The ITO, International Taxation,, GANDHIDHAM v. M/s. Perma Shipping Lines (India) Pvt. Ltd., as agent of Perma Containers (UK) Ltd.,, GANDHIDHAM

ITA 191/RJT/2012 | 2010-2011
Pronouncement Date: 31-07-2013 | Result: Allowed

Appeal Details

RSA Number 19124914 RSA 2012
Bench Rajkot
Appeal Number ITA 191/RJT/2012
Duration Of Justice 1 year(s) 3 month(s) 17 day(s)
Appellant The ITO, International Taxation,, GANDHIDHAM
Respondent M/s. Perma Shipping Lines (India) Pvt. Ltd., as agent of Perma Containers (UK) Ltd.,, GANDHIDHAM
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2013
Appeal Filed By Department
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 31-07-2013
Date Of Final Hearing 09-07-2013
Next Hearing Date 09-07-2013
Assessment Year 2010-2011
Appeal Filed On 13-04-2012
Judgment Text
I IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH RAJKOT. R . . D M R . . RM M BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTAVA AM ITA NO. 191/RJT/2012 R R / ASSESSMENT YEAR 2010 - 11. THE INCOME - TAX OFFICER (INTERNATIONAL TAXATION) GANDHIDHAM. ( . / APPELLANT) M/S. PERMA SHIPPING LINES (INDIA) PVT. LTD. AS AGENT OF M/S. PERMA CONTAINER (UK) LTD. 301 SUNERPARK PLOT NO.95 SEC.8 GANDHIDHAM. R. / RESPONDENT O I / REVENUE BY DR. M. L. MEENA DR. REI / ASSESSEE BY WRITTEN SUBMISSIONS FILED. I / DATE OF HEARING 26 - 02 - 2013 WRITTEN SUBMISSIONS FILED . 09 - 07 - 2013 NONE WAS PRESENT. I / DATE OF PRONOUNCEMENT 31 - 07 - 2013 / ORDER . . D M / T. K. SHARMA J. M. : THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 18 - 0 1 - 20 12 OF CIT (A) GANDHINAGAR FOR THE ASSESSMEN T YEAR 2010 - 11. BLOCK PERIOD ENDING ON 05 - 01 - 1999. 2. B RIEF LY STATED THE FACTS ARE THAT THE ASSESSEE HAS FILED VARIOUS VOYAGE FINAL RETURNS U/S. 172(3) OF THE ACT ON THE VARIOUS DATES DURING THE F.Y. 2009 - 2010 RELEVANT TO A.Y. 2010 - 11 FOR THE FREIGHT BENE FICIAL OF M/S. PERMA CONTAINER (UK) LINES LTD. WITHOUT PAYING FREIGHT TAX. THE AO PASSED AN ORDER U/S.172(4) OF THE I.T. ACT 1961 ON 13 - 12 - 2010 WHEREIN HE WITHDRAW THE DTAA BENEFIT CLAIMED HOLDING THAT THE SAME CANNOT BE ALLOWED IN PROVISIONAL RETURN U/S .172(3) OF THE I.T. ACT. AO ACCORDINGLY COMPUTED THE INCOME AS UNDER: - TOTAL CARGO LOADED BY THE VESSEL : AS PER SCHEDULE - 1 OF THE ABOVE ORDER THE AMOUNT OF FREIGHT EARNED IN : RS.3 17 06 874 INDIAN RUPEE (AS PER SCHEDULE - 1) WHICH IS INCLUDING THC. TA XABLE INCOME I.E. 7.5% : RS. 23 78 015 TAX PAYABLE ON TAXABLE INCOME : RS. 10 04 236 INCOME - TAX LESS:DOUBLE INCOME - TAX RELIEF : NIL TAX PAID ON FINAL RETURN DATED. : NIL BALANCE TAX PAYABLE : RS. 10 04 236. ITA 191 - 2012 2 3. ON APPEAL IN THE IMPUGNED O RDER