TaxTMI 
TaxTMI 
2026 (7) TMI 199
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..... 2. Insofar as the first named assessee is concerned, appeals relate to Assessment Years 2015-16, 2016-17, 2017-18, 2018-19 and 2023-24. Whereas, in respect of the second named assessee, appeals relate to Assessment Years 2016-17, 2017-18, 2018-19 and 2022-23. Since, issues arising and facts involved in the appeals are more or less identical, they have been clubbed together and disposed of in a consolidated order, for the sake of convenience. Bay-Lines, (Appeals by the assessee) ITA Nos. 520 to 524/Mum/2026 Assessment Years- 2015-16 to 2018-19 and 2023-24 3. At the outset, learned counsel appearing for the assessee submitted that since the Assessing Officer has made comprehensive observations in Assessment Year 2016-17, the appeal relating to the said assessment year may be taken up as the lead appeal and the decision taken therein can be applied in all other appeals. 4. The learned Departmental Representative (DR) agreed with the aforesaid submission of the assessee. 5. Insofar as appeal relating to IT(IT)A No. 521/Mum/2026 in Assessment Year 2016-17, the assessee, in total, has raised five grounds. In Ground No. 1, assessee has challenged the denial of benef....
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....e from such transportation of goods. During the year under consideration, the assessee had received an amount of Rs. 103,83,63,109/- towards freight received from transportation of goods. Applying Section 44B of the Act, the assessee had computed income at the rate of 7.5% of the gross receipts and worked out the quantum of profit at Rs. 7,78,77,233/-. In the return of income filed, the assessee claimed exemption under Article 8 of the India- Mauritius DTAA and offered Nil income. As discussed earlier, the Departmental Authorities denied benefit of Article 8 of the treaty to the assessee, holding that POEM of the assessee is neither in Mauritius nor in India. Having held so, the Departmental Authorities proceeded to examine the alternative claim of non6 taxability of the receipts on account of absence of PE in India. In this context, the Assessing Officer observed that the assessee has an agent in India, namely M/s Freight Connection India Pvt. Ltd., (FCIPL), who carries out business in India on behalf of the assessee. He observed, though the ITAT in assessee's case in past assessment years had held that the assessee had no PE in India, however, he declined to follow the decisions ....
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....the assessee. Thus, he concluded that FCIPL is not only a DAPE of the assessee in India but is also a fixed place PE as its premises were periodically used by the employees of the assessee. Thus, he concluded that the income derived by the assessee, being in the nature of receipt from business and profession, is attributable to the PE in India. Hence, taxable under Section 44B of the Act. The assessee contested the said decision of the Assessing Officer by filing an appeal before learned First Appellate Authority. While deciding the appeal, learned First Appellate Authority held that FCIPL, being an agent of independent status, cannot be considered as DAPE of the assessee in India. In this context, he relied upon the decisions of the ITAT in assessee's case in past assessment years. However, with reference to existence of fixed place PE, learned First Appellate Authority agreed with the Assessing Officer that the assessee had at its disposal the premises of FCIPL for carrying out day to day business activities. Accordingly, assessee has a fixed place PE in India in terms with Article 5(1) of India Mauritius Treaty. Though, he accepted that in past assessment years ITAT had held tha....
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....he observations of the Assessing Officer and Learned First Appellate Authority. 15. We have considered rival submissions and perused the materials on record. We have also applied our mind to the judicial precedents cited at the time of hearing. Though, the Assessing Officer had held that the assessee has fixed place PE and DAPE in India in terms with Article 5(1) and 5(4) of the India-Mauritius DTAA, however, learned First Appellate Authority, relying upon the decisions of the ITAT in assessee's case and other attending facts and circumstances, has held that FCIPL being an agent of independent status cannot be treated as DAPE of the assessee. However, he has agreed with the Assessing Officer that the assessee has a fixed place PE in India as the General Manager of FCIPL, Mr. G.H. Surty, regularly visits the premises of FCIPL. Hence, the premises are at the disposal of the assessee. He has further held that since FCIPL carries out the business activities of the assessee using the software provided by the assessee, it is actually the assessee, which is carrying out business operations in India by using the premises of FCIPL. While coming to such conclusion, learned First Appellate....
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....(iii) for scientific research, or (iv) for similar activities, which have a preparatory or auxiliary character for the enterprise. 4. Notwithstanding the provisions of paragraphs (1) and (2) of this article, a person acting in a Contracting State for or on behalf of an enterprise of the other Contracting State [other than an agent of an independent status to whom the provisions of paragraph (5) apply] shall be deemed to be a permanent establishment of that enterprise in the first-mentioned State if : (i) he has and habitually exercises in that first-mentioned State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise ; or (ii) he habitually maintains in that first-mentioned State a stock of goods or merchandise belonging to the enterprise from which he regularly fulfils orders on behalf of the enterprise. 5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission ag....
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....rvey conducted in the year 2016 and software was provided to the FCIPL in 2014, the earlier decisions of the ITAT had no occasion to deal with these facts. Hence, the decisions will not apply. Thus, the mainstay of the reasoning of learned First Appellate Authority qua the existence of fixed place PE is based on the facts coming out of the statement recorded from the Director of FCIPL during the survey. For better appreciation, it is necessary to look into the statement recorded, which has been generously reproduced in the assessment order. 20. Before we refer to the specific questions and answers, it is necessary to record that the assessee has appointed M/s. Sun Marine Shipping Services LLC, an entity operating out of Dubai, as its managing agent to look after the business activities. The Assessing Officer has recorded a finding of fact in assessment order that for Assessment Year 2016-17 assessee had paid USD 132981 as management fee to M/s Sunline Shipping LLC. Mr. B.H. Surty happened to be the General Manager of Sun Marine Shipping LLC. In answer to question no. 6, the Director of FCIPL had stated that the company acts as an agent of the assessee and ARC Line in India. He h....
