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2015 (5) TMI 681 - ITAT DELHI

2015 (5) TMI 681 - ITAT DELHI - TMI - Denial of benefit of Article 8 of India-USA Double Taxation Avoidance Agreement - Held that:- Arrangement of “pool” requires several persons coming together to contribute and combine their resources for a large business and then share the resources amongst them. However in the present case the arrangement was only bilateral arrangements and not several persons have come together. Nothing was brought on record to indicate that the common funds and resources w .....

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of the above, we can conclude that income derived by the assessee by booking of seat/space under code sharing agreement cannot be said to be income derived from operation of aircraft/ship in international traffic through owned/leased/chartered aircraft/ship. Furthermore the code sharing agreement cannot be held as space/slot charter in absence of inextricate linkage of both legs of journeys. In the result, the receipts to the extent of code sharing arrangement cannot be said to be profits deriv .....

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, while applying Rule 10, the A.O. enhanced the global profitability rate by disallowing the other expenditure claimed by the assessee in its global accounts which did not have any implication on the profitability from Indian operations. Thus the A.O. estimated the profit on pro rata basis @ 2.52% after excluding the expenditure not related to Indian operation. Article 7(2) of DTAA provides that such profits should be computed which the PE might be expected to make if it were a distinct and sepa .....

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t of such expenditure was attributable to PE in India. The assessee is directed to furnish such details of expenditure. In the interest of justice, we restore this ground back to the file of A.O. for determining the profit attributable to PE.

Charging of interest u/s 234B - Held that:- There is no dispute to the proposition that once the income is subject to TDS, it was responsibility of the deductor, there is no liability of interest u/s 234B of the Act for failure to pay advance tax .....

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ssesse. - I.T.A. No. 1256/Mum/2014 - Dated:- 29-4-2015 - Shri R. C. Sharma And Shri Amit Shukla,JJ. For the Appellant : Shri Ajit Kumar Jain For the Respondent : Dr. Narender Kumar and Shri Ajay Srivastava - CIT DR ORDER Per R. C. Sharma, A. M. This is an appeal filed by the assessee, passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 for A.Y. 2010-11. 2. In this appeal the assessee is aggrieved by the denial of benefit of Article 8 of India-USA Double Taxation Avoidance Agreement. .....

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in India. The assesee was also granted approval by Reserve Bank of India (RBI) to establish branches in India for undertaking activities related to booking of air passengers and air freight. A return of income was filed on September 28, 2010 declaring nil income from business operations and interest of ₹ 1,56,469/- earned on fixed deposits was offered to tax. During the course of assessment proceedings, the assessee was asked to furnish details of the revenue attributable to the usage of .....

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ment order, has proposed to assess the business income of the assessee at ₹ 2,15,32,280/- by applying the global profitability rate of 2.5% to the total revenues of ₹ 85,44,55,568/- earned by the assessee in respect of third party carriers. 5. With regard to denial of benefit under Article 8 of Double Taxation Agreement treaty, the contention of the assessee before the A.O. was that when the assessee is not able to provide seats to its passengers or space for its cargo', in its o .....

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bmitted that based on its arrangements with the third party carriers, it could be regarded as a charterer and/ or engaged in other activity directly connected with such transportation and thus, the income derived on account of utilizing third party aircrafts is covered under Article 8(2) of the India-USA tax treaty. Further, the Assessee submitted that the arrangements with the third party carriers amount to pooling and thus get covered under Article 8(4) of the India-USA tax treaty. The A.O. ho .....

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ent between India and United Kingdom (India - UK tax treaty). The A.O. has also relied upon following decisions:- (i) ADIT v. Federal Express Corporation (125 ITD 1) (Mumbai (ii) United Parcel Service Co. v DDIT (52 SOT 170) Mumbai. 6. Further contention of the A.O. was that profits derived by an enterprise from the operation by that enterprise of ships or aircraft in international traffic shall be taxable only in the state of its residence (Article 8(1). Such profits taxable in the state of its .....

