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2012 (5) TMI 9 - ITAT MUMBAIArticle 8 of DTAA between India and Germany - Reference to DRP - Pooling/slot arrangements - Permanent Establishment (PE) - the entire ship was chartered by the assessee and the same was operated by the assessee and other carriers operated its feeder service. - held that:- the DRP has already granted relief to the assessee to the extent of the profit earned from transportation of cargo by feeder vessels and the assessee is able to establish the link between the feeder vessels with mother vessels voyage wise. Feeder services - operation of ships in international traffic - held that:- The assessee has not disputed the fact that freight receipts taxed u/s 44B is towards transportation of the cargo by feeder vessels under slot/pooling arrangements and the mother vessels was not owned, leased or chartered by the assessee. Hence, when there is no link between the transportation of cargo by the feeder vessels and transportation by mother vessels owned or chartered by the assessee, then the said activity cannot be termed as operation of ships in international traffic and subsequently the benefit of Article 8 of Indo German DTAA would not be available on such profit. - the benefit of Article 8 would be available only on the profit from the operation of ships in international traffic would not necessarily be available to the profits computed u/s 44B. What is a participation in a pool - held that:- it is clear that slot sharing is not the same as participation in a pool or a joint business or an international operating agents. Hence the nature of arrangement does not fall in Article 8(4) of DTAA. - Section 115V-(2)(ii)(A) Explanation (a), explains pooling arrangement. This does not include slot charter, etc. Section 115VB definition cannot be applied to DTAA as the definition is for the purpose of that chapter only and even then the requirement is that the slot has to be chartered. Application of article 7 of DTAA - held that:- There is no dispute that the assessee carrying out the business of operation of ships in India through its Agent M/s Hapag-Lloyd India Pvt Ltd. The agent in India concluding the contract of cargo transportation by issuing bill of lading which are legally binding on the assessee; therefore, the assessee is carrying out the business of operation of ships in India and thus is having a PE in India as per article 5 of DTAA. This is not a case of availing service of agent in support of the business but the assessee is carrying out business through the agent in India. Therefore, the source of income to the extent of booking of cargo by the agent in India and physically transported the cargo from port in India to the mother vessels is in India and constitute a PE in India. The assessee has earned income through such business in India and thus certainly said to have a source of income in India Apart from having a PE, when the assessee is carrying out the business in India and earned income from such source in India, then, the contention of the assessee is not acceptable that the income is not assessable to tax in India. As it is clear from the facts in the case in hand that the assessee has carried out the business in India and the agent was concluding the contract which is legally binding on the assessee; therefore, remuneration paid to the agent is not relevant factor for taxing the profits and gain at source from India.
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