TMI Blog2022 (2) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of TDS credit - assessee's claim is that the income involved in the TDS certificate does not pertain to Indian entity but to the assessee - HELD THAT:- TDS is claimed as credit by the assessee. The Indian entity did not claim any credit of the above TDS. The Tax Deducted At Source (TDS) in form No. 26 AS is shown in the name of the Indian entity. As the assessee has shown the income involved in this TDS certificates and in turn also claimed benefit of Article 8 and the benefit of DTAA, the credit for such tax should be granted to the assessee. The claim of the assessee is that Rule 37BA is required to be complied with. It is also submitted that merely because the deductor does not revise the TDS return, it cannot go against the assessee for the claim of the above refund. The assessee raised this additional ground before the learned Dispute Resolution Panel. The Dispute Resolution Panel admitted the above additional ground along with additional evidences. It also obtained the comments from the Assessing Officer and rejoinder of the assessee thereon. The learned Dispute Resolution Panel directed the learned Assessing Officer to carry out the necessary verification and to gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an agency PE of the Appellant 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 Appellant 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 Appellant in India, no further profits could be attributed to such PE since the Appellant has remunerated HLIPL on an arm's length basis; Short grant of TDS credit of INR 25,06,606/- 8. erred in not adjudicating the ground and not following the directions of Hon'ble DRP wherein the Hon'ble DRP has clearly instructed the learned AO to verify the submissions and claims of the Appellant and accord TDS credit where legitimately due to the Appellant 9. failed to appreciate the written submissions and evidences filed by the Appellant before the learned AO; 10. erred in not granting TDS credit to the extent of INR 25,06606/- which was incorrectly deposited in the PAN No of the Agent of Appellant whereas Agent has not taken credit for the same; 11. erred in not appreciating the fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITAT in favour of assessee, which has been confirmed by the Hon'ble Bombay High Court, where in appeal filed by the Assessing Officer is dismissed. Therefore, issue is squarely covered in favour of the assessee. 5. The learned Assessing Officer held that Revenue has not accepted the decision of Hon'ble Bombay High Court in the case of Balaji Shipping (supra) and in assessee's own case the decision of the Hon'ble Bombay High Court have been challenged before the Hon'ble Supreme Court in a SLP. The Assessing Officer even otherwise, stated that Article 8 of India Germany DTAA does not cover the issue as stated in the assessment order for Assessment Year 2007-08. The Assessing Officer also held that as assessee is carrying out of its business of operation of ship through its agent in India through Hapag - Lloyd India Ltd., who concludes the contract. Thus, it is a permanent establishment of assessee in India as per Article 5 of DTAA. Therefore, income of the assessee is also chargeable to tax in India. Therefore, he applied the provisions of section 44B of the Act. The learned Assessing Officer obtained details of total freight income and noted that freight ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. In view of this, it was submitted that issue on taxability of freight charges of Rs. 17,21,95,959/- which has been taxed under section 44B determining the income of the assessee at Rs. 1,2,14,700/- is covered in favour of the assessee. He also submitted a chart showing the percentage of income from feeder vessels income to the total freight income earned by the assessee. He submitted that the total freight income of the assessee is Rs. 2492,37,10,917/- whereas, the feeder vessels income is merely Rs. 17,21,95,959/- which is just 0.69% of the total income. He extensively referred to several decision of the coordinate Benches in assessee's own case for earlier years as well as the decision of Hon'ble Bombay High Court in the case of Balaji Shipping UK Ltd. (supra). He also took us through the Double Taxation Avoidance Agreement between India and federal republic of Germany and also between India and UK. He submitted that in assessee's own case for assessment year 2007 - 08, 2009 - 10 and 2011 - 12 the honourable High Court has already days decided this issue in favour of the assessee. He further referred to the decision of the coordinate bench in assessee's ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative submitted that issue has been considered and decided by the co-ordinate Bench in assessee's own case for earlier years. 13. We have carefully considered the rival contentions and perused the orders of the lower authorities. 14. Ground number 1 of the appeal is general in nature, no arguments advanced and therefore same is dismissed. 15. Ground number 2 - 4 is with respect to the taxability of freight charges amounting to Rs. 172,195,959/- from transportation of cargo through feeder vessels. During the year, assessee has earned total freight income of Rs. 24,923,710,917/-, out of which income from feeder vessels was Rs. 172,195,959/-. Which is approximately 0.69% of the total freight income earned by the assessee. Undisputedly, assessee is a resident of Federal Republic of Germany and therefore the agreement for avoidance of double taxation and prevention of fiscal evasion between India and Germany is applicable for determination of taxability of income of the assessee. Article 8 of the DTAA relates to shipping and transport income provides as Under:- ARTICLE 8 SHIPPING AND AIR TRANSPORT 1. Profits from the operation of ships or aircraft i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding allowability of exemption of income Under the provisions of double taxation avoidance agreement. The assessee is a sipping company engaged