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go. Since the assessee itself is not involved in operation of these aircrafts in international traffic, the requirement of Article 8(1) itself is not fulfilled. The assessee has Interline Cargo Special Prorate Agreements with other airlines for carriage of cargo and Code-sharing agreements with other airlines for carriage of passengers. These agreements provide for space sharing for cargo and seat sharing for passengers at agreed rates. There is no chartering of aircrafts. The agreements of the .....

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ombine to carry out an activity and also agree to pooling of funds and sharing of profits. The agreements of the assessee with other airlines are in respect of booking of space for the assesse s cargo or booking of seats for assessee s passengers and there is neither any pooling of funds nor sharing of profits. The profits are earned by other airlines independently from the charges recovered by them from the assessee for transporting assessee s cargo/passengers. 8. In view of the above discussio .....

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2006 order dated 14/03/2012) directly apply to the case of the assessee. In the case of Federal Express Corporation (supra), Hon'ble Mumbai Tribunal has held as under: Having held as above, the next question arising for our consideration is as to what extent the benefit of art. 8 of Indo-US treaty can be allowed to the assessee. The contention of the assessee is that the entire freight revenue received by the assessee should be exempted from tax in view of the decision of this Bench in the .....

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the parties as far as the profits from transportation of cargo in the international traffic by the assessee through the aircrafts as an owner/lessee/charterer are concerned. We have also gone through the provisions of art. 8 of Indo-US treaty. Para 1 provides that profits from the operation of ships or aircrafts in the international traffic shall be taxable only in the State of residence. Para 2 provides that profits from operation of ships or aircrafts in the international traffic shall mean pr .....

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rom the transportation of cargo through aircrafts belonging to other enterprises as well as profits attributable to the inland transportation. It is in this context that the decisions of this Bench are to be analysed. Therefore, the question arises whether there is any conflict between these two decisions. In the case of Balaji Shipping (UK) Ltd. (supra), the Bench was required to interpret the provisions of art. 9 of Indo-UK treaty while in the case of Delta Airlines Inc. (supra), it was requir .....

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Indo-US treaty, the expression profits from operation of ships or aircrafts in the international traffic has been defined in para 2 of art. 8. Since the expression profits from operation of ships was not defined in Indo-UK treaty, this Bench in the case of Balaji Shipping (UK) ltd. (supra), following the judgment of the Hon ble Supreme Court in the case of Union of India & Anr. Vs. Azadi Bachao Andolan & Anr. (2003) 184 CTR (SC) 450 : (2003) 263 ITR 706 (SC) and the decision of the Trib .....

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eme Court in the case of CIT vs. P. V.V.L. Kulandagan Chettiar (supra), held that the expression, "profits from operation of ships or aircrafts in the international traffic" must be understood in the sense in which it has been defined in para 2 of art. 8. Thus, in our opinion, there is no conflict between these two decisions, Therefore, following the decision of the Bench in the case of Delta Airlines Inc. (supra), it is to be held that benefit of art 8 would be available to the assess .....

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inguished the provisions of Article 8 of Indo-US and Article 9 of indo-UK Tax Treaty. Even otherwise, from the agreements of the assessee with other airlines, it is evident that there is no arrangement in the nature of slot charter between the assessee and such other airlines. It may be noted that the decision of Mumbai Tribunal in the case of Federal Corporation has been accepted by the said assessee and issue has been settled under Mutual Agreement Procedure (MAP) between Indian and US Governm .....

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cation of its global profitability percentage by above exclusion of other expenses and Restructuring and Merger Related Expenses . The A.O. also levied interest on the entire income u/s 234B of the Act. 12. By the impugned order, the DRP confirmed the action of the A.O. against which the assessee is in further appeal before us. 13. Shri Ajit Kumar Jain, the ld. A.R. appearing on behalf of the assessee contended that the assessee is a US entity engaged in the operation of aircrafts in internation .....

