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TMI Blog2022 (4) TMI 1512X X X X Extracts X X X X X X X X Extracts X X X X ..... ing anything contained in the other provisions of this Act, apply for the purpose of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India unless the Income-tax Officer is satisfied that there is an agent of the non-resident from whom the tax will be recoverable under the other provisions of this Act. (2) Where such a ship carries passengers, livestock, mail or goods shipped at port in India, one-sixth of the amount paid or payable on account of such carriage to the owner or the charterer or to any person on his behalf, whether that amount is paid or payable in or out of India, shall be deemed to be income accruing in India to the owner charterer on account of such carriage. (3) Before the departure from any port in India of any such ship, the master of the ship shall prepare and furnish to the Income-tax Officer a return of the full amount paid or payable to the owner or charterer or any person on his behalf, on account of the carriage of all passengers, livestock, mail or goods shipped at that port since the last arrival of the ship thereat : Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar nature. 3. It was submitted by the ld. AR that there is no provision for filing of the appeal against the order passed by the Assessing Officer u/s 172 of the Act either before the Commissioner of Income Tax (Appeals) or before the Tribunal. He had drawn our attention to section 246 of the I.T. Act which provides as under : "Appealable orders. 246. (1) Subject to the provisions of sub-section (2), any assessee aggrieved by any of the following orders of an Assessing Officer (other than the Deputy Commissioner) may appeal to the Deputy Commissioner (Appeals) before the 1st day of June, 2000 against such order- (a) an order against the assessee, where the assessee denies his liability to be assessed under this Act, or an intimation under sub-section (1) or sub-section (1B) of section 143, where the assessee objects to the making of adjustments, or any order of assessment under sub-section (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed; (b) an order of assessment, reassessment or recomputation under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or functions conferred on or assigned to him under section 120 or section 124; (b) an order specified in clauses (a) to (e) (both inclusive) and clauses (i) to (l) (both inclusive) of sub-section (1) or an order under section 104, as it stood immediately before the 1st day of April, 1988 in respect of any assessment for the assessment year commencing on the 1st day of April, 1987 or any earlier assessment year made against the assessee, being a company; (c) an order of assessment made after the 30th day of September, 1984, on the basis of the directions issued by the Deputy Commissioner under section 144A; (d) an order made by the Deputy Commissioner under section 154; (da) an order of assessment made by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or after the 1st day of January, 1997; (db) an order imposing a penalty under sub-section (2) of section 158BFA; (e) an order imposing a penalty under section 271B or section 271BB; (ee) an order made by a Deputy Commissioner imposing a penalty under section 271C, sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se out of the various orders passed by the Assessing Officer / Commissioner of Income Tax (Appeals). For completeness of the record, we are reproducing section 253 of the Act which reads as under : "Appeals to the Appellate Tribunal. 253. (1) Any assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order- (a) an order passed by a Deputy Commissioner (Appeals) before the 1st day of October, 1998 or, as the case may be, a Commissioner (Appeals) under section 154, section 250, section 270A, section 271, section 271A, section 271J or section 272A; or (b) an order passed by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995, but before the 1st day of January, 1997; or (ba) an order passed by an Assessing Officer under sub-section (1) of section 115VZC; or (c) an order passed by a Principal Commissioner or Commissioner 54[under section 12AA or section 12AB] or under clause (vi) of sub-section (5) of section 80G or under section 263 or under section 270A or unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate Tribunal as if it were an appeal presented within the time specified in sub-section (3). (5) The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if it is satisfied that there was sufficient cause for not presenting it within that period. (6) An appeal to the Appellate Tribunal shall be in the prescribed form55 and shall be verified in the prescribed manner and shall, in the case of an appeal made, on or after the 1st day of October, 1998, irrespective of the date of initiation of the assessment proceedings relating thereto, be accompanied by a fee of,- (a) where the total income of the assessee as computed by the Assessing Officer, in the case to which the appeal relates, is one hundred thousand rupees or less, five hundred rupees, (b) where the total income of the assessee, computed as aforesaid, in the case to which the appeal relates is more than one hundred thousand rupees but not more than two hundred thousand rupees, one thousand five hundred rupees, (c) where the total income of the assessee, computed as aforesaid, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT. 2. The logic behind this is that the assessee is eligible to question the order under section 172(4) under section 172(7) and the AO is bound to pass an order under section 143(3) which is an appealable matter. Accordingly, there is no prejudice caused to the assessee by considering an order section 172(4). This understanding is line with the judgement of Hon'ble Supreme Court in the case of A.S. Glittre (1997) 91 Taxman 286, wherein it was held that the proceedings u/s 172(4) are summary or adhoc proceedings. It is a right conferred upon the AO to levy and recover tax on the freight paid towards ship belonging to non-resident. Another right is given to the assessee u/s 172(7) to opt for the regular assessment and the AO is bound to make such assessment. The relevant extract is as under - "6. The scheme of section 172 appears to be this: Section 172(1) gives a right to the ITO to levy and recover tax in the case of any ship belonging to a non-resident, in a summary manner (ad hoc assessment) notwithstanding anything contained in the other provisions of the Act. It is an absolute right conferred on the assessing authority. The assessee has no right to object to the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re (1997) 91 Taxman 286. 