TMI Blog2021 (8) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... spirit. Respectfully following the same, we uphold the plea, of the assessee and direct that benefit of article 8 must be extended to entire freight receipts-irrespective of whether the earnings are relating to feeder vessels or by the ships in international traffic. The assessee gets the relief accordingly. - ITA No.: 7113/M/2019 - - - Dated:- 30-8-2021 - Pramod Kumar (Vice President) and Amarjit Singh (Judicial Member) For the Appellant : Porus Kaka Divesh Chawla For the Respondent : S. S Iyengar ORDER Per Pramod Kumar, VP: 1. By way of this appeal, the assessee-appellant has challenged correctness of the order dated 11th October 2019 passed by the learned Assessing Officer under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 for the assessment year 2016-17. 2. In grounds nos 1 to 2, the assessee appellant has raised the following grievances:- 1. Ground 1 - On the facts and in the circumstances of the case and in law, the learned DCIT has erred in denying the benefit of Article 8 of the Double Taxation Avoidance Agreement between India and UAE (Tax Treaty) to the Appellant by holding it liable to tax in India under Rule 10 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaty; in short]. The assessee is engaged in the business of operation of ships in the international traffic, and has earned freight income from the same. During the course of assessment proceedings, the Assessing Officer noted that while the assessee has earned freight income of Rs. 275,44,81,577/- the assessee has produced the charter party arrangement in respect of MV OEL India and only pooling arrangement in respect of Orient Express Line FZCO, which covers receipts of Rs. 59,43,86,472/-. It was thus noted that so far as freight receipts of Rs. 216,00,95,105/- are concerned, his claim of exemption under UAE tax treaty, as claimed and accordingly declined the same. It was then observed that the assessee had business connection by way of exclusive agent and front office which also constitutes it s permanent establishment in India. The income in question was thus held to be taxable in India, and taxed @7.5% of gross receipts under rule 10. When this stand was put to the assessee in a draft assessment order, assessee raised objections before the Dispute Resolution Panel and also filed additional evidences in support of his claim. Learned DRP accepted the additional evidence and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 216,00,95,105/- on account of Freight, THS and Detention charges earned from pooling arrangement which OEL, FZCO has with other pooling parties. It is submitted that the AO has denied the benefit of the DTAA between Indai and UAE inspite of DIT Relief Certificate obtained by OEL, FZCO for pooling arrangement with other pooling parties and the DIT Relief Certificate obtained by other pooling parties (for their respective vessels) who are under pooling arrangement with OEL, FZCO. It is noted that as the India UAE DTAA the profits from the operation of ships in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated. Further these provisions also apply to profits from the participation in a pool, a joint business or an international operating agency. Another point to be kept in mind is that while the provisions of section 44B of the IT Act relate to the non-residents engaged in the business of operation of ships, for the purpose of section 44B the business of operation of ships is an inclusive definition but term used in restricts the scope of DTAA to the profits from operation of ships i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r: the term international traffic means any transport by a ship or aircraft operated by an enterprise of a Contracting State except when the ship or aircraft is operated solely between placed in the other Contracting State. If the meaning assigned to income from the operation of ships in international traffic as appearing in India UK DTAA is seen there is no scope for any ancillary income being part of income from the operation of ships in international traffic. The income from transpiration of goods through feeds vessels cannot be a part of income from the operation of ships in international traffic unless feeder vessels are part of the pool in which the assessee is participating. All such income which is not in the nature of income from the operation of ships in international traffic but is an income from Shipping Business will have to be taxed only under section 44B of the IT Act which deals with computation of Profit and Gains of Shipping Business in the case of non-Residents. In view of this, the DRP is of the opinion that Income from Freight, THC and Detention charges earned from pooling arrangements which OEL FZCO has with other pooling parties cannot be th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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