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TMI Blog2008 (11) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... e Agreement (DTAA) in respect of income from vessels used by the assessee on slot arrangement basis which were neither owned nor chartered by the assessee. 2.1 The assessee is a French company engaged in the business of operation of ships in international traffic. The assessee had an agent in India named "M/s. Container Marine Agencies Pvt. Ltd." The Assessing Officer in the assessment order held that agency constituted a permanent establishment of the assessee in India. There was however a double taxation avoidance agreement between India and France and as per article 9 of the said agreement, the income derived from operation of ships is taxable only in the State of residence. The phrase 'operation of ships' has not been defined either in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the operation of chartered ship or aircraft will in all cases come under article 8 of OECD MC which was similar to article 9 of DTAA whether or not the enterprise owned the vessel/aircraft, or CIT(A) accordingly held that the receipts from use of vessels on slot arrangement basis amounting to Rs. 5,97,51,061 would also been entitled for relief under article 9 of DTAA. Aggrieved by the said decision, the revenue is in appeal before the Tribunal. 3. Before us, the Learned AR of the assessee at the very outset pointed out that this issue has already been considered by the Tribunal in case of Balaji Shipping (UK) Ltd. in [IT Appeal No. 1540 (Mum.) of 2005] in which the Tribunal held that the assessee would be entitled to relief under DTA in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the provisions of paragraph 1, such profits may be taxed in the other Contracting State from which they are derived provided that the tax so charged shall not exceed: (a )during the first five fiscal years after the entry into force of this Convention, 50 per cent; and (b )during the subsequent five fiscal years, 25 per cent; of the tax otherwise imposed by the internal law of that Contracting State. Subsequently, only the provisions of paragraph 1 shall be applicable. 3.The provisions of paragraphs 1 and 2 shall also apply to profits from the participation in a pool, a joint business or an international operating agency engaged in the operation of ships. 4.For the purposes of this article, interest arising on funds connected with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us now consider whether freight income of the assessee on account of transportation of cargo in international traffic through slot charter arrangement by the ships operated by other enterprises can be said to be profits from operation of ship under Article 9 of Indo-UK Treaty in view of the OECD Commentary. Perusal of paragraph 4 of the said commentary shows that two kinds of profits are covered by Article 8 of OECD Commentary which is similarly worded. In the first category are those profits which are directly obtained by the enterprise from the transportation of cargo/passengers in the international traffic by the ships whether owned or leased or at the disposal of such enterprise. It also covers profits from activities directly connecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nternational traffic by the ships operated by other enterprises under slot chartering arrangement. Since Article 8 of OECD Model Convention and Article 9 of Indo-UK Treaty are similarly worded, Paragraph 6 of OECD Commentary discussed above would apply in defining the scope of Article 9(1) of Indo-UK Treaty as per the rule of contemporaneous exposition discussed in the earlier part of the order. Accordingly, it is held that the freight income earned by the assessee on account of transportation of cargo in the international traffic by ships operated by other enterprises under slot chartering arrangement would be taxable only in the State of residence and consequently, such income would be exempt from taxation under the Indian Income-tax Law. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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