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2016 (10) TMI 1178 - AT - Income TaxEntitled to the benefit of Article 9(1) of DTAA between India and Denmark - Inland Haulage Charges (IHC) and also IHC related to movement of cargo from ICD/CFS from Indian Ports and Vice Versa within the context of section 44B - Held that:- 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, a fact which is undisputed. IHC is not only directly connected with the business of shipping but it is also a part of overall international voyage and hence it is directly covered within the definition of profits from operation of ships in international traffic. IHC earned by the assessee is taxable only in Denmark and not in India as per Article 9(1) of the India Denmark Tax Treaty. We also noted from the facts that single BL is issued by the assessee to its shippers for the entire combined transport i.e from the place of origin in India to final destination outside India. It is also a fact on records that the assessee is not carrying out separate business activity of carrying cargo between mainland and a port in India, without any obligation of its transport on its ship in international waters. This issue is covered in favour of the assessee by decision of the Co-ordinate bench of Mumbai Tribunal in the case of Deputy Director Of Income Tax (International Taxation v. Safmarine Container Lines N.V. [2010 (5) TMI 670 - ITAT MUMBAI]. 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 connected with such transportation will always be included within the term “operations of ships”. The activities of the IHC are connected directly or an ancillary activity that provides minor contribution and should not be regarded as a separate business to the operations of ships. These activities are linked or connected to each other and as such one cannot say that one is to be conducted efficiently without the other and which have a nexus to the main business of the assessee of operations of ships should be considered as integral part of income from shipping operations. Accordingly, we allow the claim of assessee and hence, this common issue of assessee appeal is allowed and that of revenue is dismissed. Whether the amount received by the assessee from Maersk India Private Limited (MIPL) towards MIPL’s ship of IT system usage and support cost of SAP based on ERP Solution i.e. Finance and Accounting of Container Transport (FACT) is taxable in the hands of the assessee as Royalty/Fees for technical services under the Act as well under the provisions of DTAA between India and Denmark or not? - Held that:- The FACT cost represent merely allocation of cost incurred and hence in the nature of reimbursement of expenses not having any element of profit embedded in it. Such recovery only includes proportionate cost incurred by the assessee for the development and maintenance of the system. Such recoupment of cost does not constitute income chargeable to tax in the hands of the assessee. It is undisputed that the assessee is in business of conducting operation of ships in international traffic and not engaged in the business of providing communication services, and therefore, per se no separate royalty/FTS were rendered by the assessee. We allow this issue of assessee’s appeal. Levying interest u/s 234B the Appellant was not liable to pay any advance tax - Held that:- The issue is covered in favour of the assessee in the case of DDIT (IT) Vs NGC Network Asia LLC (2009 (1) TMI 174 - BOMBAY HIGH COURT), wherein it is held that interest u/s 234B of the Act will not apply to non-resident assessee
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