TMI Blog2013 (9) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the case of Balaji Shipping (2012 (8) TMI 681 - BOMBAY HIGH COURT), would fully applies on the assessee. - income from slot hire agreements fall within section 44B they must be held to be within the ambit of Article 9(1) Stock Exchange is providing the entire transaction on BOLT and for that complete service, the SE is charging from its members/brokers. But this is not the case of the assessee. Assessee only provides information regarding the whereabouts of cargo, to its agents/customers. In our opinion, the case of the assessee is different on facts. Also the case of Kotak Securities neither pertained to international taxation nor came under any treaty. Since the issue is already decided by the coordinate Benches in the assessee's own cases in preceding years. - ITAs No. 8703 and 8704/Mum/2010 - - - Dated:- 28-8-2013 - Shri Rajendra Singh And Shri Vivek Varma,JJ. For the Appellant : Mr. Porus Kaka Mr. Divesh Chawla For the Respondent : Shri Narender Kumar ORDER Per Vivek Varma, JM:- The two appeals are filed by the assessee against the order of Dispute Resolution Panel -1, passed under 144C(5) of the Act, dated 16.09.2010. 2. Since the only ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant from Maersk India Private Limited ('MIPL'), Maersk Infotech Services India Private Limited ('MISIPL'), Maersk Logistics India Private Limited ('MLIPL'), Safmarine India Private Limited ('SIPL') and Maersk Concorde Airfreight India Private Limited ('MCAIPL'), towards their share of IT Global Portfolio tracking system costs, is taxable in the hands of the appellant under the IT Act and Tax Treaty as 'fees for technical services'. 2 (b) Without prejudice to the above, the learned DDIT and DRP ought to have held that the said receipts are not chargeable to tax in India as per Article 9 of the Tax Treaty being directly a part of the shipping business carried on by the appellant. 2 (c) The learned DDIT and DRP erred in not appreciating the fact that the amounts recovered represent a mere allocation of costs and hence a reimbursement of expenses which is not an income in the hands of the appellant. 2 (d) In any event and without prejudice to the above, the learned DDIT and DRP ought to have held that the amount, if considered as income, will be taxable as business profits and in the absence of the appellant's Permanent Establishment ('PE') in India, the income if at all, is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the AR, therefore, dispute only relates to items no. 1 to 3. 6. Reverting back to the business of the assessee, the assessee is in operation of ships and containers on own ships or on slot hire, on international waters. The AO accepts that operation of ships in international water/traffic is covered by Article 9 of India Denmark DTAA. In the course of proceedings before the revenue authorities, the assessee was asked to furnish proof regarding ownership and/or chartering of the ships. The assessee in its response provided port clearance certificates, ship registration and charter party agreements in 141 cases out of 145 cases. The AO, accepted the documents, details and claim of the assessee that freight income is taxed in Denmark. But since the assessee was unable to satisfy the revenue authorities on four cases, the income attributed to them, was brought to tax under Indian Tax Laws. The AO, as per the submissions by the AR, even ignored section 44B and computed the income at 10% of receipts on gross basis, as mentioned above. 7. The AR, on these facts, submitted that complete details of receipts of the assessee were annexed with the return of income and for convenienc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that if the assessee has receipts from operation of ships from the use, maintenance or rental of containers, in connection with transport of goods or merchandise in international traffic, treaty shall become operative on the basis of this Article, the AR submits that once the assessee operates its own ships, charters the ships, takes slot hire in addition to its own operations or operates in international traffic by feeder vessels taking the merchandise from port to hub, in so far as the assessee and its customers are concerned, is operation of ships and is one composite business. 