ACIT, CHENNAI v. Poompuhar Shipping Corporation Limited, CHENNAI

ITA 537/CHNY/2013 | 2007-2008
Pronouncement Date: 30-09-2016

Appeal Details

RSA Number 53721714 RSA 2013
Assessee PAN AAACP4383J
Bench Chennai
Appeal Number ITA 537/CHNY/2013
Duration Of Justice 3 year(s) 6 month(s) 2 day(s)
Appellant ACIT, CHENNAI
Respondent Poompuhar Shipping Corporation Limited, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Department
Bench Allotted B
Date Of Final Hearing 20-07-2016
Next Hearing Date 20-07-2016
Assessment Year 2007-2008
Appeal Filed On 28-03-2013
Judgment Text
IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH CHENNAI . . BEFORE SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER & SHRI DUVVURU R L REDDY JUDICIAL MEMBER ./ I T.A. NO. 5 3 7/MDS/2013 / ASSESSMENT YEAR :200 7 - 0 8 & C.O. NO. 8 9/MDS/2013 [IN I.T.A. NO. 5 37/MDS/2013 ] THE ASSISTANT COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION - II(1) ANNEXE BUILDING VII FLOOR 121 N.H. ROAD CHENNAI 34 . VS. M/S. POOMPUHAR SHIPPING CORPORATION LIMITED NO. 692 ANNA SALAI CHENNAI 600 035. [PAN: AA A C P4383J ] ( APPELLANT ) ( R ESPONDENT /CROSS OBJECTOR ) DEPARTMENT BY : SHRI S UPRIYO PAL J CIT ASSESSEE BY : SHRI R. VIJAY ARAGHAVAN ADVOCATE / DATE OF HEARING : 27 . 0 7 .201 6 / DATE OF P RONOUNCEMENT : 30 .09 .201 6 / O R D E R PER DUVVURU RL REDDY JUDICIAL MEMBER : TH IS APPEAL PREFERRED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IV CHENNAI DATED 27 . 1 1 .201 2 FOR THE ASSESSMENT YEAR 20 0 7 - 0 8 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS AND CIRC UMSTANCES OF THE CASE. I.T.A. NO . 537 /M/1 3 & C.O. NO. 8 9 /M /16 2 2. THE CIT(A) ERRED IN DIRECTING THE AO NOT TO TREAT THE ASSESSEE AS A 'REPRESENTATIVE ASSESSEE U/S 163 OF THE ACT. 2.1. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE IS REGULARLY USING THE 'EQUIPMENT' NAMELY THE VESSE LS OF THE FSCS FOR ITS BUSINESS PURPOSES AND THEREFORE THE ASSESSEE HAS BUSINESS LINKS WITH THE FOREIGN SHIPPING COMPANIES WHO WERE TREATED TO BE ASSESSEES IN DEFAULT. 2.2 THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE AMOUNTS PAID TO FSCS IS AN INC OME IN THE NATURE OF 'ROYALTY' AND HENCE OUGHT TO HAVE UPHELD THE ASSESSING OFFICER'S ACTION OF TREATING THE ASSESSEE AS A REPRESENTATIVE ASSESSEE DUE TO THE FAILURE TO PAY TAX ON THE INCOME DEEMED TO ARISE IN INDIA. 