TMI Blog2022 (4) TMI 1512X X X X Extracts X X X X X X X X Extracts X X X X ..... s before him. Ld.CIT(A) has decided the issue on merit, hence, the impugned orders passed by the ld.CIT(A) falls within the realm of section 253 of the Income Tax Act, against which the assessee had preferred appeal before us. Accordingly, the preliminary objection raised by the Revenue is dismissed. Benefit of Article 8 of Double Taxation Avoidance Agreement (hereinafter referred as DTAA ) denied - In the present case, as per the undisputed fact for the year under consideration, the agent filed an application on behalf of the company for grant of NOC in respect of Vessel MV PAC ALKAID . The vessel departed from Krishnapatnam Port on 09.10.2014 to Houston, USA with a cargo of 7302.99 MT of Seamless Pipes. The total freight rate was USD 88 per MT which works out to total USD 642663. However, in the proceedings, the agent claimed that the entire freight earned by the freight beneficiary is exempt from tax in India in view of DTAA and therefore, the necessary benefit be given to the assessee. The agent of the assessee filed return on 07.11.2014 u/s 172(3) of the Act and along with return, the copy of the bank account in support of the remittance of freight was also placed on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Assessing Officer which provides as under : 172. (1) The provisions of this section shall, notwithstanding 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 carria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t referred to in sub-section (2) shall include the amount paid or payable by way of demurrage charge or handling charge or any other amount of 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 determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day of June, 2000 against such order (a) an intimation or order specified in sub-section (1) where such intimation is sent or such order is made by the Deputy Commissioner in exercise of the powers 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 impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the assessee is assessed as individual , Hindu undivided family and so on. 4. Ld. DR had also drawn our attention to section 253 of the Income Tax Act whereby the power to the Tribunal was provided to hear and adjudicate the appeal if arise 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 Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the order of the Commissioner (Appeals), and such memorandum shall be disposed of by the Appellate 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue has not preferred an appeal or cross objection as the case was covered under low tax effect, it is prayed that the learned CIT(A) erred in admitting appeal filed against the order passed u/s.172(4) as this is not an appealable order before CIT(A) as per section 246A of the ITAct and by extension of the same, not appealable before 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Msc Agency (India) P Ltd. vs Department Of Income Tax vide I.T.A. No. 871/Mds/2010for Assessment Year :2007-08, however, the said judgement did no take into consideration the judgements of Raghunath Rai Bareja and Another vs Punjab National Bank and Others on 6 December, 2006 vide CASE NO.: Appeal (civil) 5634 of 2006 and the case of A.S. Glittre (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/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 172(3), where the Master of the ship has made satisfactory arrangements for filing of the return and payment of tax by any other person on his behalf. On the return being filed under Section 172(3), the Assessing Officer has to assess the income referred to in sub-section (2) and pass an order under Section 172(4) of the Act determining the tax payable. The said sum 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 satisfactor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft, and the provisions of Art.11 shall not apply in relation to such interest. 4. 4. For the purposes of this Article, profits from the operation of ships or aircraft in international traffic shall mean profits derived from the transportation by sea or air of passengers, 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts of the present case. The claim made by the local agent part of the freight was not remitted to received in Singapore due to adjustment of the same to the commission do not come to its rescue and hence it cannot be entertained/acceptable. Here in this case the local evidence failed to prove that short remitted freight in question had been remitted to or received in Singapore and of the same to tax there. Therefore the local 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 operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneficiary is exempt from tax in India in view of DTAA and therefore, the necessary benefit be given to the assessee. The agent of the assessee filed return on 07.11.2014 u/s 172(3) of the Act and along with return, the copy of the bank account in support of the remittance of freight was also placed on record. 18. It is an admitted case of the assessee as well as the Assessing Officer that there was short of remittance of USD 22,493 for the year under consideration 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 adjus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then such an onus is confined to the cases in which income in question is taxable in Singapore on limited receipt basis rather than on comprehensive accrual basis. However, in a case in which it can be demonstrated, as has been demonstrated in the case before us, that the related income is taxable in Singapore on accrual basis and not on remittance basis, such an onus does not get triggered. In the present case, as mentioned above, the assessee has not discharged 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 purp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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