THE LD. CIT (A) HELD THAT ASSESSEE IS ELIGIBLE FOR BENEFIT OF SEC. 90(2) OF THE I.T. ACT READ WITH INDIA - UK DTAA. THE RELEVANT OBSERVATION IS CONTAINED IN PARA - 5.2 OF IMPUGNED ORDER WHICH READS AS UNDER: - 5.2 I HAVE CONSIDERED THE FACTS OF THE CASE THE LAW INCLUDING THE DTAA THE ASSESSMENT ORDER AND THE SUBMISSIONS. THE FACTS ARE UNDISPUTED IN THIS CASE. M/S. PERMA SHIPPING LINE (INDIA) PVT. LTD IS AN AGENT OF FOREIGN PRINCIPAL M/S. PERMA CONTAINER (UK) LINE LTD; UK AND HAS ITS REGISTERED OFFICE IN MUMBAI. THE PRINCIPAL IS IN THE BUSINESS OF TRANSPORTING GOODS IN CONTAINERS OWNED BY IT SHIPPED ON THE VESSELS BELONGING TO OTHERS AND SLOT CHARTERED BY IT. THE PRINCIPAL IS THE RESIDENT OF UK AND IS THE FREIGHT BENEFICIARY IN THIS CASE. NOW IT IS TO BE DECIDED WHETHER IN VIEW OF THE ABOVE FACTS THE PRINCIPALS INCOME IS EXEMPT FROM TAXATION IN INDIA IN VIEW OF SECTION 90(2) OF THE IT ACT READ WITH INDIA - UK DTAA. ARTICLE 9 OF INDIA - UK DTAA IS DIFFERENT THAN CORRESPONDING ARTICLE IN MAJORITY OF THE O THER TREATIES. THE ARTICLE IS REPRODUCED HEREUNDER: RTICLE 9 SHIPPING - 1. INCOME OF AN ENTERPRISE OF CONTRACTING STATE FROM THE OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC SHALL BE TAXABLE ONLY IN THAT STATE . 2. THE PROVISIONS OF PARAGRAPH 1 OF THIS ARTICLE SHALL NOT APPLY TO INCOME FROM JOURNEYS BETWEEN PLACES WHICH ARE SITUATED IN A CONTRACTING STATE. 3. FOR THE PURPOSES OF THIS ARTICLE INCOME FROM THE OPERATION OF SHIPS INCLUDES INCOME DERIVED FROM THE RENTAL ON A BAREBOAT BASIS OF SHIPS IF SUCH RENTAL INCOME IS INCIDENTAL TO THE INCOME DESCRIBED IN PARAGRAPH 1 OF THIS ARTICLE. 4. NOTWITHSTANDING THE PROVISIONS OF ARTICLE 7 (BUSINESS PROFITS) OF THIS CONVENTION THE PROVISIONS OF PARAGRAPHS 1 AND 2 OF THIS ARTICLE SHALL LIKEWISE APPLY TO INCOME O F AN ENTERPRISE OF A CONTRACTING STATE FROM THE USE MAINTENANCE OR RENTAL OF CONTAINERS (INCLUDING TRAILERS AND RELATED EQUIPMENT FOR THE TRANSPORT OF CONTAINERS) USED FOR THE TRANSPORT OF GOODS OR MERCHANDISE. 5. THE PROVISIONS OF THIS ARTICLE SHALL APP LY ALSO TO INCOME DERIVED FROM PARTICIPATION IN A POOL A JOINT BUSINESS OR AN INTERNATIONAL OPERATING AGENCY. 6. GAINS DERIVED BY AN ENTERPRISE OF A CONTRACTING STATE FROM THE ALIENATION OF SHIPS OR CONTAINERS OWNED AND OPERATED BY THE ENTERPRISE SHALL B E TAXED ONLY IN THAT STATE IF EITHER THE INCOME FROM THE OPERATION OF THE ALIENATED SHIPS OR CONTAINERS WAS TAXED ONLY IN THAT STATE OR THE SHIPS OR CONTAINERS ARE SITUATED OUTSIDE THE OTHER CONTRACTING STATE AT THE TIME OF THE ALIENATION. THE PARAGRA PHS 4 & 6 STANDS OUT DIFFERENTLY IN THIS A RTICLE. EVEN IF THE PERMANENT ESTABLISHMENT (PE) IS THERE IN