2.3 IT IS SUBMITTED THAT THE RELIED UPON DECISION OF THE ITAT IN THE ASSESSEE'S OWN CASE FOR THE AYS 2002 - 03 TO 2006 - 07 IN ITA NOS.145 TO 148/MDS/2012 DATED 29/06/12 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CARRIED IN APPEAL BEFORE THE HON'BLE HIGH COURT. 3. THE CIT(A) ERRED IN HOLDIN G THAT THE HIRE CHARGES PAID TO FSCS ARE NOT TO BE TREATED AS 'ROYALTY' U/S 9(1)(VI) OF THE ACT. 3.1 THE CIT(A) FAILED TO APPRECIATE THAT IN THE RELIED UPON DECISION OF THE ITAT RELIEF WAS ALLOWED BY THE ITAT RELYING ON THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF STATE OF TAMILNADU VS ESSAR SHIPPING LTD.(47 VST(2009) (MAD) WHICH WAS RENDERED IN THE CONTEXT OF THE PROVISIONS OF SALES TAX ACT AND THE FACTS OF THE PRESENT CASE ARE DISTINGUISHABLE. 3.2 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT IN THE RELIED UPON DECISION OF THE ITAT IN ASSESSEE'S OWN CASE ON THE ISSUE' OF WITHHOLDING TAX HAS HELD THAT (199 ITO 226) THE PAYMENTS MADE BY THE ASSESSEE IN THE A.YS 2002 - 03 TO 2004 - 05 COME WITHIN THE PURVIEW OF ROYALTY U/S 9(1)(VI) OF THE IT ACT AS T HE PAYMENT MADE BY THE ASSESSEE IS FOR THE USE OF THE EQUIPMENT AND THAT 'SHIP' IS AN EQUIPMENT AND A SIMILAR VIEW WAS TAKEN BY THE ITAT CHENNAI IN THE CASE OF WEST ASIA MARITIME LTD. ALSO. 3.3 IT IS SUBMITTED THAT THE ITAT (WHILE RENDERING ITS DECISI ON IN ITA NOS.145 TO 148/MDS/2012 DATED 29/06/12) OUGHT TO HAVE FOLLOWED THE DECISION OF THE EARLIER BENCH AND OUGHT NOT TO HAVE TAKEN A VIEW WHICH IS DIFFERENT WITHOUT REFERENCE TO A LARGER BENCH AND THE CIT(A) OUGHT I.T.A. NO . 537 /M/1 3 & C.O. NO. 8 9 /M /16 3 TO HAVE FOLLOWED THE ABOVE DECISIONS OF THE ITAT WHEREIN THE ISSUE HAS BEEN DECIDED IN THE FAVOUR OF REVENUE. 3.4 IT IS SUBMITTED THAT THE RELIED UPON DECISION OF THE ITAT IN THE ASSESSEE'S OWN CASE FOR THE AYS 2002 - 03 TO 2006 - 07 IN ITA NOS.145 TO 148/MDS/2012 DATED 29/06/12 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CARRIED IN APPEAL BEFORE THE HON'BLE HIGH COURT. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER RESTORED. 2. BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY M/S. POOMPUHAR SHIPPING CORPORATION LTD ( PSCL IN SHORT ) IS A GOVERNMENT OF TAMIL NADU ENTERPRISE. AS IN THE EARLIER YEARS THE COMPANY TRANSPORTED COAL FROM VARIOUS PORTS IN INDIA O N BEHALF OF TA M IL NADU STATE ELECTRICITY BOARD (OR TNEB). FOR THIS PURPOSE THE ASSESSEE CHARTERED VESSELS FROM DOMESTIC SHIPPING COMPANIES AS WELL AS FROM FOREIGN SHIPPING COMPANIES. FOR THE PURPOSE OF TRANSPORTING COAL THE ASSESSEE ENTERED INTO STANDARD TIME CHARTERED AGREEMENTS WITH VARIOUS FOREIGN SHIPPING COMPANIES. THE