TMI Blog2018 (6) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... PER SAKTIJIT DEY, J.M. Aforesaid appeal at the instance of the assessee is directed against assessment order dated 25th January 2017, passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 (for short the Act ) for the assessment year 2012 13, in pursuance to the directions of the Dispute Resolution Panel (DRP). 2. Ground no.1, being of general nature is dismissed. 3. In grounds no.2 and 3, assessee has challenged the decision of the Departmental Authorities in bringing the Inland Haulage Charges (IHC) to tax under section 44B of the Act. 4. Brief facts are, the assessee a tax resident of France is engaged in shipping business in international water. During the year under consideration, the assessee is stated to have carried out its business activities in India through its agent Parekh Marine Agencies Pvt. Ltd. For the impugned assessment year assessee filed its return of income on 27th September 2013, declaring total income of ₹ 9,52,43,663. During the assessment proceedings, the Assessing Officer noticing that the assessee has not offered to tax IHC, service tax in relation to IHC and feeder vessel charges, called upon the assessee to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of India France Tax Treaty which governs the taxability of shipping income in international traffic, the DRP held that there are material differences in the wordings of both the treaties insofar as it relates shipping income from international traffic. They observed, as per Article 8 of the India Belgium Treaty income derived from the operation of ships in international traffic also includes income derived from the transportation by ship of goods etc., and also any other activity directly connected with such transportation. However, in Article 9 of India France Tax Treaty, the expression any other activity directly connected with such transportation is absent. Thus, the DRP ultimately concluded that IHC not being part of international traffic has to be brought to tax under section 44B of the Act. Accordingly, they upheld the decision of the Assessing Officer. 6. The learned Authorised Representative submitted that the issue in dispute now stands decided in favour of the assessee in assessee s own case by virtue of order of the Tribunal in ITA no.6649/Mum./2017 and Ors., dated 14th March 2018. 7. Learned Authorised Representative taking us through the relevant observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xempt under Article 9 of India France DTAA. The aforesaid decision of the DRP in assessment year 2012 13, was challenged by the Department before the Tribunal. It is necessary to observe, while deciding similar issue in case of CMA CGM SA, the company with which the assessee subsequently got merged, identical issue came up for consideration before the DRP in assessment years 2012 13, 2013 14 and 2014 15. While in assessment year 2012 13, the DRP decided the issue in favour of the assessee, in assessment years 2013 14 and 2014 15 the DRP took a diametrically opposite view by holding that IHC is taxable in India under section 44B of the Act. The reason for doing so as observed by the DRP was, in the absence of expression any other activity connected with such transportation in Article 9 of India France DTAA, it cannot be said that IHC is exempt under Article 9 of India France DTAA. As could be seen from the impugned order of the DRP, on identical reasoning the DRP has held that IHC is taxable in India under section 44B of the Act. Notably, while deciding the Revenue s appeal against the order of the DRP in case of the present assessee as well as the appeals filed by the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so taken a plea that the communication system is very much an integral part of shipping business and therefore, the income received by the assessee from the agents, did in fact, amount to income from the shipping business of the assessee and therefore, not chargeable to tax. The Hon ble Bombay High Court held that the amount received by the assessee for using the communication system by the agents is part of shipping business and could not be captured under any other provisions of the Income tax Act except DTAA. The High Court further held that it does not amount to technical service. Finally the High Court held that the amounts paid by the agents for using the communication system arose out of the shipping business and cannot be brought to tax. 19. The decision so rendered by Hon ble Bombay High Court in the context of India-Denmark DTAA clearly shows that the ancillary activities connected with the shipping business are also included in the shipping business. The above said decision has been followed by the co-ordinate bench in the case of same assessee, viz., A.P.Moller Maersk A/S (ITA No.1798/Mum/2015 dated 15-02-2017) for AY 2011-12 to hold that the Inland Haulage charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussed earlier, while framing draft assessment order, the Assessing Officer held that IHC being not part of income derived from shipping operation in international traffic is taxable in India. Thus, he held, service tax collected amounting to ₹ 62,16,237 on IHC is also taxable in India. Though, assessee objected to the aforesaid decision of the Assessing Officer, however, the DRP rejecting the objections of the assessee held that service tax collected on IHC is taxable u/s 44B since it is part of IHC which is taxable under the said provision. The DRP observed that while deciding the issue in the preceding assessment year the DRP has relied upon the decision of the Hon'ble Delhi High Court in Mitchel Drilling. However, they observed, in case of Halliburton Off shore Inc. v/s ACIT, Division Bench of Hon'ble Uttarakhand has referred identical issue to a Larger Bench. The DRP observed, considering the fact that the provisions of section 44B and section 44BB of the Act are similar; the position of law on the issue has not attained finality. The DRP observed, since, the order of the DRP is not appealable by the Department, in order to protect the interest of Revenue they h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30. We shall now take up the appeals filed in the case of M/s Delmas SAS (now merged with CMA CGM SA). The revenue has filed appeal and the assessee has filed cross objection for assessment year 2012-13. The grounds urged by the revenue relate to (a) Taxability of Inland Haulage Charges. (b) Taxability of freight charges received on transportation of cargo through feeder vessels. (c) Inclusion of service tax as part of Gross receipts. 31. The decision rendered by us in the hands of CMA CGM SA in the earlier paragraphs on identical issues shall equally apply to the issues urged in the case of this assessee also. Accordingly, following the decisions so rendered, we confirm the order passed by Ld DRP in all the above said three issues. 16. Respectfully following the aforesaid decision of the Co ordinate Bench, we hold that service tax collected on IHC is not taxable in India as per Article 9 of India France DTAA. These grounds are allowed. 17. In grounds no.6 and 7, the assessee has challenged the decision of the Departmental Authorities in holding Parekh Marine Agencies Pvt. Ltd. as the agency Permanent Establishment (P.E) of the assessee in In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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