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S Regulations, Air Transport Agreement between India and US, rulings in the case of Balaji Shipping UK Ltd. (2012) 24 taxmann.com 229] and APL & Co Pte Ltd [(2013) 33 taxmann.com 186] to contend that usage of space tantamount to 'charter'. The learned Counsel of the assessee during the hearing argued that the same bench of the IT AT had pronounced a ruling on facts similar to the assessee in the case of MISC Berhad (ITA No 6499/Mum/2012) post the final order being passed by the AO un .....

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ruling is based on facts similar to that of the assessee. He submitted that in the case of MISC Berhad, an owner of ships, (supra) the assessee had booked some space on ships operated by third party shipping companies on an as and when required basis under a space booking/slot charter arrangement which is similar to the present case. The learned Counsel for the assessee referred to the following paragraphs of the judgment in the case of MISC Berhad where it has been held that space booking / slo .....

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lso includes space charterer or slot charterer and the same cannot be segregated from the meaning of operation of ships. Heavy reliance has been placed on the concept of charterer given by the Hon'ble Bombay High Court in Balaji Shipping U.K Ltd. (supra) .... " • Page 25 - para 20 "20. For the shipping income, the Para-2 categorically envisages that for the purpose of Article-8, profits from the operation of ships in the international traffic means, profit derived by an enterp .....

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es used in Article-8 in Indo- Malaysia treaty is indeed differently worded. However, certain relevant observations and interpretation word "charterer"/ "charter" by the Hon'ble High Court can be taken as guidance for understanding these terms, which shall be discussed in the later part of the order. " 23. We will now independently examine Article-8(l) and Article-8(2) of Indo- Malaysia DTAA. The crucial phrase or words which need to be analysed here are "operati .....

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understood in a broader sense of carrying out shipping activity. The carrying of shipping activity could be as an owner of a ship or as a lessee of a ship or as a charterer of a ship. Here, the word "owner" has to be inferred as a person who owns a ship and the word "lessee" as a person who owns the ship for a given lease period. The word "charterer" has to be understood as a person who charters or hires a ship for a voyage. " • Page 33 - para 24 and para .....

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t a "slot charter" and a "voyage charter" of a part of a ship are in a sense charterers of a space in a ship. 25. From the above discussion, the following inferences can be deduced:- i) Firstly, the operation of a ship can be done as charterer which does not mean to own or control the ship either as an owner or as a lessee; ii) Secondly, charterer is a hirer of a ship under an agreement or arrangement to acquire the right to use a vessel or a ship for the transportation of a .....

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or as an operator of the ship. The operation of ship can be done as a charterer, which includes part of a ship or particular space in a ship. " • Page 37 - 6th line " ... Thus, the view taken by the Assessing Officer for denying the benefit under the present Article-8 is not tenable as per our discussion in the forgoing paragraphs, that chartering of some space or slot charterer in a ship is actually a part and parcel of charter of a ship ... " • Page 39 - Para 31 " .....

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ed Counsel for the assessee that full exemption should be granted to the assesse under Article 8, as space booking has been held to be 'chartering' as contemplated under Article 8(2) of the India US tax treaty. 15. Without prejudice to the arguments that booking of space on third party aircrafts is 'charter' and therefore income of the assesse is exempt under Article 8(2), the Counsel for the assessee submitted that income from usage of third party aircrafts amounts to income ear .....

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r separate resources in one large operation or to promote their joint business or undertaking. 16. He further referred to the meaning of the term 'pool' discussed by Mr Klaus Vogel in his commentary on Article 8(4) of the OECD model convention, which is in pari-materia with Article 8(4) of the India US tax treaty: "The terms 'pool " 'joint business', and 'international operating agency' are not defined in the convention. The terms are taken from the Internat .....

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m 'pool' includes any 'commercial arrangement' and covers all forms of co-operations that would include commercial co-operation and should not be given a narrow interpretation as given by the AO and the DRP in its order by only referring to pooling of funds and sharing of profits. The assessee shares a reciprocatory arrangement with the third party carriers, and therefore such an arrangement would amount to pool under Article 8(4) of the India US tax treaty. On perusal of the agr .....

