TMI Blog2020 (4) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... its shipping activities in the absence of any PE in India could not be brought to tax in India. On the basis of the aforesaid facts, we find ourselves to be in agreement with the claim of the ld. A.R that now when the assessee has been held as an agent of independent status, and the income of M/s Arc Line, Mauritius in the absence of any PE in India had been held as not taxable in India, therefore, there remains no basis for taxing the income of M/s Arc Line, Mauritius from its shipping activities under Sec. 44B of the Act in the hands of the assessee by treating it as a representative assessee of the aforesaid company. We thus set aside the order of the CIT(A) and delete the addition made by the A.O in the hands of the assessee, vide his order passed under Sec. 143(3)/147 r.w.s 161 163 of the Act, dated 30.03.2001. - ITA No. 7680/Mum/2003, ITA No. 2455/Mum/2005, ITA No. 2453/Mum/2005, ITA No. 2280/Mum/2005 - - - Dated:- 31-1-2020 - Shri Ravish Sood, Judicial Member And Shri N.K. Pradhan, Accountant Member For the Appellant : Shri Arpit Jain For the Respondent : Shri Avaneesh Tiwari ORDER PER RAVISH SOOD, JM The present cross-appeals filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot exclusively or almost exclusively for AL. Accordingly, he erred in holding that they are dependent Agents and constitute FE of AL in India. 5. Without prejudice to the above and on the facts and in the circumstances of the case, the learned CIT(A) legally erred in bringing to tax the entire freight collected on behalf of AL and applying the provisions of section 44B of the Income-tax Act, 1961, instead of taxing the profits attributable to the activities performed in the Indian territorial waters. 6. Without prejudice to the fact that AL does not have a PE in India, the learned CIT(A) legally erred in not applying the provisions of Article 7(2) of the DTAA and Circular No. 23, dated July 23, 1969 issued by Central Board of Direct Taxes in order to determine AL's profits attributable to Indian operations. 7. Without prejudice to the above and on the facts and in the circumstances of the case, the learned CIT(A) legally erred in confirming the tax liability of the appellant on the entire amount of freight collected by it on behalf of AL in India instead of restricting the same to the amount of assets belonging to AL in possession of the appellant. The Appellant cra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 3,87,11,273/- @ 7.5%, which worked out to an amount of ₹ 29,03,351/-. As such, the income of M/s Arc Line, Mauritius amounting to ₹ 29,03,351/- was brought to tax in the hands of the assessee company in its capacity as that of a representative assessee. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, the CIT(A) not finding favour with the contentions advanced by the assessee dismissed the appeal. 5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short A.R ) for the assessee at the very outset of the hearing of the appeal submitted that the issue involved in the present appeal was squarely covered by the order passed by the Tribunal in the case of M/s Arc Line, Mauritius for the year under consideration i.e A.Y. 1998-99. It was submitted by the ld. A.R that the Tribunal while disposing off the quantum appeal of M/s Arc Line, Mauritius had concluded that the assessee was an agent of independent status and hence could not be considered as constituting an agency PE of the assessee. As such, it was the claim of the ld. A.R that the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inabove, the A.O treating the assessee as an exclusive/dependant agent of M/s Arc Line, a company incorporated in Mauritius and engaged in the activity of shipping in international traffic, had vide his order passed under Sec. 143(3)/147 r.w.s. 161 and 163 of the Act, dated 30.03.2001 assessed its income from shipping activities under Sec. 44B in the hands of the assessee company. As is discernible from the records, the Tribunal while disposing off the quantum appeal of M/s Arc Line, Mauritius for the year under consideration i.e A.Y. 1998-99 in ITA No. 5122/Mum/2003 had concluded viz. (i) that, the assessee i.e M/s Freight Connection India Pvt. ltd. being an agent of an independent status could not be considered as constituting an agency PE of the assessee; (ii) that, M/s Arc Line, Mauritius did not have any PE in India; and (iii) that, the income derived by M/s Arc Line, Mauritius from its shipping activities in the absence of any PE in India could not be brought to tax in India. On the basis of the aforesaid facts, we find ourselves to be in agreement with the claim of the ld. A.R that now when the assessee has been held as an agent of independent status, and the income of M/s A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Article 5 of the Mauritius Treaty. 