TMI Blog2020 (1) TMI 1555X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, we are of the considered view that the benefits of Article 8 of the India-Germany DTAA would also be available to the assessee in respect of the revenue that was earned by the assessee from the feeder vessels obtained on slot hire arrangement basis. Accordingly, we set aside the order of the CIT(A) in terms of our aforesaid observations. The Grounds of appeal No. 2 to 4 raised by the assessee before us are allowed. Agency PE in India - HELD THAT:- We are further of the view that as we have held that the benefit of Article 8 of the India Germany DTAA would also be available to the assessee in respect of the revenue earned by it from the feeder vessels obtained on slot hire arrangements, therefore, the Grounds of appeal Nos. 5 to 7 as to whether the assessee had an agency PE in India having been rendered as academic are not being adverted to and adjudicated upon by us and are left open. The Grounds of appeal No. 5 to 7 are dismissed in terms of our aforesaid observations. Interest levied on the assessee u/s 234B - HELD THAT:- We find, that the said issue is covered in favour of the assessee by the decision of the Hon ble High Court of Bombay in the case of DDIT(IT) Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-14 and AY 201415, wherein the Hon'ble HC/ Hon‟ble ITAT has held that freight income from transportation of cargo through feeder vessels is eligible for benefit under Article 8 of the India-Germany DTAA: Hapag Lloyd India Private Limited ('HLIPL') held to be agency permanent establishment ('PE') of the Assessee in India 5. erred in holding that HLIPL constitutes an agency PE of the Assessee in India , without providing cogent reasons for the same: 6. without prejudice to the above, erred in not appreciating that HLIPL is not a dependent agent of the Assessee as per Article 5 of India-Germany DTAA, 7. without prejudice to the above, failed to appreciate that even if it is held that HLIPL constitutes an agency PE of the Assessee in India. no further profits could be attributed to such PE since the Assessee has remunerated HLIPL on an arms length basis: Short grant of TDS credit of INR 60,06,811/- 8. er red in not grant ing TDS credi t to the extent of INR 60 ,06,811 which was incorrectly deposited in the PAN No. of the Agent of Assessee whereas Agent has not taken credit for the same: Levy of interest under section 234B of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... destination port on the vessels owned/chartered or pooled by the assessee. The assessee persuaded by commercial requirements would at times transport cargo on slot arrangement basis from the origin port to the destination port. The assessee would issue bill of lading to the exporters for transportation of cargo for the entire journey (i.e from the origin port to the destination port). 4. During the course of the assessment proceedings the A.O called upon the assessee to explain as to how the freight earned by it from the feeder vessels (i.e portion of freight income attributed to feeder vessels) which were neither owned, chartered or leased by the assessee was brought within the sweep of Article 8 of the Double Taxation Avoidance Agreement‟ (for short DTAA‟) between India and Germany. It was the claim of the assessee before the A.O that as per Article 8 Clause 1 of the India-Germany DTAA the profits from the operation of ships or aircraft in international traffic was taxable only in the contracting state in which the place of effective management of the enterprise was situated. The assessee taking support of the judgment of the Hon‟ble High Court of Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eder vessels was entitled for relief provided in Article 8 of the India-Germany tax treaty and thus would not be taxable in India. Also, it was submitted by the assessee that the tribunal had taken a similar view while disposing off the appeals in the assesse‟s own case, vide its order dated 21.09.2016 for A.Y. 2005-06, vide order dated 22.07.2016 for AY(s). 2006-07, 2008-09 to A.Y. 2011-12, and vide its order dated 31.10.2017 for A.Y. 2013-14. 5. However, the A.O held a conviction that as the case of Balaji Shipping U.K. Ltd. (supra) pertained to India-UK treaty which specifically provided that income from the operation of ships included income derived from the rental on a bareboat basis of ships if such rental income was incidental to the income described in Paragraph 1 of the Article 9, therefore, the reliance placed by the assessee on the same was misconceived. The A.O observed that as there were no such alike provisions in Article 8 of India-Germany tax treaty, therefore, the ratio of the decision in the case of Balaji Shipping U.K. Ltd. (supra) would not be applicable to the case of the assessee. The A.O further observing that as the order of the Hon‟ble Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) r.w.s 144C(13) of the Act‟ before the DRP. The DRP dealt with the contentions of the assessee, as under: (A). The DRP observed that as per Article 8 of India-Germany tax treaty the profits from the operation of ships or aircraft in international traffic was taxable only in the Contracting state in which the place of effective management of the enterprise was situated. Also, as per the A.O the said provisions would apply to profits from the participation in a pool, a joint business or an international operating agency. As per the DRP, while for the provisions of Sec. 44B of the Act related to the non-residents engaged in the business of operation of ships, however, the same were not pari-materia with the wordings of India-Germany tax treaty. It was observed by the DRP that for the purposes of Sec. 44B the business of operation of ships was an inclusive definition but the term used in DTAA was income from the operation of ships in international traffic which impliedly restricted the scope of DTAA to the profits from operation of ships in international traffic only. Accordingly, on the basis of its aforesaid observations the DRP was of the view that though the India- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,82,92,050/-. 