TaxTMI 
TaxTMI 
2025 (4) TMI 149
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....usively and almost excessively acting as an agent on behalf of non-resident principal. Whereas in the cross objection the assessee stated that ld. CIT(A) has erred in holding that place of effective management of assessee company is neither in Mauritius nor in India but in the third Country and therefore, assessee is not entitled to benefit of Article 8 of India-Mauritius DTAA. 3. At the outset, it has been admitted by the parties that the grounds raised by the Revenue as well as Cross Objection raised by the assessee are covered by the decision of the Tribunal in assessee's own case right from A.Y.1998-1999 to A.Y.2012-13, wherein the Revenue's appeal has been dismissed on similar ground and cross objection of the assessee has been decided against the assessee. 4. The brief facts are that assessee is a shipping company incorporated in Mauritius. It has shown gross receipts pertaining to freight of Rs. 79,84,21,227/- in the A.Y.2013-14 and Rs. 78,12,51,160/- in A.Y.2014-15. After applying the presumptive rate of tax u/s.44B which is 7.5% of these receipts was shown as income. However, in the return of income assessee claimed benefit of Article 8 of India-Mauritius DTAA and ac....
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....jected these contentions after observing and holding as under:- (i) Factual details as discussed in para 4.5 above clearly suggest that the place of effective management is not in India or Mauritius, but is in Dubai. (ii) Copy of Minutes of Board Meeting clearly shows that Mr. Saadi Rais and Mr. Salim Rais, participated in the meeting by telephone. However, no details or documentary evidences have been produced to show that there was even a meeting by way of telephonic conversation. (iii) In the A.Y.2003-04, the authorised representative of the assessee has furnished copy of charter agreement between the assessee and M/s. Amir Shipping LLC, Dubai, UAE, for the Vessel 'Wave 23". In the assessment order for A.Y.2003-04, It was mentioned by the A.O that this charter agreement was also entered into in Dubai only. The charter agreements are normally valid for 36 to 60 months. However, there is nothing on record to show that any agreement has been entered into in Mauritius. (iv) In the commentaries on the tax treaties by Mr. Klaus Vogel in his book of International taxation, who is an eminent authority of International taxation, it has been stated ....
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.... Some of the key terms of the Agency Agreement are reproduced below for quick reference: Clause 2 A. Agents shall solicit and book cargo and arrange for the reception of same for shipment, prepare and/or sign receipt and/or issue and/or send out receipts, manifests, loading permits, bill of lading, arrival notices and delivery orders and other papers or documents pertaining to the receipt and delivery of goods, as customary. B. (1) Principals shall authorize agents to select and appoint stevedores and other contractors on their behalf after securing their prior approval, agents shall supervise the stevedoring, chocking, clerking, tallying, pler work and all other works having to with the physical receipt, storing, handling, loading, discharging and delivering of cargo at the ports of India. C. The conform to all statutory or other applicable local, national or international rules, regulations and requirements and to promptly advise the principals of any and all proposed or adopted rules, regulations or orders, governmental or otherwise, which may affect the operations and activities of the principal within the area of representation. Cla....
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....thorities. For the purpose of remitting the freight collected on behalf of the principal, the agent is required to interact with the Reserve Bank of India and Income Tax Department. It is further submitted that apart from this routine activity, the agent does not need to work with these authorities. Also, the interaction with these departments is only in connection with the business as an agent and none of the tasks performed before these authorities are on account of the principal. The contention that FCIPL is habitually concluding contracts on behalf of the Assessee is far from truth since such routine matters ought not be categorized as 'concluding contracts' for the principal. Reference is invited to Clause 2 which specifies the gamut of operations required to be performed as agent. Deciding brokers, contracting with parties for loading cargo, dealing with laborers, loading and unloading, collecting the freight are functions of FCIPL for its own business as a shipping agent. It is submitted that "none of the activities are to be performed by the Assessee which are delegated to the FCIPL. In background of the above stated correct factu....
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....ich has been noted by him is that, FCIPL was not wholly and exclusively doing business for the assessee but was acting as an independent agent for various other entities. The total income or revenue from the assessee was only 22.32%; and from third party customers in India as well as other principals, it was 77.68%. Various streams of operating income derived by FCIPL from its ordinary course of business, i.e., acting as a shipping agent and facilitating movement cargo was given as under:- Nature of Income Bay Lines Other Principals Third Party customers in India Total (INR) Agency Commission 2,09,11,303 1,55,49,528 - 3,64,60,906 Recovery of communication expenses 69,26,503 18,96,250 88,22,753 Logistic Fees 69,26,503 16,04,042 - 85,30,545 Documentation charges - - 4,36,62,222 4,36,62,222 Container freight station handling income 5,82,41,036 5,82,41,036 Total (INR) 3,47,64,309 1,90,49,820 10,19,03,258 15,57,17,387 Total (%) 22.32% 12.23% 65.44% 100.00% 12. In support, copy of profit and loss account of FCIPL was also furnished. Thus, it was ....
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....ny does not have permanent establishment in India vide para 14 of its order as under: "Considering the above legal proposition and as well as facts of the present case we find that the Hon'ble Bombay High Court has affirmed the Tribunal's decision in B4U International Holdings which had held that the conclusion in DHL operations was erroneous. Therefore, we hold that the Freight Connection is an independent agent who acts in it ordinary course of its business and whose activities are not devoted exclusively or almost exclusively on behalf of the assessee. Therefore, it is held that the assessee does not have an Agency PE in India and the CIT(A) was right in so holding for the A.Y.1998-99 and the successor CIT(A) was wrong in taking a contrary view for the subsequent assessment years. Accordingly, we further hold that even if the assessee's case is not covered by Article 8, the business profits would not be chargeable to Indian tax as it does not carry on business in India through a permanent establishment (an agency PE) as per articles 7 and 5 of the DTAA No other facts or contrary judgments have been brought on record before us by the Ld. DR in order ....
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....t available. In such a scenario, the income of a shipping business can be taxed where it maintains a permanent establishment. Accordingly, the permanent establishment principle modify the application of Article 8 in as much as an effective place of management ships or aircrafts is operated by the permanent establishment becomes the place where PE is situated and as a result, the profits derived from operating such ships or aircrafts are taxable in the state of PE. Ergo, if assessee has a PE in India, then income from operation of ships is to be taxed in the place where PE situated, i.e., in India. 16. The case of the ld. AO is that FCIPL was the sole agent of the assessee who was doing agency work for the assessee and it is a dependent agent which is habitually concluding contracts on behalf of the assessee. While making such a statement AO referred that agent was doing various clearances from the Government department and authorities and contracting with the parties for loading of cargo, dealing with labours etc., and maintaining and operating a bank account on behalf of the assessee. Nowhere, he has stated that either from the agreement or from any other document or evidence, ....