4. Without prejudice to Ground No.1 to 3 above, and on the facts and in the circumstances of the case, the learned CIT(A) has erred in holding that the profits of AL should be computed under Section 44B of the Act. It is prayed that the learned AO be directed to compute the profits of AL as attributable to the activities performed in the Indian territorial waters. The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing. 10. Briefly stated, M/s Arc Line, Mauritius had filed its return of income for A.Y. 2001-02 wherein it had reflected its total collections from its shipping operations in India at ₹ 6,39,32,338.15. In the return of income, M/s Arc Line, Mauritius had reported that the assessee company viz. M/s Freight Connection India Pvt. Ltd was an exclusive/dependant agent for its shipping business in India. In support thereof, M/s Arc Line, Mauritius had in the course of its assessment proceedings placed on record the agency agreement dated 01.12.1997 that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as were involved in its appeal for A.Y.1998-99 in ITA No. 7680/Mum/2003, therefore, our order therein passed shall apply mutatis mutandis for the disposal of its present appeal for A.Y. 2001-02 . As such, in terms of our aforesaid observations recorded while disposing off the appeal of the assessee for A.Y. 1998-99, we herein conclude that the assessee was not an exclusive/dependent agent of M/s Arc Line, Mauritius. Accordingly, the business income of M/s Arc Line, Mauritius in the absence of its PE in India could not have been brought to tax in India as per Article 7 of the India-Mauritius Tax Treaty. On the basis of the aforesaid facts, we herein conclude that the income of M/s Arc Line, Mauritius amounting to ₹ 47,95,688/- that had been assessed by the A.O in the hands of the assessee company (as a representative assessee), which thereafter was upheld by the CIT(A) cannot be sustained and is liable to be vacated. Accordingly, we delete the addition of ₹ 47,95,688/- made in the hands of the assessee. 13. The appeal filed by the assessee is allowed in terms of our aforesaid observations. ITA No. 2453/Mum/2005 A.Y. 2001-02 14. We shall now adve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a company incorporated in Mauritius, and is engaged in the business of shipping. It had filed its return of income for A.Y. 2001-02, wherein its total collections from its shipping operations in India were shown at ₹ 15,26,97,100.71. In its return of income, M/s Bay Lines, Mauritius had reported that the assessee company viz. M/s Freight Connection India Pvt. ltd. had acted as its agent for its shipping business in India. In the course of the assessment proceedings, M/s Bay Lines, Mauritius had placed on record an agency agreement dated 01.12.1997 that was executed by it with the assessee company. On the basis of the aforesaid facts the A.O called upon the assessee to show cause as to why it should not be considered as a representative assessee of M/s Bay Lines, Mauritius for the year under consideration under Sec.163(2) of the Act. As the reply filed by the assessee did not find favour with the A.O, therefore, he vide his order passed under Sec. 163, dated 03.02.2004 treated the assessee as a representative assessee in relation to the income of M/s Bay Line, Mauritius for A.Y. 2001-02. Notice under Sec. 148 was issued to the assessee on 04.02.2004, wherein it was called u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent agent which acted in its ordinary course of its business and was not devoted exclusively or almost exclusively on behalf of M/s Bay Line, Mauritius. Accordingly, it was observed by the Tribunal that M/s Bay Line, Mauritius did not have an agency PE in India. On the basis of the aforesaid facts, we are of the considered view that now when it has been held that M/s Bay Line, Mauritius, did not have a PE in India, therefore, its business income derived from the shipping operations could not have been brought to tax in India as per Article 7 of the India-Mauritius Tax Treaty. Accordingly, in our considered view, in the absence of any taxable income of M/s Bay Lines, Mauritius in India, the addition of ₹ 1,14,52,300/- in the hands of the assessee by treating it as a representative assessee of M/s Bay Lines, Mauritius by the A.O, which thereafter had been sustained by the CIT(A), cannot be upheld and is liable to be vacated. As such, we set aside the order of the CIT(A) in terms of our aforesaid observations and delete the addition of ₹ 1,14,52,300/- made by the A.O. 18. The appeal of the assessee is allowed in terms of our aforesaid observations. ITA No. 2280/Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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