INDIA THE INCOME FROM THE USE MAINTENANCE OR RENTAL OF CONTAINERS (INCLUDING TRAILERS AND REL ATED EQUIP MENT FOR THE TRANSPORT OF CONTAINERS) USED FOR THE TRANSPORT OF GOODS OR MERCHANDISE IS TO BE TAXED IN UK IN THE CASE OF RESIDENT OF THAT STATE. NOW THIS INCOME IS TO BE TAKEN AS AKIN TO WHICH PROVISIONS OF PARAGRAPHS ITA 191 - 2012 3 1 & 2 OF THE ARTICLE APPLY. THEREFORE THIS WOULD TAXABLE IN UK ONLY AND EXEMPT FROM TAXATION IN INDIA. ACCORDINGLY THE APPELLANT / THE PRINCIPAL WHO IS THE FREIGHT BENEFICIARY IS ELIGIBLE FOR BENEFIT OF SECTION 90(2) OF THE IT ACT READ WITH INDIA - UK DTAA. AGGRIEVED WITH THE ORDER OF LD. CIT (A) THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL ON THE FOLLOWING GROUNDS: - I ) THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE SLOT CHARTERING IS AKIN TO CHARTERING OF A VESSEL. II ) THE LD. CIT (A) HAS FURTHER ERRED IN LAW AND ON FACTS IN HOLDING THAT THE BENEFITS OF DTAA BETWEEN INDI A AND UK READ WITH SECTION 90(2) OF THE ACT IS AVAILABLE TO THE ASSESSEE THOUGH THE ASSESSEE COMPANY IS NOT ENGAGED IN THE OPERATION OF SHIPS AND HAS NEITHER OWNED OR CHARTERED THE VESSELS IN WHICH THE GOODS HAVE BEEN TRANSPORTED. 4. ON THE DATE FIXED FOR HEARING ON 09 - 07 - 2013 NONE WAS PRESENT. HOWEVER ON EARLIER DATE OF HEARING I.E. 26 - 02 - 2013 WRITTEN SUBMISSIONS WERE FILED WHEREIN IT WAS CONTENDED THAT THE VIEW TAKEN BY LD. CIT (A) THAT ASSESSEE - COMPANY IS ELIGIBLE FOR DTAA U/S.90 AS PER ARTICLE 9 (4) OF UK INDO TREATY BE UPHELD. ALTERNATIVELY IT WAS PLEADED THAT FOR THE ASSESSMENT UNDER APPEAL PRINCIPAL NAMELY M/S. PREMA CONTAINER (UK) LTD. IS ENGAGED IN REGULAR SHIPPING BUSINESS AND NOT IN OCCASIONAL BUSINESS. THEY ARE FILING THE RETU RN OF INCOM E U/S.139 R.W.S.44B OF THE ACT FOR THE PAST AND SUBSEQUENT YEARS. IN SUPPORT OF THIS PHOTOCOPIES OF THE RETURN FILED FOR THE ASSESSMENT YEARS 2008 - 09 TO 2011 - 2012 WERE PLACED AT SR. NOS. 2 TO 5 OF THE PAPER - BOOK. IT WAS SUBMITTED THAT THE RETURN OF INCO ME FOR THE ASSESSMENT YEAR UNDER APPEAL I.E. 2010 - 11 WAS FILED ON 23 - 03 - 2011 VIDE ACKNOWLEDGEMENT RECEIPT NO.201606811240311 WITH ITO WARD - 3(2)(4) MUMBAI/MUM/W/332/04. THEREFORE ORDER PASSED BY AO U/S.172(4) BE CANCELLED. IN SUPPORT OF THIS RELIANCE W AS PLACE ON DECISION OF ITAT RAJKOT BENCH IN THE CASE OF M/S. PIL MUMBAI PVT. LTD. DATED 24 - 01 - 2013. 