ABOVE FOREIGN SHIPPING COMPANIES (OR FSCS) DID NOT FILE THEIR RETURNS OF INCOME IN INDIA. HENCE THE ASSESSING OFFICER INITIATED PROCEEDINGS UNDER SECTION 163 OF THE ACT AND PASSED AN OR DER U NDER SECTION 163 OF THE ACT TREATING THE ASSESSEE AS A REPRESENTATIVE ASSESSEE OF THE FOREIGN SHIPPING COMPANIES. CONSEQUENTLY THE ASSESSING OFFICER ALSO REOPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT BY ISSUING A NOTICE UNDER SECTION 148 OF THE ACT. I.T.A. NO . 537 /M/1 3 & C.O. NO. 8 9 /M /16 4 2.1 THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 1 43(3) R.W.S. 163 & 147 OF THE ACT OBSERVED THAT THE CHARTERED HIRE CHARGES BY THE ASSESSEE DURING THE FINANCIAL YEAR 2 00 6 - 07 ARE RS.25 39 14 701/ - (I.E. RS.3 57 89 434/ - TO STAR SHIPPING A/S BERGEN NORWAY AND RS.21 81 25 267/ - TO SINVRAC S.A.S FRANCE). THE ASSESSING OFFICER ALSO OBSERVED THAT THE CHARTERED HIRE CHARGES ARE IN THE NATURE OF ROYALTY FALLING THE IN THE DEFINITION OF EXPLANATION - 2 TO SEC TION 9(1)(VI )(A) OF THE ACT. AS PER THE ASSESSING OFFICER THE ROYALTY INCOME OF FSCS IS ASSESSABLE U NDER SECTION 115A R.W.S. 44D OF THE ACT SUBJECT TO THE DTAA AGREEMENTS. ACCORDINGLY THE ASSESSING OFFICER DETERMINED THE TAX LIABILITIES @ 10% + EC 3% IN THE CASE OF STAR SHIPPING A/S BERGEN (NORWAY) AND @ 10% IN THE CASE OF SINVRAC S.A.S FRANCE. THE RELEVANT PORTION OF THE ORDER OF THE ASSESSING OFFICER IS AS UNDER: 7. TO CONCLUDE THE HIRE CHARGES PAID BY THE ASSESSEE FOR HIRING THE VESSELS OF THE FSCS WHICH WE RE USED BY THE ASSESSEE TO TRANSPORT COAL FROM VARIOUS PORTS IN INDIA TO TNEB CHENNAI WOULD COME UNDER THE DEFINITION OF ROYALTY AS STATED IN EXPLANATION 2 OF SUB - SECTION IV(A) OF SEC 9(1)(VI) OF THE IT ACT. IT IS SEEN THAT THE COUNTRIES OF ORIGIN OF THE T WO SHIPPING COMPANIES ARE FRANCE AND NORWAY RESPECTIVELY WITH WHOM INDIA HAS DOUBLE TAXATION AVOIDANCE AGREEMENTS. THE DEFINITION OF ROYALTY IS SIMILAR AS PER THE RESPECTIVE ARTICLES IN THE TREATY WITH THE TWO COUNTRIES. THEREFORE THE ROYALTY INCOME WOULD BE CHARGEABLE TO TAX U/S 15A R.W.S.44D OF IT ACT 01' AT THE RATES SPECIFIED IN DTAA WHICHEVER IS BENEFICIAL TO ASSESSEE. THIS TREATMENT IS ON THE LINE OF SEC. 90(2) OF THE IT ACT 1961. 8. THERE IS A VARIATION IN THE PAYMENT OF HIRE CHARGES FURNISHED ON 30.03.2010 AND 12.12.2011. THE VARIATION WAS ANALYSED AND THE DETAILS FURNISHED ON 30.03.2010 WAS SUBMITTED BY THE ASSESSEE COMPANY ITSELF THE SAME IS TAKEN AS THE ACTUAL HIRE CHARGES PAID FOR THE PURPOSE OF I.T.A. NO . 