11. The AR, therefore, relied on the decision of DDIT v Balaji Shipping UK Ltd., reported in 253 CTR 460 (Bom) (head notes), held, "... income from slot hire agreements falls within s. 44B they must be held to be within the ambit of art. 9(1). Although this may indicate that income from slot hire agreements falls within the ambit of art. 9(1) per se the Court does not wish to go that far. This judgment would not apply to assessees who carry on the business of shipping cargo only by availing the slot hire facilities obtained by them. In some cases goods are transported by the assessee, a UK company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re agreements are therefore, at least indirectly, if not directly, connected and interlinked with and are an integral part of the enterprise's business of operating ships. Without availing slot hire facilities, an enterprise would be unable to carry on its business of operating ships in international traffic at all in many cases. They may well lose much of their business. Even if business expediency is irrelevant to the interpretation of the DTAA, it indicates the close nexus between slot hires and the business of operation of ships in international traffic. If the DTAA is construed to include activities directly or indirectly connected to the operation of ships, it would include slot charters. The second type of case poses some difficulty. However, even such cases fall under art. 9(1). Article 9 would apply in respect of an enterprise that carries on the business of operation of ships in international traffic but for a valid reason is required to transport the cargo availing entirely a slot hire facility obtained by it on a ship of another. An enterprise may not ply the ships owned or chartered or otherwise controlled or managed by it in respect of certain routes. It would however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om utilizing slot hire facilities as availing of in these cases would fall within art. 9(1) for slot hires have a closer nexus, connection and relationship to the actual operation of ships than the illustrative activities mentioned in the commentaries". 12. The AR submitted that Hon'ble Bombay High Court placed reliance on the decision of DIT v KLM Royal Dutch Airlines, reported in 220 CTR 268 (Del). He submitted that in the case of KLM, the issue was income from hire of godown for cargo handling. The ITAT Delhi and Hon'ble Delhi High Court concluded that the business is one composite business, i.e. cargo handling, and was not a case of separate business of renting out the premises. 13. The AR, therefore, submitted that once complete details have been given and there are no issues on the impugned additions either in preceding years or even in the subsequent year (which also is in appeal before us) the conclusion drawn by the AO is incorrect. He also specified that in so far as the proportion of revenues are to be considered then the ratio comes down to less then even .5%, therefore, when major and substantial receipts are from shipping business, which is not disputed, as held b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details were not provided for, that itself can not be a ground, because, the AO, has, with him powers to call for third party details/evidence, which he chose to ignore. We are in agreement with the AR that the ratio laid down in the decision of Hon'ble Delhi High Court in the case of KLM (supra), where, the revenues from lease were accepted to be related and having close nexus with the shipping business. Even in the case of Balaji Shipping (supra), wherein, the Hon'ble Bombay High Court observes that even the nexus establishing, shipping business, would fall within the Treaty provisions, despite the fact that 12% of the revenues generated were from slot hire. The Hon'ble Bombay High Court observed that since there was close nexus with the operation of ships in international traffic, DTAA would apply. In the instant case, there is no dispute with regard to the operation of ships in international traffic in case of four ships, whose revenues were less than even .5% of the total revenues of the assessee, hence, in our opinion, the ratio laid down in the case of Balaji Shipping (supra), would fully applies on the assessee. 20. We are not taking into consideration the additional evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Dampsikibsselskabet af 1912 A/s (supra) decided by the coordinate bench of this Tribunal, we respectfully follow the decision rendered in the said case and hold that the amount in question received by the assessee from MIPL, MLIL and SIPL was not in the nature of FTS and the same being part of the income from shipping business was not taxable in India as per Article 9 of the DTAA since the place of effective management of the assessee company is situated in Denmark. We, therefore, delete the addition of the said amount made by the AO and confirmed by the learned CIT(Appeals) to the total income of the assessee for all the four years under consideration and allow these appeals of the assessee. 16. In the result, all the appeals by the assessee are allowed". The issue was dealt with in the assessee's own case in assessment year 2005-06 in ITA no. 7676/Mum/2010, wherein also it was held that the payments received from its agents was not in the nature of FTS but reimbursements, not amounting to generation of income. 23. The DR on the other hand tried to distinguish the case laws referred to in the ITAT decision in the case of the assessee and also placed reliance on the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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