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on behalf of the Revenue contended that the profits derived from activity of operations of ship/aircraft in international traffic under Article 8 will not cover the receipts under code sharing agreement. As per the ld. D.R. Article 8(1) is the substantive provisions granting the exemption. What is exempt under Article 8(1) is the profit derived from operation of ship or aircraft in International traffic . The twin condition of operation of aircraft and in international traffic should be simulta .....

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d. D.R. further contended that the meaning of profits derived from operation of ships/aircraft is restrictive which is also evident from the fact that Article 8(2) seeks to further expand the meaning of profits derived from operation of aircraft in international traffic as owner/lessor/charterer. Clause (a), (b),(c) of Article 8(2) seek to further expand the restrictive meaning so as to allow exemption to other ancillary activities also but for such clarification, they would have not been part o .....

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ation has been done by third parties that such receipts cannot be said to be the profits derived from international voyage carried by assessee in case of third party agreements. Hence to the extent of such receipts, the basic condition of 8(1) are not satisfied because there is no operation of aircraft in International traffic by assessee relevant to such receipt which has resulted in profits and hence such profits cannot be said to be derived from operation of aircraft in International traffic .....

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Article 8(1) r/w 8(2) also in respect of the very same voyage for which it has earned profit on sale of ticket for an international voyage. As already demonstrated earlier, the receipts for activities under Article 8(2)(a)/(b)/(c) are only for enlarging the scope of profits but the qualifying conditions have to be still independently fulfilled under Article 8(1)& 8(2) to claim the benefit of receipts falling in Article 8. The ld. D.R. further contended that the Ld. AR while arguing that the .....

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r activities connected to such transport falling in 8(2)(b) without having any receipts which qualify under Article 8(1) & 8(2) have been held by ITAT Mumbai in assessee s own case to be not eligible for benefit of Article 8. This view of the ITAT therefore supports the arguments made in earlier para above. 22. As per the ld. D.R., the issue is covered by the decision of the ITAT in assesee s own case reported at 124 ITD 114 (Mumbai). Following are the observations of the Tribunal at para 13 .....

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ctly connected with such transportation. The words such transportation refers to the transportation prescribed in the main body of para 2, i.e., transportation by sea or air of passengers, mail, livestock or goods carried by the owner or lessee or the charter of the ships. In our opinion, the combined reading of paras 1 and 2(b) reveals that only that activity which is directly related to the transportation of passengers by the assessee as owner/lessee/ charterer of the aircraft would fall withi .....

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similarly worded) was denied in respect of the various services provided to other airlines. For the reasons given above, we are unable to uphold the finding of the CIT(A) that the subsidiary activities carried on by the assessee fall within the scope of art. 8(2)(b) of Indo-US treaty. The orders of the CIT(A) are, therefore, reversed on this issue and consequently, denial of exemption by the AO is upheld . From perusal of this para it is evident that it is mandatory for an assessee to carry the .....

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as owner/lessee/charterer, then qua such voyage it would fall out of main articles 8(1)( and 8(2) even though it may qualify under Article 8 for other voyages wherein it has transported as owner/lessee/charterer. The receipts in question are in respect of code sharing voyages where the assessee has not at all carried operation in International traffic even partly. Therefore this decision shall also apply to facts of present assessee, where no transportation is carried out by assessee as charter .....

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e of present assessee. Para 29, 31 and 40 were relied, for ready reference relevant part of para 40 is reproduced as under:- As per para 1 of the article 8, the profits from the operation of aircrafts in the international traffic derived by the assessee cannot be taxed in India. However, the expression Profits from the operation of ships or aircraft in the international traffic has been defined in para 2. According to this para, the said expression has been defined in two parts. The first part d .....

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ssessee neither as owner nor as charterer or lessee would be outside the scope of such expression. The alternate contention of the assessee that such transportation would fall within para 2(b), in our opinion, is also without force since para 2(b) includes other activity directly connected with such transportation. The words such transportation , in our opinion, would only mean the transportation referred to in first part of the definition. Therefore, transportation in the international traffic .....