5. THE LD. D.R. APPEARED FOR THE REVENUE DREW OUR ATTENTION TO PARA - 4.1 OF THE IMPUGNED ORDER AND CONTENDED THAT ASSESSEE HAS NOT OPTED FOR THE OPTION TO BE ASSESSED U/S.172( 4 ) BY FILING RETURN OF INCOME U/S.139(1) BEFORE THE ASSESS MENT THEREFORE IT IS ESTABLISHED THAT ASSESSEE IS NOT LIABLE TO BE ASSESSED U/S.172(4). THEREFORE ORDER U/S. 172(4) BY AO BE HELD LEGAL. THE LD. DR SUBMITTED THAT THE ASSESSE E - PRINCIPAL NAMELY M/S. PERMA CONTAINER (UK) LINE ITA 191 - 2012 4 LTD. FILED RETURN OF INCOME ON 24 - 03 - 2011 WHEREAS AO PASSED THE ORDER U/S.172(4) ON 13 - 12 - 2010. THEREFORE VIEW TAKEN BY LD. CIT (A) IN THIS REGARD BE UPHELD AND IT MAY BE HELD THAT THE ASSESSEE IS NOT EN TITLED TO DTAA BENEFIT AS HELD BY AO IN THE ORDER PASSED U/S.172(4) OF THE I. T. ACT 1961. 6. THE RIVAL SUBMISSIONS WERE CONSIDERED. IT IS THE CASE OF THE RESPONDENT - COMPANY THAT ITS INCOME OF VARIOUS VOYAGES COVERED BY THE IMPUGNED ORDER PASSED BY AO U/ S. 172(4) SHOULD BE TAXED IN ACCORDANCE WITH THE NORMAL PROCEEDINGS OF THE INCOME - TAX ACT ON THE BASIS OF RETURN OF INCOME FILED IT U/S.139 OF THE I. T. ACT ON 24 - 03 - 2011 WITH ITO WART - 3(2)(4) MUMBAI/MUM/W/332/04 VIDE ACKNOWLEDGMENT RECEIPT NO.2016068112 40311. THE ITAT RAJKOT BENCH IN THE CASE OF ITO VS. M/S.CMA CGM AGENCIES (INDIA) PVT. LTD. IN ITA NOS. 151 TO 190/RJT/2012 (A.Y. 2010 - 11) DATED 31.08.2012 ON IDENTICAL FACTS HAS HELD AS UNDER: - 19. AS STATED EARLIER THE HONBLE JURISDICTIONAL HIGH CO URT HAS HELD IN ARABIAN EXPRESS LINE LTD. OF UNITED KINGDOM V. UNION OF INDIA 120 CTR (GUJ) 377 THAT HE PROCEDURE CONTEMPLATED BY SECTION 172 FOR ASSESSING THE INCOME OF A NON - RESIDENT INDIAN BECAUSE OF HIS OCCASIONAL ACTIVITY IN SHIPPING BUSINESS IN INDIA WOULD NOT BE APPLICABLE LE IN A CASE WHERE THERE IS A CONVENTION BETWEEN THE GOVERNMENT OF INDIA AND THE FOREIGN COUNTRIES AS PROVIDED UNDER SECTION 90 OF THE INCOME TAX - ACT. THE REASON FOR SUCH A VIEW IS OBVIOUS. SECTION 172(2)/(4) PROVIDES FOR S UMMARY ASSESSMENT @ 7.5% OF THE FREIGHT PAID OR PAYABLE. BY THE VERY NATURE OF ASSESSMENT CONTEMPLATED BY SECTION 172 IT IS NOT POSSIBLE TO DEAL WITH THE CASES COVERED BY DOUBLE TAXATION AVOIDANCE AGREEMENT. IN THE MATTES BEFORE US THE AO HAS REJECT ED THE CLAIM OF THE RESPONDENT - COMPANY THAT ITS FALLS UNDER DTAA. SUCH AN EXAMINATION IN OUR VIEW CAN NOT BE UNDERTAKEN IN THE PROCEEDINGS U/S 172 AS THE AO HAS NO DISCRETION U/S 172(2)/(4) EXCEPT TO COMPUTE THE INCOME @ 7.5% OF FREIGHT PAID OR PAYABL E. IT IS PERHAPS FOR THIS REASON THAT SECTION 172(7) GIVES AN OPTION TO THE OWNERS/CHARTERERS OF SHIPS TO SEEK ASSESSMENT OF THEIR INCOME IN ACCORDANCE WITH THE NORMAL PROVISIONS OF THE INCOME TAX AT. ONCE A RETURN IS FILED BY A NON - RESIDENT U/S 139 CLAI MING THE BENEFIT OF DTAA HIS ASSESSMENT WOULD NEED TO BE COMPLETED UNDER NORMAL PROVISIONS OF THE INCOME TAX ACT. 20. APROPOS GROUND NO.