to tax 7.5%. As the charterer is located in Singapore, the provisions of DTAA between India and Singapore shall apply. Though Article 8 is applicable to the persons engaged in shipping business there is a limitation clause in the form of Article 24 which limits the benefit if the amount is not received in the other contracting state ie., Singapore. Article 24 is reproduced hereunder for ready reference: "1. Where this Agreement provides (with or without other conditions) that income from ....