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e, profits attributable to such voyage would be outside the scope of article 8 of Indo-Brazil treaty even though the assessee may be engaged in the business of transportation of goods in the international traffic. The case of DDIT vs. CIE DE NAVEGACAO (supra) was also considered by Hon ble Bench in case of MISC Berhard. At para 30 page 37 Hon ble Bench in MISC Berhard observed that the assessee has failed to link and establish the voyage wise transportation, whether the feeder vessels were actua .....

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een placed on record or claimed for any linkage between feeder voyage from India to Hub port and there from to final destination, even the entire voyage from India to final destination under code sharing arrangement is performed through third parties only and no part of such voyage was performed by assessee. Hence the question of linkage would not arise at all. Hence by implication even as per the ratio of MISC Berhard(supra), the decision in case of DDIT vs. CIE DE NAVEGACAO would be applicable .....

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his regard, argument of revenue is that once assessee is opting for Indo - US treaty for taxation then definition given is article 8 (2) of treaty must be considered not as mentioned in IT Act 1961 for some other purpose i.e. for chapter - XII. 26. The ld. CIT- DR also argued that the arrangement under code sharing is not in nature of a slot/space charter to qualify under 8(2) for following reasons:- i. There is no such written agreement for space or slot charter between assessee and other airli .....

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greement. It varies from time to time and from party to party. In substance the arrangement of assessee with third party is such that it only allows the assessee (without exclusion of others) also to book the tickets for its customers on the flights operated by other third parties. The role of the assessee to the extent of bookings made under code sharing agent is therefore more like a booking agent and not as a charterer. iii. Though it is the contention of Ld AR that the cargo/passengers carri .....

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stinations. iv. Even if there is break of voyages at intermediary destination, but nothing has been produced before the AO/CIT(A)/ITAT to show that destinations to which all passengers/cargo were carried from India under code sharing were further transported to final destination by assessee s airlines. v. Mere fact that the assessee was operating its airline also from such intermediary destinations to final destinations will not automatically prove that that the all such passengers/cargo which w .....

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haring was not the final destination and that there was an in extricate link between voyage from India to interim destination by third parties under code sharing arrangement and from interim destination to final destination by assessee as a charterer. vii. The existence of an in extricate link of one leg to final leg is necessary to fulfill the condition of space/charter arrangement. This view is supported by observation of ITAT in case of MISC Berhard (supra) also which has been relied by Ld AR .....

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part and parcel of the operation, which is inextricably linked with the completion of the entire voyage. The linkage between the transportation by feeder vessels, mother vessels of the ship owned by the assessee has to be established. Hence in absence of any link qua each voyage from India to interim destination under code sharing and interim destination to final destination by assessee, and also in absence of any evidence that even the second leg of same voyage which started from India was car .....

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ter from Indian Port to Hub Port. At the Hub Port, the containers which were owned by the assessee were transferred to mother vessels i.e., the ships owned by the assessee and from thereon, the cargos / containers were transported by its own ships to the final destination port. The entire voyage from India Port to Hub Port and from there to final destination port, is inextricably linked and cannot be segregated as held by the Assessing Officer and the learned Commissioner (Appeals). He further s .....

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der vessel is nothing but a charter only, in a sense that the assessee has booked space charter / slot charter for its containers which are owned by it. …….. 28. The ld. CIT - DR further submitted that in case of present assessee, it has not been shown that one leg of the voyage is carried by third parties as a feeder channel and the remaining leg to final destination is carried by assessee unlike the case of MISC Berhard(supra). Further nothing has been shown by assessee to prove .....

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m there to final destination port, was inextricably linked and could not be segregated and that the Assessing Officer has, in fact, admitted that the assessee has furnished proof to substantiate the linkage of the voyage performed on feeder vessels and mother vessels (i.e., ships owned by the assessee. It was on these facts it was held by ITAT in MISC Berhard that assessee was operating ships in international traffic and that the carriage of goods in the first leg of voyage from India to Hub por .....

