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TMI Blog2014 (1) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... ax resident of Singapore. Gross receipts of freight amounting to Rs.13.34 crore were shown and after application of section 44B of the Act, income was declared at the rate of 7.5% amounting to Rs.1.00 crore and odd. The Assessee claimed exemption of this income as per Article 8 of the Double Taxation Avoidance Agreement between India and Singapore (hereinafter also called `the DTAA'). A copy of Tax residency certificate was furnished to indicate that the assessee was tax resident of Singapore. The Assessing Officer noticed that the assessee earned shipping income from pool arrangement with Noratia and CMA CGM China in respect of 37 voyages, which in his opinion did not qualify for relief under Article 8 of the DTAA because of the absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he computed income at Rs.89.01 lacs u/s 44B of the Act by applying rate of 10% in respect of the 98 voyages. As regards the remaining 80 voyages, he computed income u/s 44B at the rate of 7.5% at Rs.33.35 lacs and allowed exemption under Article 8 of the DTAA. The Draft assessment order was challenged by the assessee before the Dispute Resolution Panel (hereinafter also called `the DRP'). Vide its Direction dated 16.09.2010, the DRP directed the Assessing Officer to examine fresh evidence in respect of 98 voyages and allow similar benefit if the conditions of Article 8 were fulfilled. Vide the final order passed by the AO u/s 144C(13), the Assessing Officer noticed that the assessee failed to furnish any details in respect of 21 shipments. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the relevant AO in the case of CMA, a transfer pricing adjustment of Rs.3.00 crore was proposed. However, the DRP vide its direction dated 23.09.2011, in the case of CMA, held that the transfer pricing adjustment was not warranted. In the final assessment order passed u/s 144C(13) in respect of CMA, the Assessing Officer did not make any transfer pricing adjustment. It was submitted that since commission etc. to CMA was paid at arm's length price (ALP), there were no question of taxing further `business profits' in the hands of the assessee under Article 7. In support of this contention, he relied on the judgment of the Hon'ble jurisdictional High Court in Set Satellite(Singapore) Pte Ltd. v/s DDIT(IT) (2008) 307 ITR 205 (BOM). Simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that such agent, representing PE, has been taxed distinctly in its individual capacity, inter alia, from the commission earned at arm's length price, does not mean that the business profits of the assessee attributable to the PE stand automatically erased. She explained her point of view with help of an example, in which a product with cost price at Rs.100, financial costs at Rs.10 and selling expenses at Rs.15 is eventually sold for Rs.150, thereby giving profit of Rs.25 to the seller. She argued that the fact that commission on sale has been paid at a sum of Rs.8, which forms part of the total selling expenses of Rs.15, as against the prevalent market rate of such commission at the same amount, does not mean that the seller earned no pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand in the way. In these decisions, it has been held that where the associated enterprise (that also constitutes a PE) is remunerated on ALP, then nothing further would be left to attribute to the PE. In that view of the matter and respectfully following the precedents, we uphold the contention of the ld. AR. We, therefore, hold that income in respect of 21 voyages cannot be included in the hands of the assessee. 7. In view of our above decision on the exclusion of income in respect of 21 voyages, there remains no need to consider the taxability or otherwise of the amount as per Article 8 of the DTAA. The main issue raised through various grounds is, therefore, decided in assessee's favour. 8. The only other effective ground is against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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