537 /M/1 3 & C.O. NO. 8 9 /M /16 5 ASSESSMENT. THE DETAILS REGARDING NAME OF TH E FSCS ENGAGED NAME OF VESSEL HIRED AND THE HIRE CHARGES PAID DURING ASST.YEAR 2007 - 08 AS FURNISHED BY THE ASSESSEE IS ALREADY GIVEN IN TABLE - IL PARA 4 OF THIS ORDER. THE DETAILS OF TAX PAYABLE ARE AS UNDER: FOREIGN SHIPPING COMPANY GROSS HIRE CHARGES RATE OF TAX TAX PAYABLE STAR SHIPPING A/S BERGEN (NORWAY) 3 57 89 434 10% + EC @ 3% (AS PER NOTE BELOW) 36 86 311 SINVRAC S.A.S. FRANCE 21 81 25 267 DTAA (ART. 13.2) 10% 2 18 12 527 TOTAL 25 39 14 701 2 54 98 838 NOTE: THOUGH THE DTAA WITH NORWAY SPECIFIES THAT THE INCOME IN THE NATURE OF ROYALTY IS TAXABLE IN BOTH COUNTRIES THE RATE OF TAXABILITY IS NOT PRESCRIBED. IN THE ABSENCE OF ANY SPECIFIC RATE OF TAX LIABILITY IN DTAA THE RATE AS SPECIFIED IN SEC.115(1)(B)((A) OF THE I.T. ACT IS APPLIED. 3. AGGRIEVED BY THE ABOVE ACTION OF THE ASSESSING OFFICER THE ASSESSEE IS IN APPEAL BEFORE THE LD. CIT(A) AND OBJECTED TO THE ASSESSING OFFICER'S ACTION OF TREATING THE ASSESSEE AS A REPRESENTATIVE ASSESSEE TREATING THE HIRE CHARGES AS ROYALTY PAYME NTS U NDER SECTION 9(1)(VI) OF THE ACT AND ALSO DETERMINING THE T AX LIABILITIES AT .3 19 58 590/ - BEFORE THE SETTING OFF THE TDS DEDUCTED UNDER PROTEST. DURING THE COURSE OF APPELLATE PROCEEDINGS THE LD. CIT(A) HAS OBSERVED THAT ISSUES INVOLVED IN THIS A PPEAL ARE REPETITIONS FROM THE EARLIER ASSESSMENT YEARS AND T HE ASSESSING OFFICER HAD ALSO TAKEN SIMILAR STAND IN THE ASSESSMENTS OF EARLIER ASSESSMENT YEARS AND TREATED THE HIRE CHARGES PAID AS ROYALTY PAYMENTS U NDER SECTION 9(1)(VI) OF THE ACT. IN THE EA RLIER ASSESSMENT YEARS T HE CIT(A) UPHELD THE VIEW TAKEN BY THE ASSESSING OFFICER. HOWEVER ON FURTHER APPEAL AGAINST THE ORDER OF THE LD. CIT(A) THE ITAT VIDE ITS ORDERS IN I . T . A . NO. 149 TO 153/ M D S/2012 DATED I.T.A. NO . 537 /M/1 3 & C.O. NO. 8 9 /M /16 6 29.06.2012 REVERSED THE ORDERS OF THE CIT (A) AND HELD THAT THE ASSESSEE CAN NOT BE TREATED AS A REPRESENTATIVE ASSESSEE. SIMILARLY THE ITAT ALSO HELD THAT THE HIRE CHARGES PAID TO THE FSCS WILL NOT CONSTITUTE 'ROYALTY' U NDER SECTION 9(1)(VI) OF THE ACT. AT THE SAME TIME THE ITAT ALSO HELD THAT TH E ASSESSEE IS LIABLE TO DEDUCT TDS ON THE PAYMENTS MADE TO THE FOREIGN SHIPPING COMPANIES (FSCS) U NDER SECTION 195 OF THE ACT. THE RELEVANT PORTION OF THE ORDER OF THE ITAT IS REPRODUCED AS UNDER: 13. WE FIND THAT IN THE INSTANT CASE THE ASSESSEE WAS USING THE SERVICES OF FOREIGN SHIPPING COMPANIES FOR TRANSPORTING