5. On merit, it is seen that the assessee is contesting the order under section 172(4) on the question of interplay between article 8 and article 24 of DTAA. This ground of appeal is not sustainable as Hon'ble Supreme Court in the case of A.S. Glittre (1997) 91 Taxman 286, has held that the proceedings u/s 172(4) are summary or adhoc proceedings, it further stated that it is a right conferred upon the AO to levy and recover tax on the freight paid towards ship belonging to non-resident. The right given to the assessee u/s 172(7) is to opt for the regular assessment, in this case, the assessee has surrendered the right under section 172(7), accordingly, he cannot agitate the applicability of article 24 in appeal now against the observations of Supreme court. In the present case the order is passed u/s 172(4) , the actual taxability or otherwise can only be determined u/s 143(3) of the I.T. Act. 6. Art 8 of DTAA talks about the profits, Art 24 talks about income and section 172(2) says about the amount paid or payable on account of such carriage. The terminologies employed carry different and specific meanings. Art 8 can only be examined during the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m is payable by the Master of the ship, unless arrangement has been made under Section 194. For the purpose of the said determination, the Assessing Officer can call for documents and/or accounts as he may require. Port clearance cannot be granted unless the Collector of Customs or other officer authorized, is satisfied that the tax assessable under the said Section has been duly paid or satisfactory arrangements have been made for payment thereof. 14. A reading of the said Section would show that Section 172(4) postulates a summary assessment of payment of tax payable under Section 172 before the ship leaves India. This is necessary because after the ship leaves India, it would be difficult; (if not impossible), to recover the tax. The section postulates that the ship can be allowed to leave when satisfactory arrangements have been made for filing of return and payment of tax. These are special provisions which have been enacted keeping in view the specific need and requirement relating to international shipping and their liability to pay income tax in India." 7. Per contra, ld.AR has drawn our attention to the order of the Tribunal in the case of ITO (International Taxation) V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mail, livestock or goods carried on by the owners or lessees or charterers of the ships or aircraft, including profits from : (a) the sale of tickets for such transportation on behalf of other enterprises; (b) the incidental lease of ships or aircraft used in such transportation; (c) the use, maintenance or rental of containers (including trailers and related equipment for the transport of containers) in connection with such transportation; and (d) any other activity directly connected with such transportation." 10. It was submitted by the ld.AR that Article 8 of DTAA of India - Singapore will have overriding effect over the provisions of the Income Tax Act in terms of section 90 of the I.T. Act. In view of the overriding effect, the profit derived by the assessee from the operation of the ships shall be taxable in Singapore only. The Assessing Officer, was bound to apply the provisions of India - Singapore Treaty even at the stage of passing the summary order u/s 172(4) of the Act. It was further submitted that as Article 8 is fully applicable, the occasion for applicability of Article 24 does not arise. It was submitted that the Assessing Officer had wrongly invoked Art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocal agent M/s J.M. Baxi & Co is not eligible for for relief under DTAA as per its claim .........." 13. Per contra, the ld.DR had submitted that the Assessing Officer as well as ld.CIT(A) had rightly applied the DTAA in the present case and our attention was drawn to Paras 3 to 8 of the assessment order which are to the following effect : 14. Ld.DR. had further drawn our attention to Paras 10.2 to 10.6 of the order of CIT(A) which are to the following effect: 15. We have heard the rival contentions of the both the parties and perused the material available on record. The bare reading of Article 8 of India - Singapore Treaty make it abundantly clear that the profit derived by the enterprise of the "Contract State" from the operations of ships shall be taxable only in that state, namely Singapore. In the present case, the Assessing Officer had mentioned in the assessment order that the assessee is a resident of Singapore and as per the assessment order, the entire freight earned by the freight beneficiaries of the assessee is exempt from tax in India and is required to be taxed in Singapore. Undoubtedly, the Article 8 governs the field, and the assessee is entitled to the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration and that was on account of commission @ 3.5% of the gross amount. In the additional evidence filed by the assessee before ld.CIT(A), the assessee has placed on record the invoices / receipts issued by Bertling at Pages 17 to 23 of the paper book to demonstrate that the money was advanced by the cargo commission agent and only the amount mentioned hereinabove i.e., USD 621169 was remitted to the assessee at Singapore. In our considered opinion, for the present controversy, it is undoubtedly clear that only the above said amount USD 621169 was remitted to the Singapore bank account and the remaining amount i.e., USD 22493 subject matter of the appeal was not remitted to the Singapore bank account and was allegedly adjusted towards the commission paid to the said Bertling. Therefore, in our considered opinion, the appellant / assessee is only entitled to the benefit of DTAA for the amount remitted or received. However, the case would have been different if the assessee had filed on record before us or before the lower authorities, the return of income, whereby the assessee had claimed the amount on accrual basis and debited the amount paid USD 22,493 as commission in its bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged his onus as no document was filled in this regard. 20. The second decision relied upon by the ld.AR in the paper book namely, Emirates Shipping Line, FZE Vs. ADIT (supra) is not relevant for the purposes of determining the present controversy as the judgment is relevant to whether the provisions of DTAA can be invoked for the purposes of determining at the stage of application of section 172(4) r.w.s 172(7) of the Act or not. 21. In the present case, the AO / ld.CIT(A) had already granted the benefit of DTAA to the assessee as it has only restricted the benefit to the extent of the amount received, we do not find the judgment in the case of Emirates Shipping Line, FZE Vs. ADIT (supra) is of any use for the purpose of determining the present controversy. No other judgment was cited by the ld.AR before us. Therefore, we do not find any merit in this regard. Accordingly, the appeal of assessee in ITA 25/Hyd/2018 for A.Y. 2015-16 is dismissed. 22. Now, coming to the remaining appeals i.e., ITA 26/Hyd/2018, ITA 27/Hyd/2018, ITA 550/Hyd/2021 and ITA 551/Hyd/2021 which are identical to the facts and issues raised in lead appeal ITA 25/Hyd/2018, we hold that our decision would appl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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