TMI Blog2018 (3) TMI 1832X X X X Extracts X X X X X X X X Extracts X X X X ..... COURT] held that where the goods are transported by an enterprise by availing of the slot hire facility obtained by it on the ship of another from a port in India up to a hub port abroad and from there transporting the goods further to their final destination upon a ship owned or chartered or otherwise controlled by it, would be covered by Article 9(1) of India-UK DTAA. Since the India-France DTAA is similar thereto, the Hon ble High Court held that the decision rendered in the case of Balaji Shipping UK Limited (supra) would apply to the assessee also. 25. Accordingly, by following the decision rendered by Hon ble Bombay High Court in the assessee s own case (referred supra), we hold that the freight charges received for transportation of Cargo through feeder vessels is part of shipping income eligible for relief under Article 9(1) of India-France DTAA Inclusion of Service tax as part of Gross receipts - This issue is covered in favour of the assessee by the decision rendered by Hon ble Delhi High Court in the case of Mitchell Drilling International (P) Ltd [ 2015 (10) TMI 259 - DELHI HIGH COURT] . We have noticed that the Ld DRP has considered the decision rendered by Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to the assessee. It filed its return of income declaring NIL income by claiming benefit of Article 9 of India-France DTAA. 5. The assessee claimed freight collections received from carriage of cargo in international traffic as shipping income not taxable under Article 9 referred above. The assessee also claimed following receipts as part of income from international traffic and accordingly claimed relief in all the three years:- (a) Receipts from Inland Haulage Charges and service tax collected thereon. (b) Freight charges received from transportation of cargo through feeder vessels to mother vessels. When the AO rejected the claim of the assessee in respect of above receipts and sought to tax them u/s 44B of the Income tax Act, the assessee contended that the service tax is a Statutory liability collected on behalf of the Government and accordingly claimed that it will not form part of gross receipts for the purposes of sec. 44B of the Act. 6. The AO, in his draft assessment orders passed for all the three years, took the view that the receipts from inland haulage charges and freight charges received for using feeder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that the decision in the case of Safmarine Container Lines N.V (supra) was rendered by Hon ble Bombay High Court under India- Belgium treaty, whereas the issue under consideration is required to be examined in the context of India-France treaty. The ld DRP observed that Article 8(b)(ii) of the India-Belgium treaty states that Income derived from operation of ships includes, inter alia, any other activity directly connected with such transportation . The Ld DRP observed that Article 9 of India-France only talks about the profits derived by an enterprise from the operation of ships in international traffic. It does not specifically include any other activity directly connected with such transportation . Accordingly the Ld DRP held that the activity relating to Inland transportation of goods cannot be construed to be an activity which is part and parcel of international traffic as defined in Article 3(1)(i) of the Treaty, as it is other activity connected with such transportation. (b) In respect of freight received from feeder vessels, the Ld DRP observed that the decisions rendered in the assessee s own case (ITA No.2175 of 2009 for AY 2002-03) and in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income derived from operation of ships would include, inter alia, any other activity directly connected with such transportation , while it was so provided in India-Belgium DTAA. Since the decision rendered by Hon ble Bombay High Court in the case of Safmarine Containers Lines NV (supra) has been rendered in the context of India-Belgium DTAA, the Ld DRP has held that the said decision will not be applicable to the provisions of India-France DTAA. 12. The Ld A.R referred to Article 8 of the Model Tax Convention of OECD, which prescribes taxability of income from Shipping, inland waterways transport and air transport. Article 8(1) is relevant here and the same is extracted below:- Profits from operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated. The Ld A.R submitted that the Commentary on Article 8 clarifies that the above said Article would also cover profits from activities which are not directly connected with the operation of ships. For the sake of convenience, we extract below the relevant paragraph from the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question of taxability of Inland Haulage Charges came to be considered in the case of a Denmark Company named A.P.Moller Maersk A/S by the ITAT on several occasions. In its order dated 15-02-2017 passed in ITA No.1798/Mum/2015, the co-ordinate bench has decided this issue in favour of the assessee as under:- 6. Apropos ground no. 2-4 On this issue also Ld. Counsel of the assessee submitted that the issue is squarely covered in favour of the assessee by the decisions of the tribunal in assessee own case and also Hon'ble Bombay High Court also for earlier year. Per Contra Ld. DR not dispute this proposition. 7. Up on careful consideration we find that similar issue was decided in favour of the assessee by this tribunal as per its order dated 7/10/2016 as above. 