TMI Blog2008 (11) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... ia. 2. Briefly stated, the facts are these. The assessee is a non-resident and tax-resident of Australia. It is engaged in the business of shipping. It filed its income-tax return for the year under consideration declaring gross freight of ₹ 4,25,26,859/-. Applying the provisions of section 44B of the Income-tax Act, 1961 ('the Act') the assessee declared its income of ₹ 31,89,514/- being 7.5% of the gross freight. However, the assessee claimed exemption from payment of tax by virtue of the provisions of Article 8 of the Double Taxation Avoidance Agreement ('DTAA') between India and Australia. The claim of the assessee for exemption from payment of tax under Article 8 of DTAA between India and Australia was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ships would be treated as part of the main business, (c) that benefit of Article 8 can be denied only when it is found that an activity of the assessee amounts to separate business, (d) that incidental use of ships belonging to others does not amount to separate business but is part of the main business of shipping, (e) it is not necessary to establish one to one connection of voyage wise details of the feeder vessels with mother vessels since there is no such conditions prescribed for availing the benefit under DTAA. In view of the above findings of fact and law, it was held by him that assessee as entitled to benefit of Article 8 of DTAA since assessee was found to be engaged in the business of shipping and cargo was tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the expression 'operation of ships' and consequently, profits arising from such activity would be taxable only in the state of residence. The commentary by Klaus Vogel further provides that even the inland transport incidental to main transportation of cargo in the international traffic would also be within the scope of such expression. Applying the aforesaid principle, it has to be held that the transportation of cargo in the international traffic by feeder vessel would fall within the ambit of such expression if such transportation is incidental or auxiliary to the main transportation. It is clarified that in order to claim benefit under Article 8, it must be established that cargo in the international traffic was by the ship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be ancillary activity only if it can be linked with the main voyage by mother ship. If the proposition of CIT(A) is accepted then it would cover the entire voyage undertaken by the ship belonging to other shipping companies. For example, assessee may transport the goods by one ship from Mumbai to Singapore belonging to other enterprises and load the cargo in another ship which is also not owned/leased/chartered by the assessee for transporting the cargo from Singapore to Australia. Such type of voyage is never intended to be covered by the expression 'operation of ships'. Therefore, broad proposition laid down by the CIT(A) cannot be accepted. In our opinion, the benefit under Article 8 would be available in respect of transporta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e through feeder vessel operated by Taipan Shipping Pvt Ltd. Similar details are given in the chart in respect of remaining 128 transactions alleged to be transported under pool agreement but no Bill of Lading was given in respect of such consignments. There is no list of mother vessels operated under the pool agreement. There is nothing to prove that such ship was chartered by the pool partners. Even assuming that 'Mare Balticum' was charted by pool partners, the sample evidence, in our view, would not prove the linkage between feeder vessel and mother vessel in all the transactions. Therefore, this fact has to be verified and the claim of the assessee can be allowed accordingly. 5. There is another aspect of the issue which req ..... X X X X Extracts X X X X X X X X Extracts X X X X
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