(II) IT WAS VEHEMENTLY CONTENDED BY THE LD. CIT - DR THAT THE JURISDICTIONAL AO SHOULD BE DIRECTED TO VERIFY THE POSIT ION AND TAX THE INCOME OF THE FREIGHT BENEFICIARY (REPRESENTED BY THE RESPONDENT - COMPANY) FROM THE BUSINESS OF HANDLING CARGO TRANSPORTATION (INCLUDING SLOT CHARTERING BUSINESS) AS PER NORMAL PROVISIONS OF THE ACT. IT IS THE CASE OF THE RESPONDENT - COMPAN Y THAT ITS INCOME INCLUDING THE INCOME FROM 40 VOYAGES COVERED BY THE IMPUGNED ORDER PASSED BY THE AO U/S 172(4) SHOULD BE TAXED IN ACCORDANCE WITH THE NORMAL PROVISIONS OF THE INCOME TAX ACT ON THE BASIS OF THE RETURN FILED BY IT U/S 139 AT MUMBAI. PERUS AL OF THE ORDER PASSED BY THE CIT(A) SHOWS THAT HE HAS TAKEN A VIEW THAT THE CASE OF THE RESPONDENT FALLS U/S 172(7) AND NOT U/S 172(4). THE RESPONDENT - COMPANY HAS ALSO ACCEPTED THE LIABILITY TO BE ITA 191 - 2012 5 DEALT WITH U/S 172(7). THE JURISDICTIONAL AO MAY THEREF ORE VERIFY THE POSITION AND TAKE SUCH ACTION AS MAY BE WARRANTED IN LAW IN TERMS OF SECTION 172(7) TO ENSURE THAT THE INCOME OF THE ASSESSEE FROM THE AFORESAID 40 VOYAGES DOES NOT ESCAPE ASSESSMENT AS PER THE NORMAL PROVISIONS OF THE IT ACT. 7. KEEP ING IN VIEW THE CONSPICUOUS FACTS OF THE CASE WE SET - ASIDE THE IMPUGNED ORDER OF LD. CIT (A) AND DIRECT THE ASSESSEE TO FURNISH THE COPY OF RETURN OF INCOME FILED BY PRINCIPAL NAMELY M/S. PERMA CONTAINER (UK) LINE LTD. ON 24 - 03 - 2011 VIDE ACKNOWLEDGMENT R ECEIPT NO.201606811240311FOR ASSESSMENT YEAR 2010 - 11. THE AO WILL VERIFY THE SAME. IN CASE THIS CONTENTION OF THE ASSESSEE IS FOUND CORRECT AO WILL CANCEL THE IMPUGNED ORDER. THE JURISDICTIONAL AO WILL TAKE SUCH ACTION AS MAY BE WARRANTED IN TERMS OF SEC. 172 (7) OF THE ACT TO ENSURE THAT THE INCOME OF THE ASSESSEE FROM VARIOUS VOYAGES DECLARED IN THIS RETURN OF INCOME FILED ON 23 - 03 - 2011 VIDE ACKNOWLEDGMENT RECEIPT NO.201606811240311 DOES NOT ESCAPE ASSESSMENT AS PER NORMAL PROVISION OF I.T. ACT 1961. SUB JECT TO AFORESAID VERIFICATION FOR STATISTICAL PURPOSES THE APPEAL OF THE REVENUE IS TREATED AS ALLOWED. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 9 . THIS O RDER IS PRONOUNCED IN OP EN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/ - SD/ - ( . . ZO D. K. SRIVASTAVA ) ( . . R / T. K. SHARMA) / ACCOUNTANT MEMBER O / JUDICIAL MEMBER / ORDER DATE 31 - 0 7 - 2013. /RAJKOT NVA/ - DJO O / COPY OF ORDER FORWARDED TO: - 1 . . /APPELLANT - THE INCOME - TAX OFFICER (INTERNATIONAL TAXATION) GANDHIDHAM. 2 . R. / RESPONDENT - M/S. PERMA SHIPPING LINES (INDIA) PVT. LTD. AS AGENT OF M/S.PERMA CONTAINER (UK) LTD. 301 SUNERPARK PLO T NO.95 SEC.8 GANDHIDHAM. 3 . I M / CONCERNED CIT - 4 . M - / CIT (A) GANDHINAGAR. 5 . RI I / DR ITAT RAJKOT 6 . R / GUARD FILE. / BY ORDER TRUE COPY. PRIVATE SECRETARY ITAT RAJKOT