TaxTMI 
TaxTMI 
2022 (7) TMI 1634
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....n the operation of ships. It is tax resident of Germany and has claimed relief under Article 8 of the DTAA between India and Germany. As part of its regular business of operation of ships internationally, the assessee is engaged in transportation of cargo to ports outside India. In the course of its shipping operations, Hapag-Lloyd transported cargo on vessels owned/chartered by it as well as through pooled vessels. The assessee claims that at times the vessels of Hapag Lloyd/Consortium partners do not call at the Indian ports on account of various reasons viz., the size of the vessels being too large to enter the Indian ports or the depth of Indian ports is not enough to allow proper anchorage etc. and in such cases, the assessee engages feeder vessel operators who transport cargo from the origin port to the hub port on feeder vessels and from the hub port to the destination port. However, the assessee issues bill of lading to the exporters for transportation of cargo for the entire journey i.e. from origin port to destination port. The assessee filed its return of income declaring total income at Rs.. Nil claiming that the entire income arising to it in India is represented by pr....
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.... the operation of ships by the enterprises. Without availing slot hire facilities, shipping enterprises would be unable to carry on their business of operating ships in international traffic at all in many cases. They may well lose much of their business. This indicates the close nexus between slot hire and the business of operation of ships in international traffic. If the Double Taxation Avoidance Agreement (DTAA') is construed to include activities directly or indirectly connected to the operation of ships, it would include slot charters/feeder vessels. Further, the Hon'ble Bombay High Court in the case of Balaji Shipping (UK) Ltd (77 DTR 361) has reiterated the above and held that income from slot is income from operation of ships and is an integral part of the business of shipping companies. We wish to respectfully submit that in the case of Hapag-Lloyd also, income from slot arrangement is part of the business of Hapag Lloyd and in light of the Hon'ble Bombay High Court ruling be considered as part of income from operation of ships in traffic. The conclusions drawn by the Hon'ble Bombay High Court squarely apply to HapagLloyd and acc....
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....gh use of feeder vessels is entitled to the relief provided in Article 8 of India-Germany tax treaty and hence, the same would not be taxable in India. Further, the Hon'ble Mumbai ITAT has upheld the above in its order dated 21 September 2016 for AY 2005-06 and order dated 22 July 2016 for AY 2006-07, 2008-09, 2009-10, 2010-11, 2011-12, order dated 31 October 2017 for 2013-14 and order dated 28 June 2019 for AY 2014-15. Additionally, the Hon'ble Bombay High Court has dismissed the appeal filed by the tax department for AY 2007-08 vide its order dated 28 September 2016. In view of the above, we wish to state that the income earned by Hapag-Lloyd by transportation of cargo under slot arrangement should not be taxable in India as per Article 8 of India-Germany DTAA." 5. Further, assessee submitted that identical issue in case of assessee's own case has been decided by the ITAT in favour of the assessee, which has been confirmed by the Hon'ble Bombay High Court, wherein appeal filed by the Assessing Officer is dismissed. Therefore, the issue is squarely covered in favour of the assessee. However, Assessing Officer held that revenue has not acce....
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....fficer / Dispute Resolution Panel ['DRP] has erred in not appreciating the facts in the case of the appellant and therefore appellant prays that the impugned order be treated as void ab initio. 1.2 The learned Assessing Officer/DRP erred in rejecting the appellant's claim for relief under Article 8 of the Double Taxation Avoidance Agreement entered into and subsisting between India Germany India Germany DTAA] in respect of its freight earnings of Rs. 16,68,06,241 on the premise that the earnings attributable to the carriage on feeder vessels were not eligible for the relief. 1.3 The learned Assessing Officer erred in refusing to follow the decision of jurisdictional Bombay High Court (HC)/ Income Tax Appellate Tribunal (Hon'ble TTAT) in the Appellant's own case for AY 2005-06 to AY 2011-12, AY 2013-14, AY 2014-15, AY 2015- 16 and AY 2016-17 wherein the Hon'ble HC/ Hon'ble ITAT has held that freight income from transportation of cargo through feeder vessels is eligible for benefit under Article 8 of the India-Germany DTAA. 1.4 The appellant prays that the learned Assessing Officer / DRP be directed to allow relief of Rs. 16,68,06,24....