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interim destinations to final destinations, he contends that this principle cannot be applied to airline business unlike the case of MISC Berhard which was for a shipping business. The Ld AR has failed to appreciate that the very basis for holding the arrangement of transportation from India to interim destination by third parties and from there to final destination by assessee, by ITAT in MISC Berhard was the undisputed presence of one to one linkage for both the legs of journeys i.e. from Ind .....

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ke any such distinction between the shipping and airline business. If the contention of Ld AR is accepted then how can he rely on the case of MISC Berhard to support his claim of benefit under Article 8. 30. The alternate contention of Ld AR that the profits are eligible for exemption under Article 8(4) as the profits derived from pool arrangement, is also not tenable for following reasons;- As per the dictionary meaning of pool as illustrated by Ld AR during hearing it would clearly suggest tha .....

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a pool which are shared by both. Only the third party is contributing its aircraft and the assessee is only using the resources of the third party as per the terms of agreement. Thus the arrangement does not at all meets principles of pool arrangement; rather assessee is conducting itself as a simple hirer of the resources for its own activities. b. Further even to qualify for exemption for profits under a pool arrangement, one has to still satisfy the condition of Article 8(1) as applicability .....

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age in International traffic qua voyages under code sharing arrangement, the conditions of Article 8(1) is not fulfilled and hence the benefit of Article 8(4) cannot be claimed even if there were any pool arrangement (without admitting the existence of pool arrangement in this case). c. Since Article 8(2) is not at all referred under article 8(4), the question of going into expanded definition of international traffic as charterer/lessee would not come into play without prejudice to the fact tha .....

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nternational Traffic. These services were performed by employing Delta s airlines own aircrafts whose income has been claimed exempt under Article 8 and allowed by AO also. However, the assessee has also entered into code sharing agreement with other third party airlines for carriage of cargo and passengers from India. For such code sharing voyages, the aircrafts used by third party carriers are neither owned nor leased or chartered by the assessee i.e. Delta Air lines Inc but under the code sha .....

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s are not covered under Article 8 as the code sharing agreement could not be said to be in the nature of a charter arrangement as envisaged under the DTAA. The basic question to be decided is whether the code sharing arrangement with third party in which assessee was booking tickets for its customers can be said to be slot/space charter arrangement on specific facts of the instant case so as to make it eligible for benefit under Article 8 of DTAA. 32. For better understanding of exemption provid .....

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ribed in paragraph 1 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 .....

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bstantive provisions granting the exemption to an enterprise of a contracting state from the operation by that enterprise of ships or aircraft in international traffic. Article 8(2) clarifies that the operation of ships or aircraft in international traffic shall mean profits derived by an enterprise 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. Thus the meaning of profit derived f .....

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ly the receipts under code sharing agreements with the third parties where the assessee has only booked the tickets and the actual transportation is done by third parties ship or aircraft that such receipts cannot be said to be the profits derived from international voyage carried by the assessee by entering into code sharing agreements. The receipts for activities under Article 8(2)(a)(b)(c) are only for enlarging the scope of profits from other related activities but the qualifying condition o .....

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se reported at 124 ITD 114 (Mumbai) observed at para 13 that Article 8(2)(b) makes it clear that the activity carried on by the assessee must be directly connected with such transportation. The words such transportation refers to the transportation prescribed in the main body of para 2 i.e. transportation by sea or air of passengers, mail, livestock or goods carried by the owner or lessee or the charter of the aircraft. It was also observed that only that activity which is directly related to th .....

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tish Airways Plc. wherein expression under Article 8 of Indo-UK Treaty (which is similarly worded) was denied in respect of the various services provided through other airlines. The contention of the ld. AR was that since the assessee is an airline, admittedly operating in international traffic, therefore income from cargo/passengers through third airlines is also covered under Article 8 of DTAA. Heavy reliance was placed by the ld. AR on the decision of Tribunal in the case of MISC Berhard vs. .....

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g the entire facts, the Tribunal had recorded its finding to the effect that since the entire voyage from Indian Port to Hub Port and from there to final destination port was inextricably linked and could not be segregated and hence the carriage of goods from the feeder vessel was nothing but a charter only and therefore the receipts in respect of voyage from Indian Port to Hub port were also held to be exempt under Article 8. However, in the instant case there is no situation like transportatio .....

