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2015 (11) TMI 274 - AT - Income TaxAssessment under section 172(4) - ‘vessel voyage returns’ filed by the Atlantic Shipping Pvt Ltd, under section 172(3) - validity of orders passed under 172(4) challenged without issuing a draft order as required under section 144C as the assessee is an eligible assessee under section 144(15)(b)(ii) - denial the benefits of India Denmark Double Taxation Avoidance Agreement - Held that:- The point of dispute being whether or not the course of action 144C was permissible, a decision in favour of the assessee is to be essentially followed with an opportunity being given to the assessee to be allowed to traverse that path. However, having held so in principle, on the peculiar facts of this case and for the reasons we will now set out, this conclusion is somewhat academic as we see no need to remit the matter back to the Assessing Officer for the reason that the assessee deserves to succeed on merits. As evident from the Directors’ report of Torm A/s which is filed before us in the paperbook, the assessee “has incurred a clearly unsatisfactory loss before tax of USD 579 million in 2012”. This report also states that the assessee incurred an operating loss of USD 253 millions which was stated to be on account of adverse market conditions. When assessee is incurring losses, in respect of its global operations, there cannot be an occasion to pay tax on the income. In these circumstances, if the freight receipts from India are not actually brought to tax in Denmark, it is not because of the profits from these receipts not being taxable in Denmark, it is because there are no profits embedded in these receipts. However, so far as Article 4(1) of Indo Danish tax treaty is concerned, all that is required of a Danish company to be entitled to treaty protection in India, is that its profits, on global basis, should be liable to tax in Denmark- irrespective of whether or not the assessee indeed earns any profits taxable in Denmark or whether or not such profits are actually subjected to tax in Demark. That condition, in our considered view and for the detailed reasons set out above, is clearly satisfied. As for the place of effective management being in Denmark, as required under Article 9(1), we have already taken note of the evidences in support of the place of effective management being in Denmark. In view of the above discussions, as also bearing in mind entirety of the case, we are of the considered view that the profits embedded in the freight receipts in question were not taxable in India. In this view of the matter, the Assessing Officer indeed erred in bringing the same to tax in India. The CIT(A) should have deleted the same. We, therefore, vacate the stand of the authorities below and delete the impugned tax demands. - Decided in favour of assessee.
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