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2008 (11) TMI 280 - ITAT BOMBAY-LEntitled to the benefit of Article 8 of DTAA between India and Brazil - operation of ships or aircraft - transportation of cargo - whether the CIT(A) was justified in holding that assessee was entitled to 100 per cent relief in respect of freight received on transportation of cargo from Indian port to ultimate destination in Brazil or sub-continent of South America as the case may be in view of art. 8 of DTAA between India and Brazil? HELD THAT:- Admittedly, the assessee is neither the owner nor lessee nor the charterer of the feeder vessel carrying the cargo from Mumbai port to destination in South Africa i.e., Durban. Therefore, profits attributable to such voyage would be outside the scope of art. 8 of Indo-Brazil treaty even though the assessee may be engaged in the business of transportation of goods in the international traffic. Whether the transportation of cargo from Durban to destination in Brazil or destination in sub-continent of South America by the ship owned/leased/chartered by the assessee would fall within the ambit of art. 8 of the above DTAA? - HELD THAT:- Such transportation would clearly fall within the ambit of expression 'operation of ships' as defined in art. 8(4). It has been shown from record that the assessee had issued one single bill of lading covering the entire transportation from Indian port to a destination in Brazil. The entire transportation is one and independent and the claim of the assessee regarding voyage between Durban to Brazil cannot be denied merely because the goods were not sent from Mumbai port through the ship owned/leased/chartered by it. Even if a part of the transportation is covered by the definition, assessee would be entitled to relief in respect of the profits attributable to the voyage covered by the ships owned/leased/chartered by the assessee. Hence, in our opinion, the assessee would be entitled to 100 per cent relief in respect of profits attributable to voyage between Durban to destination to Brazil or South America, as the case may be, transported by the ship owned, leased or chartered by the assessee. Whether the assessee is entitled to such relief in respect of transportation of goods though the ship owned/chartered/leased by members of consortium? - HELD THAT:- The assessee owned/chartered two ships which were part of the consortium. Other ships are owned/chartered by other members of the consortium. Any member can transport the goods through any of such ships. There is no dispute that goods were transported from Durban to destination in Brazil though such ships as per sample detail shown before us. The only dispute by Revenue is that the assessee could not link the goods sent through feeder vessel and mother vessels (owned/chartered by consortium). We are in agreement with the contention of the learned Departmental Representative that exemption can be granted only when it is shown that goods were transported from Durban to Brazil through the ships either belonging to the assessee or to the members of the consortium. If the goods had been transported by some other ships then art. 8 would not apply since in such cases it cannot be said that goods were transported through ships owned/leased/chartered by the assessee. Therefore, some verification is required. Profit arising from participation in pool - HELD THAT:- Profits from pool arrangement arise because of participation of assessee in such arrangement. Therefore, any profit arising from such arrangement would be taxable only in the State of residence. There is no distinction between the profits from operation of ships falling under paras 3 and 4 of art. 8. Therefore, in our opinion, profits from such arrangement cannot be taxed in India. Appeal allowed in part.
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