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....ing the facts and circumstances of its case and the law prevailing on the subject it is entitled to a credit of Rs. 54,89,753/- being the total tax deducted at source from its income. 3.3 The Appellant submits that the learned Assessing Officer be directed to grant full credit for tax deducted at source and to recompute its tax liability accordingly. 3.4 The learned Assessing Officer ought to have considered the fact that the credit of the TDS of Rs. 36,76,585 is appearing in the Form 26AS of the appellant. 3.5 The learned Assessing Officer failed to appreciate that though the TDS of Rs. 18,13,168 is appearing in the Form 26AS of HLIPL, the same is claimed by the appellant since the income was offered to tax by the appellant for AY 2018-19 and on which it claimed treaty benefit. 3.6 The learned Assessing Officer failed to appreciate that the issue of grant of TDS appearing in the Form 26AS of HLIPL is covered in favour of the appellant by the order of the Hon'ble ITAT for the AY 2016-17 and AY 2017-18. 3.7 The learned Assessing Officer erred in not complying with the directions of the Hon'ble DRP wherein, the learned Assessing Of....
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....international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated. 2. If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship is a resident. 3. For the purposes of this Article, 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 Article 11 shall not apply in relation to such interest. 4. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency. 016. On the basis of above it is required to be decided that whether the freight income received on account of transportation of cargo on vessel Under slot arrangement is eligible for benefit of exemption to the assessee or not. In assessee's own case for assessment ye....
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..... He, therefore, granted relief only in respect of income arising from said freight. On objections filed by the assessee, the DRP took the view that the assessee was also entitled to exemption in respect of revenue from goods transported through feeder vessel owned or chartered by the assessee. He therefore, allowed relief in respect of further freight revenue earned by the assessee to the tune of Rs. 956,379,908/-. Thus income from balance freight revenue relating to feeder vessels amounting to Rs. 1,677,537,979/- has been taxed by AO u/s 44B of the income tax act on the ground that the revenue had been earned on the basis of slot sharing arrangement which was not eligible for relief Under the provisions of DTAA. 8. We find that the issue raised in this appeal as to whether the double taxation exemption provision will be available even in respect of sipping facilities used by the assessee on slot sharing arrangement basis has already been considered and decided by the honourable High Court of Delhi in case of Director Of Income Tax (International Taxation) Versus Balaji Shipping vide order dated 6 August 2012 in income tax appeal number 3024 and 3215 of 2009. In that case....
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....ly] linked to cargo handling business of the assessee and, therefore, it was the part of the income from business of operating an airline in international traffic and was eligible for exemption Under the treaty. 8.2 The High Court also referred to OECD model convention on avoidance of double taxation which provides that the treaty provisions relating to shipping will also apply to the activities directly connected with the operation of ships and also to activities indirectly connected which were ancillary to such operations. The article 4.1 of the model convention provided that any activity carried out primarily in connection with transportation by ships or aircraft should be considered directly connected with such transportation and article 4.2 provided that other operations which are so closely related that they should not be regarded as separate business or source of income held to be considered as ancillary to the operation of ship and aircraft in international traffic. The High Court therefore held that slot sailing arrangement was covered by the provision of clause 4.1 and 4.2 of the model OECD Convention. 8.3 Thus after considering the OECD model convention....
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....nourable High Court in Income Tax Appeal number 1362 of 2017 for assessment year 2009-10 which is decided on 6 January 2020, placed at paper book page number 4 - 6). The honourable High Court held that the impugned order of the coordinate bench has allowed the appeal of the assessee by following the decision of honourable High Court in Director Of Income Tax, International taxation versus Balaji shipping UK Ltd (2012) 211 taxman 535 and further the learned counsel appearing for the revenue in that case stated that the issue stands concluded in the favour of the respondent assessee by the decision of honourable Bombay High Court in Balaji shipping UK (supra). Based on this the honourable High Court held that no substantial question of law arises and the appeal of the revenue was dismissed. 019. Further as the fact shows that for assessment year 2009-10 also the honourable High Court following its own order for assessment year 2007-08 and also on the submission made by the learned counsel for the revenue that the issue stands covered, the appeal filed by the learned assessing officer was not admitted by order dated 7 January 2020. 020. Further the coordinate bench f....