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2008 (11) TMI 421 - AT - Income TaxDTAA - Entitled to to 75 per cent relief regarding payment of income-tax in view of Article 9(1) of DTAA - expression ‘operation of ships’ - treatment of Inland Haulage Charges - Article 8 of the OECD Model Convention. Expression "operation of ships" - HELD THAT:- The expression "operation of ships" has not been defined in the Article itself. The comparison made by the learned Departmental Representative between the provisions of Article 9 of DTAA and Article 8 of OECD Model Convention has no relevance. The word ‘derived’ in para 1 of the above Article is followed by the words ‘by an enterprise of Contracting State’ and not by the words ‘from operation of ships’. The provisions contained in Article 9(2) of the DTAA have nothing to do with the definition of the expression ‘operation of ships’. In the present case, the assessee could not furnish the relevant details before the Assessing Officer. However, it filed additional evidences before the CIT(A) to establish the linkage between the feeder vessel and the mother vessel on sample basis. That shows that the entire evidence was not furnished before the CIT(A) in this regard - the assessee would be at liberty to establish that the transportation of cargo was carried out by mother vessel either owned or leased or chartered by the assessee. The order of the CIT(A) is, therefore modified and the matter is restored to his file for fresh adjudication in the light of the observations made in the preceding paragraphs. Treatment of Inland Haulage Charges - HELD THAT:- This issue stands covered by our decision in the case of Dy. Director of Income-tax v. Safmarine Container Lines N.V. [2008 (7) TMI 444 - ITAT BOMBAY-L] held that such charges would fall within the scope of the expression "profits from operation of ships" if such amount is minor in comparison to freight relating to main voyage. Admittedly, the amount of haulage charges is negligible and, therefore, would fall under Article 9(1) itself. However, such treatment would depend on the treatment of freight relating to the voyage by feeder vessels. If the CIT(A) finds that freight attributable to feeder vessel falls under Article 9(1) then such charges would also fall under Article 9(1). Otherwise, such charges would be treated as business profits falling under Article 7 of the DTAA. Accordingly, the CIT(A) would pass appropriate order in this regard. Assessee had alternatively claimed before the CIT(A) that if the exemption is not allowable under Article 9, then such business profits falling under Article 5 would not be assessable in the hands of the assessee inasmuch as the assessee has no permanent establishment in India. It has also been contended before the CIT(A) that the rate of tax would have been 35 per cent instead of 48 per cent. If the CIT(A) finds that a portion of the profit earned by the assessee is not exempt under Article 9, then he would also adjudicate the above issues after giving adequate opportunity to the assessee. This would dispose of the grounds contained in the assessee’s appeal. Hence, the appeal of the revenue is partly allowed while the appeal of the assessee is allowed for statistical purposes.
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