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TMI Blog2013 (8) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Ld. CIT(A) on the above ground(s) be set aside and that of the Assessing Officer restored. 4. The facts in brief are that the assessee is a resident of UAE, engaged in the business of shipping. In the year under consideration the assessee has shown taxable income of Rs.1,03,43,715/-. In the course of assessment proceedings, the assessee claimed that the income so declared is not taxable in India, as per the Notification no. 282/2007- FTD (F.No. 503/2004-FTD), dated 28.11.2007, which came in force w.e.f. 03.10.2007. Besides the notification, the assessee, before the revenue authorities, also placed reliance on the decision of the coordinate bench in the case of ADIT vs Green Emirate Shipping & Travels, 99 TTJ 988 (Mum), (referred to in the assessment order), wherein it has been held that, "DTAA shall apply even though the assessee has not paid any taxes in the UAE, so long as the person is "liable to tax in the Contracting State". It was further observed in the decision that the person should actually be liable to tax in a country does not necessarily imply that the person should actually be liable to tax in that contracting state by virtue of an existing legal provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee was not eligible for Treaty benefit. He, therefore invoked the provisions of section 44B of the Income Tax Act, 1961, and computed the presumptive profit on total receipt of Rs. 32,32,60,607/- at Rs. 2,57,44,546/- applying the given rate of 7.5% and computed the tax payable at Rs.1,07,66,368/-, instead of Rs.1,03,43,715/-. 8. Aggrieved, the assessee approached the CIT(A), before whom, the assessee reiterated its arguments made before the AO and prayed that, the AO may be directed to allow the relief as claimed by the appellant company u/s 90(1)(a)(ii) of the Income-tax Act for the vessels operated by third parties, though not owned or chartered by the appellant company, also in view of the fact, that other pool partners, had received the benefit u/s 90. 9. The CIT(A), considering the detailed arguments of the assessee, held, "I have carefully gone through the order of the Assessing Officer and also the submission as made by the Authorized Representative of the appellant company. I find that the Assessing Officer had committed a mistake by not allowing the benefit of DTAA between India and UAE to the appellant company in the assessment Year 2006-07. Whereas, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and air transport - 1. Profits derived by an enterprise of a Contracting State from the operation by that enterprise of ships or aircraft in international traffic shall be taxable only in that State. 2. For the purposes of this Article, profits from the operation of ships or aircraft in international traffic shall mean profits derived by an enterprise described in paragraph I from the transportation by sea or air respectively of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of ships or aircraft including- (a) the sale of tickets for such transportation on behalf of other enterprises; (b) other activity directly connected with such transportation ; and (c) The rental of ships or aircraft incidental to any activity directly connected with such transportation. 3. Profits of an enterprise of a Contracting State described in paragraph I from the maintenance, or rental of containers (including trailers, barges, and related equipment for the transport of containers) used in connection with the operation of ships or aircraft in international traffic shall he taxable only in that State. 4. The provisions of paragraphs I and 3 shall also apply to prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, maintenance or rental of containers (including trailers and related equipment for the transport of containers) used for the transport of goods or merchandise. 5. The provisions of this Article shall apply also to income derived from participation in a pool, a joint business or an international operating agency. 6. Gains derived by an enterprise of a contracting State from the alienation of ships or containers oed and operated by the enterprise shall be taxed only in that State if either the income from the operation of the alienated ships or containers was taxed only in that State, or the ships or containers are situated outside the other Contracting State at the time of the alienation. ARTICLE 8- SHIPPING 1. Profits derived by an enterprise of a Contracting State from the operation by that enterprise of ships in international traffic shall be taxable only in that State. 2. For the purposes of this Article, profits from the operation of ships in international traffic shall mean profits derived by an enterprise described in paragraph (I) from the transportation by sea of passengers, mail, livestock or goods and shall include: (a) the charter or rental of ships incidental to suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, the case of the AO should be sustained. 13. The AR, submitted that the CIT(A) had taken into consideration the views expressed in the decision, which directly covers India UAE Treaty, i.e. the case of Green Emirate Shipping & Travels (supra), wherein the coordinate Bench held:- "8. Although the AO's objection to applicability of India-UAE tax treaty was only on the ground that the provisions of DTAAs do not come into play unless it is established that the assessee is paying tax in both the countries in respect of the same income, in the grounds of appeal before us it is also contended that the assessee-company failed to produce any evidence to the effect that it was 'liable to pay taxes' in UAE. The question then arises whether an existing liability to pay taxes in UAE is a sine qua non to avail the benefit of India-UAE tax treaty in India. On this issue also, we find guidance from the judgment of Hon'ble Supreme Court in the case of Azadi Bachao Andolan (supra). Referring to the Klaus Vogel's Commentary on Double Taxation Conventions. Their Lordships, inter alia, observed as follows "In other words, Contracting States mutually bind themselves not to levy taxes or to tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for availing relief under the treaty from taxability in the other country. All that is necessary for this purpose is that the person should be 'liable to tax in the Contracting State by reason of domicile, residence, place of management, place of incorporation or any other criterion of similar nature' which essentially refers to the fiscal domicile of such a person. In other words, if fiscal domicile of a person is in a Contracting State, irrespective of whether or not that perso1 is actually liable to pay tax in that country, he is to be treated as resident of that Contracting State. The expression 'liable to tax' is not to read in isolation but in conjunction with the words immediately following it, i.e., 'by reason of domicile, residence, place of management, place of incorporation or any other criterion, of similar nature'. That would mean that merely a person living in a Contracting State should not be sufficient, that person should also have fiscal domicile in that country. These tests of fiscal domicile which are given by way of examples following the expression 'liable to tax by reason of, i.e., domicile, residence, place of management, place of incorporation, etc., are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to tax' in UAE Treaty, DTAA becomes operative. This, exactly is the ratio laid down by the coordinate Bench of the ITAT at Kolkata in Green Emirates (supra). 16. In the above circumstances, that the assessee shall get the Treaty benefit, we would now embark on the argument of the AR that the ratio laid down by Balaji Shipping (supra) should be applied and on the other hand, DR's argument that the ratio laid down in Federal Express Corporation, reported in 125 ITD 1 (Mum) should be applied, as the language used for Article 8 in UAE Treaty is similar to US Treaty. 17. We are of the opinion that the case of Balaji Shipping (supra) cannot be relied upon, simply because Article 8 is differently worded. We are, therefore, convinced with the arguments of the DR that the wordings used in Article 8 in UAE Treaty is pari materia to the language used in US Treaty. This fact, is accepted by the AR. In these circumstances, when we find that there is no detailed reasoning in the orders of the revenue authorities, giving the nature of the receipts from shipping business, we, in the interest of justice, consider that the issue be restored to the file of the AO, to reconsider the exact nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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