10. The assessee being aggrieved with the order passed by the A.O under Sec. 143(3) r.w.s 144C(13) had carried the matter in appeal before us. The Ld. Authorised representative (for short A.R‟) for the assessee at the very outset of the hearing submitted that the issue involved in the present appeal was squarely covered by the order of the Hon ble High Court of Bombay in the case of Director Of Income-tax (International Taxation) Vs. Balaji Shipping U.K Ltd. (2012) 211 Taxman 0535 (Bom). The ld. A.R further submitted that the Hon ble High Court of Bombay while disposing of the appeal of the assessee for A.Y. 2007-08 in Hapag- Llyod AG vs. Additional Director Of Income-tax (International Taxation) (2013) 84 CCH 0073 (Bom) had restored the issue to the Tribunal for fresh adjudication after considering the judgment of the Hon‟ble High Court in the case of Balaji Shipping Pvt. Ltd. The ld. A.R submitted that the Tribunal thereafter had vide its order dated. 14.08.2013 disposed off the appeal of the assessee for A.Y 2007-08. The ld. A.R submitted that the Tribunal in its order had held that the assessee would be eligible for exemption under the treaty pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter to the Tribunal had observed as under: 2. Counsel for the parties states that in view of the decision of this Court in the matter of Director of income Tax (International Taxation) V/s. Balaji shipping UK Ltd. reported in 77 DTR 361, the impugned order be set aside in respect of the issue raised in the present appeal. Accordingly, the impugned order is set aside and the matter is remanded to the Tribunal for fresh consideration in the light of the decision of this Court in the matter of Balaji (supra). All contentions before the Tribunal are kept open. 13. We find that the Tribunal on the matter having been restored for fresh adjudication had thereafter vide its order passed in the case of the assessee for A.Y. 2007-08 in Hapag Llyod Container Line GMBH Vs. Addl. Director of Income-tax (International Taxation), Mumbai (ITA No. 8854/Mum/2010; dated. 14.08.2013) keeping in view the observations of the Hon‟ble High Court in the case of Director Of Income-tax (International Taxation) Vs. Balaji Shipping U.K Ltd. (2012) 211 Taxman 0535 (Bom), had held, that the assessee would be eligible for exemption under the treaty provisions in respect of revenue that was ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the Grounds of appeal Nos. 5 to 7 as to whether the assessee had an agency PE in India having been rendered as academic are not being adverted to and adjudicated upon by us and are left open. The Grounds of appeal No. 5 to 7 are dismissed in terms of our aforesaid observations. 15. That as regards the assailing of the interest of ₹ 29,82,996/- levied on the assessee under Sec. 234B of the Act, we find, that the said issue is covered in favour of the assessee by the decision of the Hon ble High Court of Bombay in the case of DDIT(IT) Vs. NGC Network Asia LLC (2009) 313 ITR 187 (Bom). In the aforesaid case, the Hon‟ble High Court had held that interest under Sec. 234B would not be applicable to a non-resident assessee, by observing as under: 5. Under the provisions of the present Act, the issue had come for consideration in the case of CIT Anr. vs. Sedco Forex International Drilling Co. Ltd. Ors. (2004) 186 CTR (Uttaranchal) 144 : (2003) 264 ITR 320 (Uttaranchal). One of the questions was, as to whether interest could be levied on the assessee under s. 234B of the Act in respect of tax which was not liable to be deducted at source. A learned Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongly deposited in the PAN Number of the agent of the assessee. It was submitted by the ld. A.R that the A.O while concluding as hereinabove had overlooked the fact that the agent had not taken the credit for the said amount. We find that the aforesaid claim of the assessee would require verification of facts as had been stated by the assessee before us. Accordingly, we restore the matter to the file of the A.O for making necessary verifications. In case, the income of the correlating to the TDS of ₹ 69,96,811/- had been assessed in the hands of the assessee and no credit for the same was raised by the agent, then the A.O after being satisfied shall allow the necessary credit for the same to the assessee. Needless to say, the A.O shall in the course of the set aside‟ proceedings afford a sufficient opportunity of being heard to the assessee for substantiating its aforesaid claim. The Ground of appeal No. 8 is allowed for statistical purposes in terms of our aforesaid observations. 17. The Ground of appeal No. 10 wherein the assessee had assailed the initiation of the penalty proceedings under Sec. 271(1)(c) being premature is dismissed. 18. The appeal of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudice to one another. The Appellant craves leave to add/ alter/ amend/ delete/ withdraw any or all of the grounds at or before the hearing of the appeal so as to enable the Income tax Appellate Tribunal to decide the appeal according to law. 20. The assessee has assailed the declining on the part of the A.O to allow TDS credit of INR 60,06,811/-. As we have deliberated on the said aspect and restored the said issue to the file of the A.O for fresh adjudication while disposing off the Ground of appeal No. 8 raised by the assessee in its appeal against the order passed by the A.O under Sec. 143(3) r.w.s 144C(13), dated 08.08.2019, therefore, the Grounds of appeal Nos. 1 to 4 raised in the present appeal are disposed off in the same terms. 21. The assessee has assailed before us the charging of the interest of ₹ 29,82,996/- under Sec. 234B by the A.O. As we have after necessary deliberations adjudicated upon the said issue while disposing off the Ground of appeal No. 9 raised by the assessee in its appeal against the order passed by the A.O under Sec. 143(3) r.w.s 144C(13), dated 08.08.2019, therefore, the Ground of appeal No. 5 raised by the assessee in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X
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