in the operation of ships in the international traffic and is a tax resident of Germany. The assessee for the relevant year had declared gross freight collection of Rs. 6,879,957,893/- and the entire income was claimed as exempt Under the provisions of DTAA between India and Germany. Under article 8 of the India Germany treaty, profit from operation of ships or aircraft in international traffic is taxable only contracting State in which place of effective management of the enterprise is situated. Further clause 4 of article 8 also provides that these provisions will apply to the profit from participation in pool or a joint-venture business or in international operating agency. The AO took the view that the provisions of DTAA would apply only to income from operation of ships which were either owned or chartered by the assessee and not to income from other ship/vessels. AO noted that the freight in respect of Germany by the ship, owned, chartered by the assessee or through vessel was only to the extent of Rs. 3,007,821,923/-. He, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business operation of ships in the international traffic as an enterprise may not be able to carry on business at all in many situations. The enterprise may not ply ships owned or chartered by it in respect of certain routes or on a particular route on a given day or for a particular period and, therefore, slot hire facility becomes necessary for carrying on the business and such cases have to be considered as having close nexus with the main business of enterprise of operation of ships. They are ancillary and complement the operation of the enterprise. 8.1 The High Court referred to judgement of Honourable High Court of Delhi in case of Director Of Income Tax versus KLM Royal Dutch airline (178 taxmann 241) in which assessee was engaged in the business of operating an airline in international traffic had obtained license in respect of premises at Mumbai from airport authority of India. The assessee had entered into an agreement with CSC (P) Ltd. for cargo handling. The assessee had adjusted the license fee/rent paid to the airport authority against the payment made to CSC (P) Ltd. The High Court held that the rental income was inexicably [sic. inextricably] linked to cargo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble High Court of Delhi clearly held that judgement would not apply to the assessee who are carrying on the business of shipping cargo only by availing slot hire facility is obtained by them. In the present case sipping revenue is not only from slot hire facilities. The revenue from owned/chartered ships constitutes more than 2/3rd of revenue and only 29% of the revenue from slot higher facility is. Therefore, the judgement of the honourable High Court of Delhi in case of Balaji sipping UK Ltd. (supra) is applicable to the facts of the case of the assessee. 8.5 Considering the facts and circumstances of the case and for the reasons given earlier, we hold that the assessee will be eligible for exemption Under the treaty provisions in respect of revenue earned from feeder vessels obtained by the assessee on slot hire arrangement basis. We, therefore, set-aside the order of CIT(A) and allow the claim of the assessee. 18. The above order of the coordinate bench was subject matter of challenge before the honourable Bombay High Court in Income Tax Appeal number 602 of 2014, (which is reproduced at paragraph number 5 of the order of the honourable High Court in Income Tax Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coordinate benches as well as in the decision of the honourable High Court holding in favour of the assessee. Therefore, respectfully following the decisions of the honourable High Court and coordinate benches in assessee's own case, we allow ground number 2 - 4 of the appeal holding that freight charges of Rs. 172,195,959/- earned by assessee from transportation of cargo through feeder vessels is also eligible for benefit of Article 8 of the Double Taxation Avoidance Treaty between India and Germany. 22. In view of our decision in ground number 2 - 4 of the appeal, no adjudication is required on ground number 5 - 7 and 12 - 14 of the appeal of the assessee, hence those grounds become infructuous and hence dismissed. 23. Coming to ground number 8 - 11 wherein the claim of the assessee is with respect of tax credit of Rs. 2,506,606 which was directed by the learned dispute resolution panel to the learned assessing officer to verify the submission and then allow the TDS credit where legitimately due to the assessee. This ground was identical to ground number 8 in ITA number 5898/2019 for assessment year 2016 - 17 dated 31/1/2020 in assessee's own case wherein as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 8 and the benefit of DTAA, the credit for such tax should be granted to the assessee. The claim of the assessee is that Rule 37BA is required to be complied with. It is also submitted that merely because the deductor does not revise the TDS return, it cannot go against the assessee for the claim of the above refund. The assessee raised this additional ground before the learned Dispute Resolution Panel. The Dispute Resolution Panel admitted the above additional ground along with additional evidences. It also obtained the comments from the Assessing Officer and rejoinder of the assessee thereon. The learned Dispute Resolution Panel directed the learned Assessing Officer to carry out the necessary verification and to grant credit. The assessee was also directed to submit all relevant details and clarification thereon. But AO did not consider and carry out such directions. 25. As the issue identical facts emerged in earlier year, we respectfully following the order of the coordinate bench in assessee's own case for assessment year 2016 - 17 also direct the Assessing Officer similarly. Accordingly, the Assessing Officer may examine the same in accordance with law after granti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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