8. After elaborately considering the issue the tribunal concluded as under; In view of the facts of this case and precedence discussed above, we are of the view that the entire IHC of the assessee is necessarily in connection with transport of containers either discharged or loadable at Indian ports for the purpose of delivery through international waters and is directly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of DTAA, if more beneficial than the IT Act, the provisions of DTAA would prevail. Thus, in the instant case also, it is not possible for the revenue to unilaterally decide contrary to the Provisions of the DTAA. We are informed that the agreements inter A.P. Moller Maersk A/S ITAT No. 1798/Mum/2015 parties had been performed and the payments were made by the agents to use Maersk Net for the Maersk group's global shipping business and for no other reason. It related to shipment of cargo and their movement across the oceans. The views of the revenue that it amounted to technical service is misconceived. In fact, the Assessing Officer relied upon the decision of M/s. Arthur Anderson Co. in ITA No. 9125/Mum/1995, Mumbai, 'D' Bench in which the Tribunal had observed that repayment of money may be construed as reimbursement only if it is bereft of profits for the services rendered. There is no profit element in the pro rata costs paid by the agents of the assessee to the assessee and accordingly, we have no hesitation in holding that the amounts paid by the agents to utilize the amount arose out of the shipping business cannot be brought to tax as sought to be done. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance DTAA. The Ld A.R, on the contrary, submitted that the presence or absence of the above said provision will not make any difference. In support of this proposition, the Ld A.R placed reliance on OECD model conventions and the Commentary thereon, which are extracted above. 16. We notice that the decision in the case of Safmarine Container Lines N.V (supra) has been rendered by Hon ble Bombay High Court in the context of India-Belgium DTAA. However, in the case of DIT Vs. A.P.Moller Maersk A/S (ITA No.1306 of 2013 dated 29-04-2015), to which India-Denmark treaty would apply, the Hon ble Bombay High Court has held that the principles involved in the decision of Safmarine Container Lines N.V (Supra) also govern the case of A.P. Moller Maersk A/S (supra). There is no dispute that the Article 9 of India- France DTAA is identically worded to the corresponding Article in India- Denmark DTAA. 17. We shall now discuss in brief the facts available in M/s A.P. Moller Maersk A/S case. The said company was resident of Denmark and hence India-Denmark DTAA applied to it. In order to help its agents in booking cargo and carrying out clearing agent works, the assessee ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also by the Hon ble Bombay High Court in the case of A.P.Moller Maersk A/S (ITA No.1306 of 2013), the ld A.R submitted that the absence of the expression any other activity directly connected with such transportation in the India-France DTAA will not make any difference. We notice that the contentions of the assessee also get support from the OECD model convention discussed supra. 21. In view of the foregoing discussions, we agree with the contentions of the Ld A.R on this issue. Accordingly we hold that Inland Haulage Charges received by the assessee shall form part of income from operation of ships in international traffic and accordingly Article 9 of India-France DTAA shall apply to it. Accordingly we uphold the order passed by Ld DRP in Ay 2012-13 on this issue and reverse the orders passed by it on this issue in AY 2013-14 and 2014-15. 22. The next issue urged by the parties relate to the taxability of freight charges received for transportation of Cargo through feeder vessels from Indian ports to the mother vessel standing in foreign ports/hub ports. It was brought to our notice that this issue is squarely covered by the decision rendered by Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) would apply to the assessee also. 25. Accordingly, by following the decision rendered by Hon ble Bombay High Court in the assessee s own case (referred supra), we hold that the freight charges received for transportation of Cargo through feeder vessels is part of shipping income eligible for relief under Article 9(1) of India-France DTAA. Accordingly we uphold the view taken by the Ld DRP in AY 2012-13 on this issue and reverse its decision rendered in AY 2013-14 and 2014-15 on this issue. 26. The next issue relates to the inclusion of Service tax as part of Gross receipts. The assessee has collected service tax also on Inland haulage charges collected from its clients. Since we have held that the Inland Haulage Charges received by it is part of income from operation of ships in International traffic and is eligible for relief under Article 9(1), the question of assessing the same u/s 44B of the Income tax Act would not arise. Consequently the question whether the service tax would form part of Gross receipts or not in the context of sec. 44B of the Act would become academic in nature. In any case, this issue is covered in favour of the assessee by the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee for AY 2012-13, the assessee is supporting the order of Ld DRP in grounds 1 to 5. The Ground no.6 to 8 relates to the issue of Permanent Establishment, which we have dealt in the preceding paragraph. The Ground No.9-10 relates to computational error in the income computed by the AO. Since we have decided other issues in favour of the assessee, no income shall be liable to be taxed from out of those receipts. Hence these grounds shall become infructuous. 29. Other grounds urged by the assessee are either consequential in nature or not pressed. 30. We shall now take up the appeals filed in the case of M/s Delmas SAS (now merged with CMA CGM SA). The revenue has filed appeal and the assessee has filed cross objection for assessment year 2012-13. The grounds urged by the revenue relate to (a) Taxability of Inland Haulage Charges. (b) Taxability of freight charges received on transportation of cargo through feeder vessels. (c) Inclusion of service tax as part of Gross receipts. 31. The decision rendered by us in the hands of CMA CGM SA in the earlier paragraphs on identical issues shall equally ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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