COAL FROM ONE PORT TO OTHER ON HIRE BASIS. THE ASSESSEE WAS PAYING HIRE CHARGES FOR PROVIDING SUCH SERVICES BY THE FOREIGN SHIPPING COMPANIES. IN OUR CONSIDERED OPINION THE PAYMENT MADE BY THE ASSESSEE TO THE FOREIGN SHIPPING COMPANY DO NOT PARTAKE THE CHARACTER OF 'ROYALTY'. THE PAYMENT WAS MADE FOR THE 'USE' OF SHIP BY ITS 'OWNER' IN RENDERING 'SERVICE' TO THE ASSESSEE. THEREFORE THE PAYMENT MADE IN THE PRESENT CASE WOULD NOT CONST ITUTE 'ROYALTY' FOR THE USE OF INDUSTRIAL OR COMMERCIAL OR SCIENTIFIC EQUIPMENTS. THUS THE PROVISIONS OF SECTION 9(1)(VI) OF THE ACT ARE NOT ATTRACTED. 14. ALTHOUGH THE ASSESSEE CANNOT BE TREATED AS 'REPRESENTATIVE ASSESSEE' UNDER THE PROVISIONS OF SECTION .193 OF THE ACT HOWEVER THE ASSESSEE IS LIABLE TO DEDUCT TAX ON THE PAYMENTS MADE TO FOREIGN SHIPPING COMPANIES UNDER THE PROVISIONS OF SECTION 195 OF THE ACT. IN THE INSTANT CASE THE ASSESSEE IS LIABLE TO DEDUCT TAX ON THE HIRE CHARGES PAID TO FOREIGN SHIPPING COMPANIES. THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT PROCEEDINGS HAS BEEN INITIATED AGAINST THE ASSESSEE UNDER THE PROVISIONS OF SECTION 195 OF THE ACT FOR NON - DEDUCTION OF TAX AT SOURCE. AGAINST WHICH THE ASSESSEE HAS APPROACHED TH E HON'BLE MADRAS HIGH COURT: THE HON'BLE MADRAS HIGH COURT HAS GRANTED STAY IN THE MATTER RELEVANT TO THE ASSESSMENT YEAR 2002 - 03 TO 2004 - 05. 15. THE ASSESSEE IS ASSAILING THE ORDER OF THE CIT(A) ON THE GROUND THAT THE ASSESSEE CANNOT BE CONSIDERED AS 'ASSESSEE REPRESENTATIVE' UNDER THE PROVISIONS OF SECTION 163. AT THE SAME TIME THE ASSESSEE IS ALSO NOT COMPLYING WITH THE PROVISIONS OF SECTION 195 AGAINST WHICH THE DEPARTMENT HAS ALREADY INITIATED PROCEEDINGS UNDER THE PROVISIONS OF SECTION 207 OF THE ACT. THE ASSESSEE CANNOT BE ALLOWED TO TAKE BENEFIT OF BOTH THE I.T.A. NO . 537 /M/1 3 & C.O. NO. 8 9 /M /16 7 PROVISIONS OF THE ACT TO GET AWAY FROM THE TAX LIABILITY. THE ASSESSEE CANNOT ESCAPE FROM LIABILITY OF TAXATION BY CHALLENGING THE PROVISIONS OF ACT IN DIFFERENT FORUMS. WE REMIT THE MA TTER BACK TO THE ASSESSING OFFICER TO INITIATE PROCEEDINGS AGAINST THE ASSESSEE UNDER ONE OF THE PROVISIONS OF THE ACT IN THE LIGHT OF THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PREMIER TYRES LTD. REPORTED IN 134 ITR 1 7 (WITH RESPECT TO THE PROVISION UNDER SECTION 201 OF THE ACT) AFTER DISPOSAL OF THE MATTER SUBJUDICE BEFORE THE HON 'BLE MADRAS HIGH COURT. THUS THE ITAT IN THE ASSESSEE'S OWN CASE IN THE EARLIER ASSESSMENT YEARS (I.E. A.YS.2002 - 03 TO 