TMI Blog2022 (6) TMI 1370X X X X Extracts X X X X X X X X Extracts X X X X ..... India-Denmark DTAA , Article-9(4)(b), nevertheless, considering the nature of activity and the services provided by the assessee to its customers vide a composite Bill of Lading it can be safely inferred that the activity of Inland Haulage is directly connected with transportation of goods in international traffic. The leg of transportation of containers from Inland to Port for further transportation in International traffic is a composite activity for which single Bill of Lading is issued by the assessee. No hesitation in holding that Inland Haulage Charges earned by the assessee are inextricably linked to shipping business in international traffic. The activity of shipping container from inland to the Port for further shipping it to international traffic is an integral part of operation of ships. Hence, IHC cannot be disintegrated from profit derived from shipping business as envisaged under Article -8 of India-UAE DTAA. Ergo, IHC are not taxable as business profit in India. The ground No.5 of appeal is allowed. - ITA NO.1079/MUM/2021 - - - Dated:- 16-6-2022 - SHRI VIKAS AWASTHY, JUDICIAL MEMBER SHRI GAGAN GOYAL, ACCOUNTANT MEMBER For the Appellant : Shri Pora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned DCIT and Hon'ble DRP has erred in denying the benefit of Article- 8 of the India and UAE Tax Treaty to the Appellant by holding it liable to tax in India under section 44B of the Income-tax Act, 1961 (IT Act) with respect to its shipping income of Rs.12,39,99,720/- (being 7.5% of total freight collections of Rs. 1,65,33,29,603) derived from operation of ships in international traffic. 6. The ld.Counsel for the assessee submitted that the issue raised in ground No.2 of the appeal is identical to the issue raised in Assessment Year 2016-17 in appeal by the assessee in ITA No.7113/Mum/2019 decided by the Tribunal vide order dated 30/08/2021. The ld.Counsel for the assessee pointed that the DRP while deciding the issue has categorically stated that the facts in the Assessment Year 2017-18 are pari-materia to the facts in Assessment Year 2016-17. Hence, the DRP followed findings and directions issued by the DRP in Assessment Year 2016-17 and rejected the objections of assessee. The ld.Counsel for the assessee further pointed that in Assessment Year 2016-17 the DRP agreed that the Hon'ble Bombay High Court in the case of Balaji Shipping (UK) Ltd. reported as 253 CTR 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that benefit of article 8 must be extended to entire freight receipts-irrespective of whether the earnings are relating to feeder] vessels or by the ships in international traffic. The assessee gets the relief accordingly. 8. Ground no 1 2 are thus allowed. In the absence of any contrary material we see no reason to take a different view. Respectfully following the order of Co-ordinate Bench ground No.2 of the appeal is allowed. 9. The ground No.5 of the appeal assailing addition in respect IHC reads as under: Ground 5 - On the facts and in the circumstances of the case and in law, the learned DCIT and Hon'ble DRP has erred in denying the benefit of Article 8 of the India - UAE Tax Treaty on Inland Haulage Charges amounting to Rs. 31,27,19,007 earned by the Appellant and taxing the same at 10% as per Rule 10 of the Income-tax, Rules 1962. 10. The ld.Counsel for the assessee submitted that the assessee issues bill of lading from point to point and not from Port to Port. The bill of lading includes the leg of Inland transportation, therefore, cannot be segregated from the international voyage. The IHC are inextricably linked to the movement of cargo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ships in international traffic shall be regarded as profits derived from the operation of such ships and the provisions of Article 11 shall not apply in relation to such interest. 4. The provisions of paragraphs (1), (2) and (3) shall apply to profits from the participation in a pool, a joint business or an international operating agency. 13. Article 8 of DTAA deals with profits derived by operation of ships in international traffic. Clause 2(b) of Article-8 refers to profit from the rental of ship including operation of container and related equipment used in connection with operation of ships in international traffic. Though Article-8 of India -UAE DTAA does not spell out explicitly that rental of containers include trailers and related equipment for the transport of container as has been mentioned in India -Belgium DTAA Article 8(2)(c) or India -Denmark DTAA, Article -9(4)(b), nevertheless, considering the nature of activity and the services provided by the assessee to its customers vide a composite Bill of Lading it can be safely inferred that the activity of Inland Haulage is directly connected with transportation of goods in international traffic. The leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al traffic operations. 36. As far as the first type of case is concerned viz. where the slot hire facility is availed of for carriage of goods from a port in India only up to the hub port abroad and is thereafter transshipped on vessels actually operated by the assessee up to the final destination, it is irrelevant whether slot hire agreements are considered to be directly connected with the operation of ships or not directly connected with the operation of ships by the enterprise. In such cases, the slot hire agreements are inextricably interlinked with and connected to the operation of ships by the enterprise. The first type of case would in fact be covered by paragraphs 4and 4.1 of the commentary. The Hon'ble High Court then concluded in para 42 as under:- 42. Our views on the two types of cases involved in the present appeal are in consonance with the view of the Delhi High Court, the OECD commentary and the commentaries referred to above. 10. We further noted that Hon ble Bombay High court in Balaji's case followed the decision of the Hon ble Delhi High Court in case of Director of Income-Tax. vs. KLM Royal Dutch Airlines (2009) 178 Taxman 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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