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.... named Sunliner application through which the movement of the containers were tracked. It was stated that FCIPL was given access to the software through login credentials. Explaining the use of software, it was stated that basically the software is used for monitoring location of the containers. It was explained by the Director of FCIPL that when a container is imported, if it is empty, it is moved to port and necessary entries made in the software stating its location. Similarly, a container laden with goods when imported will be taken delivery by the person importing the goods and the container will be taken to his factory and necessary entry in the software is made regarding the location of the container. Once the ladden containers are returned back to Depo after unloading the goods, again entries are made in the software. With reference to question no. 50, the Director of FCIPL stated that the business activity of the assessee is undertaken based on instructions received from Mr. B.H. Surty, General Manager of M/s Sun Marine Shipping Services LLC with regard to freight to be charged, collection of freight and transportation of cargo. With reference to question number 51, it was....
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....India for those years. The Department has not accepted the decision of ITAT on this issue and before the Hon'ble Bombay High Court. In view of the same, the issue is being taken up as a recurring issue." 23 Aforesaid observations of the Assessing Officer leave no room for doubt that there is no factual distinction between the past assessment years and assessment years under dispute before us. However, the Departmental Authorities, as discussed earlier, have attempted to make out factual distinction purely based on the statement recorded at the time of survey undertaken in case of FCIPL. In this context, the Departmental authorities have selectively relied upon some specific questions and answers to determine the existence of fixed place PE on account of visit of Mr. B.H. Surty to India and the use of web-based software of the assessee by FCIPL. To determine, the existence of fixed place PE in terms with Article 5(1) of the India- Mauritius DTAA, two crucial tests are required to be satisfied. Firstly, there must be a fixed place at the disposal of the non-resident entity in India-known as disposal test and secondly, such fixed place is being used by the non-resident entity for c....
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....t is necessary to briefly discuss the facts relating to this case and the ratio laid down by the Hon'ble Supreme Court. Hyatt International South West Asia Ltd., a non-resident entity incorporated in United Arab Emirate (UAE), had entered into two Strategic Oversight Services Agreements (SOSA)with Asian Hotels Limited at Delhi and Mumbai. Under the terms of the said agreement, the non-resident entity agreed to provide strategic planning services and know-how to ensure that the hotel was developed and operated as an efficient and high quality international full-service hotel as per the standard maintained by Hyatt brand. In course of providing such services the employees of the non-resident entity frequently visited the premises of the Indian hotels and the cumulative period of their stay in India exceeded the threshold limit of nine months under Article 5(2)(1) of India- UAE-DTAA. It was the case of the non-resident entity that it did not exercise any control or dominion over any part of the premises but was merely involved in policy decisions to enforce brand standard. It was further stated that as per the terms of SOSA, the role of the non-resident entity was limited to strategic....
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....39;ble Court observed that the non-resident entity exercised pervasive control over the hotels in India having following powers: (i) appoint and supervise general manager and other key personnel, (ii) Implement human resource and procurement policies, (iii) Control pricing, branding and marketing strategies, (iv) Manage operational bank account, (v) Assign personnel to the hotel without requiring the owner's consent. 28. Thus, the factual position in case of Hyatt International South West Asia Ltd. (Supra) clearly demonstrated that not only it had a fixed place at its disposal in the premises of Indian hotel but it carried out regular business activity from such fixed place. Whereas, in case of the present assessee, the primary conditions of Article 5(1) of India-Mauritius treaty that there should be a fixed place and from such fixed place business activity of the non-resident should be regularly carried out, are not fulfilled. The facts on record reveal that only one employee, that too, of the managing agent of the assessee visited India every three to four months for a duration of one week and during the period of stay in Mumbai he ....
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.... will not apply. In our view, even after the survey operation in the premises of FCIPL, there is no distinct change in the factual position between the pre-survey and post-survey period. Apart from the statement recorded from the Director of FCIPL, the Department is not in possession of any other evidence to demonstrate effective control of the assessee or its Managing agent over the premises of FCIPL. Nor there is any evidence to indicate that either the assessee or its Managing agent are conducting the business of the assessee from the premises of FCIPL. Even, after repeatedly scanning through the statement recorded from the Director of FCIPL we have not come across any material to establish the case of the Department on existence of fixed place PE. Thus, in our considered opinion, the observations of the Coordinate Benches in assessee's case in past assessment years would still hold good, insofar as existence or otherwise of PE is concerned. Suffice to say, in case of ADIT vs. E Funds IT Solution Inc. (2017) 86 taxman.com 2000 (SC), the Hon'ble Supreme Court has held that the burden is on the revenue to demonstrate existence of PE. In the facts of the present appeal, we are of t....
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....the second issue relates to aggregation of income of Bay Lines and Arc Lines for the purpose of attribution of profit to the PE in India. 36. We have heard the parties and perused the materials on record. As far as the issue of existence or otherwise of DAPE is concerned, the Assessing Officer right from Assessment Year 1999-2000 till 2014-15 had held that FCIPL is the DAPE of the assessee in India. However, while deciding the issue in earlier assessment years, the Coordinate Benches have consistently held that FCIPL, being an agent of independent status, cannot be considered as DAPE of the assessee. The basic reason for which the Coordinate Benches came to the such conclusion is that FCIPL was not working exclusively for the assessee but was working as an agent of various other entities in its regular course of business. The facts are no different in the impugned assessment years. As rightly observed by learned first appellate authority, in the assessment years under dispute, FCIPL was not exclusively working for the assessee. It was working as an agent in independent capacity not only for the assessee but for various other entities. Commission income earned by FCIPL from the a....