2006 - 07) HAS HELD THAT - I) THE ASSESSEE CANNOT BE TREATED AS A 'REPRESENTATIVE ASSESSEE' II] THE PAYMENTS OF HIRE CHARGES CANNOT BE TREATED AS 'ROYALTY' U/S.9(I)(VI) III) THE ASSESSEE IS LIABLE TO DEDUCT TDS ON THE HIRE CHARGES PAID U/ S.195. IN VIEW OF THE ABOVE DECISION OF THE ITAT CH E NNAI THE LD. CIT(A) DIRECT ED THE ASSESSING OFFICER NOT TO TREAT THE ASSESSEE AS A 'REPRESENTATIVE ASSESSEE' U NDER SECTION 163 OF THE ACT. SIMILARLY THE ASSESSING OFFICER WA S ALSO REQUIRED NOT TO TREAT THE HIRE CHARGES PAID TO FSCS AS 'RO YALTY' U NDER SECTION 9(I)(VI) OF THE ACT AND ALLOWED THE GROUND RAISED BY THE ASSESSEE . 4. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND MAINLY CONTENDED THAT THE ORDER OF THE TRIBUNAL FOLLOWED BY THE LD. CIT(A) HAS NOT REACHED FINALITY SI NCE THE DEPARTMENT HAS PREFERRED APPEALS AGAINST THE ORDER OF THE TRIBUNAL BEFORE THE HON BLE MADRAS HIGH COURT. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT BOTH THE ISSUES RAISED BY THE REVENUE ARE SQUARELY COVERED IN FAVO UR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN EARLIER ASSESSMENT YEARS I.T.A. NO . 537 /M/1 3 & C.O. NO. 8 9 /M /16 8 WHICH WAS RIGHTLY FOLLOWED BY THE LD. CIT(A) AND PRAYED THAT THE APPEAL FILED BY THE REVENUE SHOULD BE DISMISSED. 6. WE HAVE HEARD BOTH THE SIDES PERUSED THE MATERIALS ON R ECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. BY FOLLOWING THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2002 - 03 TO 2006 - 07 IN I.T.A. NOS. 149 TO 153/MDS/2012 DATED 29.06.2012 THE LD. CIT(A) DI RECTED THE ASSESSING OFFICER NOT TO TREAT THE ASSESSEE AS A 'REPRESENTATIVE ASSESSEE' U NDER SECTION 163 OF THE ACT AND S IMILARLY THE ASSESSING OFFICER WA S ALSO REQUIRED NOT TO TREAT THE HIRE CHARGES PAID TO FSCS AS 'ROYALTY' U NDER SECTION 9(I)(VI) OF THE ACT . WITH REGARD TO THE ABOVE ISSUES IN THE GROUNDS OF APPEAL THE DEPARTMENT HAS RAISED A SPECIFIC GROUND THAT SINCE THE DEPARTMENT HAS PREFERRED APPEALS AGAINST THE ORDER OF THE TRIBUNAL BEFORE THE HON BLE MADRAS HIGH COURT THE ORDER PASSED BY THE LD. CIT(A) SHOULD BE REVERSED. IN THIS RESPECT WE FIND THAT THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF POOMPUHAR SHIPPING CORPORATION LTD. & OTHER V. ITO & OTHER [2014] 360 ITR 257 (MAD) HAS AFFIRMED THE ORDERS OF THE TRIBUNAL WHEREIN IT WAS HELD AS UNDER: HELD ACCORDINGLY (I) THAT THE ASSESSEE UNDER THE TIME CHARTER AGREEMENT WITH THE NON - RESIDENTS HAD THE RIGHT TO USE THE SHIP SELECTING THE TIME AND THE DECIDED ROUTE ACCORDING TO ITS REQUIREMENT FOR WHICH IT PAID THE FOREIGN ENTERPRISE THE CONSIDERATION AND THE CHARACTER OF PAYMENT WAS NOTHING BUT ROYALTY FALLING UNDER CLAUSE (IVA) OF EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT. I.T.A. NO . 