TMI Blog1996 (3) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... "Commuter basis". The agreement starting from November 1985 was for two years. As per schedule of work the assessee was required to work 35 days in the foreign location followed by 35 days' field break in the country of residence. The salary and other benefits were also specified in the agreement. On the facts the assessee claimed exemption of income from tax eviable under the Income-tax Act and filed a return declaring 'Nil' income. The exemption was claimed on three grounds----(a) Salary so earned is not taxable by virtue of the provisions of sec. 10(6)(viii) of the Act, (b) At least the salary earned for the field break period is not taxable in India; (c) The salary is otherwise exempt under Article XIV of the Agreement for Avoidance of Double Taxation (AADT) between India and France. The claim of the assessee was disallowed on all the grounds by the Commissioner of Income-tax (Appeals). The Assessing Officer however did not discuss the third ground in his order. The assessee is aggrieved. 3. Mr. M.A. Dalvi and Mrs. Tara Rao, Authorised Representatives for the assessees repeated the same arguments as taken before the learned CIT(Appeals) that the assessee is a non-resident w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that in the aforesaid case the issue related to the provisions of Article 9 which deals with income from the operation of ship in International Traffic and hence the ratio is not applicable to the case of the assessee. 5. We have carefully considered the rival submissions as made and have also consulted the papers filed in this connection as well the written submissions given from time to time. Before us the controversy has narrowed down to an issue whether the SEDCO 445 is a ship or not. The term 'ship' has not been defined in the income-tax Act though it occurs at various places in different provisions of the Act. In such a situation it is permissible to refer to the meanings given in Dictionary, General Clauses Act and also other allied Acts if need be. This is to find out the general sense in which the word is used in common parlance. However regard is to be had to the context in which the expression is used. Both the parties have made reference to the Random House Dictionary of the English Language where 'ship' has been defined as a 'vessel' esp. a large ocean-going one propelled by sails or engines. Under the Words and Phrases Legally Defined(Third Edition) under the Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... navigation and squarely fits in with the description as given in the Dictionaries as mentioned above. Since its functional purpose is drilling of the oil well it is necessarily to be kept stationary in a place for which it is specifically so designed. The purpose for which it has been designed does not take away from it the basic characteristic of being a ship and as such it cannot be termed as a drilling unit. For our view we also derive a support from the judgment of the Hon'ble Bombay High Court in the case of Amarship Management (P.) Ltd. [Writ Petition No. 520 of 1994] where the assessee was also a party. The question before their Lordships was whether the oil rigs are vessels for the purposes of Customs Act, 1962 as defined in section 2(21) thereof. While deciding the issue their Lordships made a reference to the definition of foreign going vessel or aircraft or any vessel as defined in section 2(21) of the Customs Act. Reference was also made to the Merchant Shipping Act. After considering all these definitions it was held that the vessel is of a wide amplitude and it includes sailing vessel or other description of vessel used in navigation. Accordingly oil rigs were held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent who visitIndiafor a period of short duration in connection with work which promotes economic growth. The object becomes clear if the provisions of section 10(6) are scanned. In various clauses exemptions have been provided in case of individual assessees who are not citizens ofIndia. As held by their Lordships of Madras High Court in the case of CIT v. First LeasingCo.of India Ltd. [1995] 216 ITR 455: " Any legislative provision is to be construed in the light of the purpose with which it has been introduced. A provision in the statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it. " Thus the provisions have to be construed in the background of the purpose for which they have been brought on the statute. In the case of Interocean Shipping (I) (P.) Ltd. the issue before the Tribunal was whether the hire charges of the vessel fell within article 9 of the Indo-UK DTA as was then in existence, which dealt with shipping of Article 7 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement for Avoidance of Double Taxation (AADT) betweenIndiaandFrance. According to the learned AR the AADT overrides the Income-tax Act which is also as set out in Circular No. 333 dated April 2, 1982 issued by the Central Board of Direct Taxes and as held by the Hon'ble Andhra Pradesh High Court in the case of CIT v. Visakhapatnam Port Trust [1983] 144 ITR 146. The assessee satisfies all the conditions laid down in Article XIV of the AADT betweenIndiaandFranceand as such the assessee's salary is not taxable inIndia. There is no dispute in regard to the assessee's presence inIndiabeing less than 183 days in the previous year and the remuneration having been made by SFIDI which is not a resident ofIndia. The short dispute relates to the third condition which refers to the deduction of the salary in the computation of the profits of the company. The assessability of Sedco Forex International Inc. under section 44BB of the Act does not advance the case of the department. SFIDI has no permanent establishment inIndiaas defined under Article II of AADT. Thus the salaries paid are not allowed as a deduction in the computation of the profits of the company. For the proposition that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years, a person 'resident' in India and liable to tax under the tax laws of India as well as Pakistan or Bangladesh will be entitled to relief from double taxation in India only in accordance with the provisions of section 91." The aforesaid proposition has also been upheld by the Andhra Pradesh High Court in the case of Visakhapatnam Port Trust. The issue in question is whether the provisions of AADT are applicable in the case of the assessee or not. The provisions of Article XIV of the Agreement for Avoidance of Double Taxation betweenIndiaandFrancereads as under : " ARTICLE XIV (1) Subject to the provisions of Article XII, salaries, wages, or other similar remuneration for services as an employee performed in one of the Contracting States by an individual who is a resident of the otherContractingStatemay be taxed only in theContractingStatein which such services are rendered. (2) Notwithstanding the provisions of paragraph (1) of this Article, salaries, wages, or other similar remuneration paid to an individual who is a resident of one of the Contracting States for services performed in the other Contracting State shall not be subjected to tax in the other Contracting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntracting State if it carries on in that other Contracting State a construction, installation or assembly project or the like; (cc) the use of mere storage facilities or the maintenance of a place of business exclusively the purchase of goods or merchandise in the country of purchase, shall not constitute a permanent establishment; (dd) a person acting in one of the Contracting States for or on behalf of an enterprise of the otherContractingStateshall be deemed to be a permanent establishment of that enterprise in the first mentionedContractingState, if--- (1) he has and habitually exercises in the first-mentioned Contracting State, a general authority to negotiate and enter into contracts for or on behalf of the enterprise, unless the activities of the person are limited exclusively to purchase of goods or merchandise for or on behalf of the enterprise, or (2) he habitually maintains in the first-mentioned Contracting State a stock of goods or merchandise belonging to the enterprise from which the person regularly fulfils orders for or on behalf of the enterprise, or (3) he habitually secures orders in the first-mentionedContractingStateexclusively or almost exclusively, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
