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2015 (3) TMI 93 - ITAT MUMBAIBenefit of Article 22 of DTAA between India and Switzerland - taxability of the profits from the operation of ships in international traffic earned by the assessee in India - Whether the property in respect of which international shipping income was received by the assessee company through shipping business carried on in India through the P .E. situated therein i.e. ships was effectively connected with such permanent establishment? - Held that:- Article 22(2) brings profits of the PE within the scope of Article 7 only if the relevant income of the PE arises from a right or property effectively connected with such relevant income of the PE arises from a right or property effectively connected with such PE which necessarily refers to the ship itself as the property which generates the income is the ship. In the circumstances when the ships clearly do not form part the assets of the PE in India but are the assets of the non-resident shipping company abroad, the same cannot be said to be effectively connected to such PE. Where the ships are owned or chartered by the non-resident shipping company abroad and the agency PE merely clears inbound cargo and books outbound cargo and carries out similar functions, the ships are clearly not the assets of the PE nor are they any other way effectively connected with the PE. Thus concluded that the provisions of Article 22(1) of the treaty would be applicable and the profits of shipping operations in international traffic in the case of non- resident shipping company would be taxable in the country of residence i.e. Switzerland and not in India. - Where the ships are owned or chartered by a non-resident shipping company and the agency PE merely clears inbound cargo and books outbound cargo and carries out similar ancillary functions, the ships are clearly not the assets of the PE nor are they is some other way effectively connected with a permanent establishment. - Decision in the case of Assistant Director of Income-tax, (International Taxation) -3(2) Versus Mediterranean Shipping Co. [2012 (11) TMI 326 - ITAT MUMBAI] followed - Decided in favour of assessee. Interest income received from the Income Tax Department on refund as per the Article 11 of the Indo-Swiss Treaty - CIT(A) directing to tax @ 10% - Held that:- Respectfully following the ratio laid down in ACTI Vs. Clough Engineering Ltd. [2011 (5) TMI 562 - ITAT, DELHI] that refund of income-tax is taxable under Article 11 i.e. @10% - Decided against revenue. Charging of interest u/s 234B - Held that:- This ground is also covered by the decision of Hon’ble Bombay High Court in the case of NGC Network LLC (2009 (1) TMI 174 - BOMBAY HIGH COURT). It has also been brought to our notice that in assessee’s own case, the Tribunal in A.Y. 2007-08 as decided this issue in favour of the assessee which has been confirmed by the Hon’ble High Court also. - Decided against revenue.
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