TMI Blog2013 (9) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... orus Kaka Shri Divesh Chowla For the Respondent : Shri Mahesh Kumar ORDER Per P. M. Jagtap, A. M. This appeal filed by the assessee is directed against the order of ld. CIT(A) - XXXI, Mumbai dated 22-12-2006. 2. The assessee in the present case is a company incorporated and based in Netherlands and is a tax resident of that country. It is engaged in the operation of ships in international traffic in partnership with P O Nedlloyd Ltd., UK with profit sharing ratio of 56:44 under the name and style of P O Nedlloyd B.V. (PONP). In the return of income filed for the year under consideration, its share in the gross freight collection in India was shown by the assessee at Rs. 321,61,28,297/- and after deducting import freight of Rs. 160,413,551/- claimed to be exempt, the net freight collection from India was shown at Rs. 3,055,714,746/-. It was claimed that the assessee being a tax resident of Netherlands, the profit derived from the operation of ships in international traffic was taxable only in Netherlands in accordance with Article 8-A(2) of the agreement for Avoidance of the Double Taxation between India and Netherlands and accordingly the income received in India f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be treated as a resident to the extent its partners are liable to tax in USA. He found that similar provision, however, was not there in the Indo-UK Treaty. He held that there was thus no legal authority to extend treaty benefit to partners in respect of income earned by the UK partnership firm. He held that the partnership firm, being treated as fiscally transparent in UK, was not liable to tax in that state within the meaning of Article-4(1) and the same therefore could not be a resident of UK for the purposes of convention. He, therefore, denied the benefit claimed by the assessee under the treaty holding that the partnership firm PONP was not covered by the provisions of Article 9(5) of the India-UK DTAA and Article 8A of the Indo- Netherlands Treaty and brought the income from the operations in India to tax in the hands of the assessee u/s 172(2) of the Act at Rs. 24,12,09,632/- being 7.5% of the gross receipts of Rs. 321,61,28,297/-. 4. Aggrieved by the order of the A.O., appeal was preferred by the assessee before the ld. CIT(A) and elaborate submissions were made on behalf of the assessee before him in support of its case. After considering the said submissions as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of CIT vs. P.V.A.L. Kulandagan Chettiar (267 ITR 654) wherein it was held that the provisions of DTAA cannot impose a tax liability where the liability is not imposed by a local Act. It was held that where tax liability is imposed by the Act, the agreement may be resorted to either for reducing the tax liability or altogether avoiding the tax liability. He also relied on the decision in the case of Union of India vs. Azadi Bachao Andolan (263 ITR 706) wherein it was held that the effect of an agreement entered into by virtue of section 90 of the Act would be that if no tax liability is imposed under this Act, the question of resorting to the agreement would not arise. It was held that no provision of the agreement can possibly fasten a tax liability where the liability is not imposed by the Act. The ld. CIT(A) thus held that the share profit of the assessee from the partnership firm of PONP was exempt from tax in India as per section 10(2A) of the Act as the said firm was chargeable to tax in India in respect of its income. Against the order of the ld. CIT(A), the assessee has preferred this appeal before the Tribunal. 5. At the time of hearing of this appeal, the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AAC or the right to apply for a reference of a question of law arising out an order of the Tribunal is not confined technically to the party to the appeal but is a much wider right which may be exercised by any person who becomes liable to pay tax by any order against which the appeal is preferred. He contended that the present appeal filed by the assessee before the Tribunal is maintainable as per the provisions of section 253(1) of the Act. 7. We have considered the rival submissions on this preliminary issue and also carefully perused the relevant judicial pronouncements on this point including the case laws cited by the ld. counsel for the assessee. Section 253(1) read with clause (a) thereof contemplates that any assessee "aggrieved" by any of the orders mentioned therein may appeal to the Tribunal. There can be no quarrel with the proposition put forth by the ld. counsel for the assessee, which is also supported by the judicial pronouncements cited by him, that if the partnership firm is assessed, partners can be called upon to pay the tax of the partnership firm. Section 188-A of the Act also provides that the partners are jointly and severally liable to pay the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AAC had overruled the findings of the ITO on the issue of addition made on account of cash credits but did not consider it necessary to decide the legal issue raised by the assessee relating to the validity of assessment made by the ITO. When the assessee went up to the Tribunal and raised this legal issue, the Tribunal dismissed the appeal of the assessee as not maintainable on the ground that the demand raised against the assessee stood already cancelled by the order passed by the AAC. The Hon'ble Allahabad High Court, however, held that the principal ground in the appeal filed by the assessee before the Tribunal was related to the validity of the proceedings and it was necessary for the Tribunal to decide the same. It was held that the Tribunal misdirected itself in law in taking a view that subsisting demand was essential for maintainability of appeal before the Tribunal. The issue involved before the Hon'ble Allahabad High Court in the case of J T Jain (supra) as well as the relevant facts involved thus were altogether different than that of the present case and the reliance of the ld. counsel for the assessee on the said decision, in our opinion, is completely misplaced. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the effect of the judgment of the Tribunal was that the petitioner was relieved of his liability on account of tax payable by the firm thereby increasing the liability of Gokaldas to that extent. It was held that Shri Gokaldas thus rightly felt aggrieved by the decision of the Tribunal as his rights were vitally affected and was liable to pay tax as a result of the said order. It was held that although Shri Gokaldas accepted the decision of the AAC holding that income tax was payable by all the partners of the firm, he become aggrieved only as a result of the decision of the Tribunal and therefore was competent to file a reference before the Tribunal even though he was technically not a party to the appeal. 10. A careful perusal of the decision of the Hon'ble Bombay High Court in the case of Kikabhai Abdulali (supra) shows that the term "assessee aggrieved" used in section 253(1), is interpreted and explained as any person by whom income tax or any other sum of money is payable as a result of the order which is sought to be appealed against. In the case of CIT vs. Ambala Flour Mills (1970) 78 ITR 256, the Hon'ble Supreme Court ruled that if a person is fastened with the liab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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