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h other third parties is not exclusive unlike the charter agreement. The assessee has no fixed space/slot for which the booking rights are exclusively with assessee only. The number of seats/space which can be booked by assessee is also not fixed under the code sharing agreement. The role of the assessee in respect of bookings so made under code sharing agreement is essentially in the nature of booking agent and not as a charterer. Nothing was placed on record in support of ld. AR s contention t .....

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s. Thus the proposition laid down in the case of MISC Berhard (supra) is not applicable to the facts of the present case. However, nothing has been produced before the A.O./DRP/ITAT to show that destinations to which all passengers/cargo were carried from India under code sharing were further transported to final destination by assessee s airlines. Merely the fact that assessee in some instances operating its airline from such intermediary destinations will not automatically prove that passenger .....

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servation by the ITAT in the case of MISC Berhard (supra) vide para No. 29, page 36 of its order:- From the above observations, it can be understood that the facility of slot hire agreement with the feeder vessels to complete the voyage is not merely an auxiliary or incidental activity to the operation of ships, but inextricably linked. If the transportation of cargo by feeder vessels belonging to other enterprise is only a part of main voyage by the mother ship i.e., owned or leased by the asse .....

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same voyage which started from India was carried by assessee, the code sharing arrangement cannot be said to be in nature of space/slot charter. 35. To arrive at conclusion that the shipping activity of assessee from Indian Port to Hub Port was in the nature of charter arrangement and covered under Article 8, precise observation at para 14 in page No. 17 of the Tribunal order reads as under:- For the purpose of its transportation of cargo, the assessee used the services of feeder vessels operat .....

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r and the learned Commissioner (Appeals). He further submitted that the Assessing Officer has, in fact, admitted that the assessee has furnished proof to substantiate the linkage of the voyage performed on feeder vessels and mother vessels [i.e., ships owned by the assessee). The Revenue's case is that since the feeder vessel is not owned / leased by the assessee, therefore, the benefit of Article - 8, cannot be given on the goods carried through the feeder vessel is not a correct interpreta .....

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ight destinations booked under code sharing were only upto interim destinations and not to the final destinations and even if they were interim destinations the passengers transported from India to interim destinations by third party airlines, were ultimately transported by assessee s airline to complete their voyage there from to the final destination. However, in the case of MISC Berhard (supra), the Tribunal has given a clear finding that the entire voyage from India Port to Hub Port and from .....

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facts of the assessee s case from that of MISC Berhard (supra) which has been heavily relied upon by the ld. A.R. We found that on the one hand the ld. A.R. relied on the decision in the case of MISC Berhard (supra) to support assessee s eligibility under Article 8 but on the other hand when it comes to requirement of establishing one to one linkage of voyages from India to interim destinations and from interim destinations to final destinations, he contends that this principle cannot be applied .....

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ns. Arrangement of pool requires several persons coming together to contribute and combine their resources for a large business and then share the resources amongst them. However in the present case the arrangement was only bilateral arrangements and not several persons have come together. Nothing was brought on record to indicate that the common funds and resources were brought together in a pool which is shared by members of the pool. However, the assessee has only entered into code sharing ar .....

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ot be said to be income derived from operation of aircraft/ship in international traffic through owned/leased/chartered aircraft/ship. Furthermore the code sharing agreement cannot be held as space/slot charter in absence of inextricate linkage of both legs of journeys. In the result, the receipts to the extent of code sharing arrangement cannot be said to be profits derived from operation in international traffic under Article 8-(1) read with Article 8-(2). The decision in the case of MISC Berh .....

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ofitability rate by disallowing the other expenditure claimed by the assessee in its global accounts which did not have any implication on the profitability from Indian operations. Thus the A.O. estimated the profit on pro rata basis @ 2.52% after excluding the expenditure not related to Indian operation. Article 7(2) of DTAA provides that such profits should be computed which the PE might be expected to make if it were a distinct and separate enterprise, then any expenditure which is required f .....

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