537 /M/1 3 & C.O. NO. 8 9 /M /16 9 (II) THAT ON MAY 14 1999 THE ASSESSEE ENTERED INTO A BAREBOAT CHARTER - CUM - DEMISE CONTRACT WITH D FIXING THE H IRE CHARGES FOR 69 MONTHS STARTING FROM APRIL 1999 TO DECEMBER 2004 AND THE PURCHASE OPTION AT THE END OF EACH PERIOD WAS ALSO SPECIFIED. THUS TILL THE LAST MONTH OF THE PAYMENT OR THE OPTION EXERCISED THE ASSESSEE WAS NOT THE OWNER OF THE VESSEL. AD MITTEDLY THE SHIP IN QUESTION WAS SOLD UNDER THE CERTIFICATE OF SALE ONLY ON JANUARY 12 2005. THUS TILL THAT TIME IT WAS A BAREBOAT CHARTER WHICH IN TERMS OF SECTION 115V(A) MEANS HIRING OF SHIP FOR A STIPULATED PERIOD ON TERMS WHICH GIVE THE CHARTERER THE POSSESSION AND CONTROL OF THE SHIP INCLUDING THE RIGHT TO APPOINT THE MASTER AND CREW. THUS ADMITTEDLY WITH POSSESSION AND CUSTODY WITH THE HIRER THE CONSIDERATION PAID FOR THE USE OF THE SAME WAS LIABLE TO BE TREATED AS 'ROYALTY'. THE CONSIDERATI ON PAID PERIODICALLY WAS IN THE NATURE OF HIRE CHARGES FOR THE USE OF THE VESSEL AS DESCRIBED IN THE AGREEMENT AND NOT SALE CONSIDERATION AS WAS CONTENDED BY THE ASSESSEE. THE ASSESSEE ALSO TREATED THE HIRE CHARGES AS REVENUE EXPENDITURE IN ITS RETURN OF INCOME. THUS THE CONSIDERATION FOR THE BAREBOAT CHARTER - CUM - DEMISE WAS ROYALTY. (III) THAT THE ASSESSEE HAD A BAREBOAT CHARTER - CUM - DEMISE WITH THE CYPRUS COMPANY WHOSE EFFECTIVE MANAGEMENT WAS IN CYPRUS A COUNTRY WITH WHOM INDIA HAS A DT AA. THUS GOIN G BY THE COMMENTARY AND THE DEFINITION ON INTERNATIONAL TRAFFIC AND THE BAREBOAT CHARTER - CUM - DEMISE THE MOVEMENT BEING ON THE COASTAL LINES OF THE INDIAN SHORE THE ASSESSEE FAILED THE TEST OF INTERNATIONAL TRAFFIC. THEREFORE THE RECEIPTS WERE TAXABLE ON LY IN INDIA. (IV) THAT THE VESSELS WERE DESIGNATED AS COASTAL VESSEL BY THE CHENNAI PORT TRUST TO MEAN EXCLUSIVELY EMPLOYED IN TRADING BETWEEN ANY PORT OR PLACE IN INDIA TO ANY OTHER PORT IN INDIA HAVING A VALID COASTAL LICENCE ISSUED BY THE COMPETENT A UTHORITY. THE DIRECTOR GENERAL OF SHIPPING HAD GIVEN VALID LICENCE TO THE ASSESSEE FOR CHARTERING OF THE FOREIGN VESSELS ON TIME CHARTER BASIS FOR TRANSPORTING OF COAL FOR HALDIA/PARADIP/VIZAG TO CHENNAI/TUIICORIN/ENNORE BASED ON THE APPLICATION FILED BY T HE ASSESSEE. THESE VESSELS WERE TREATED ON PAR WITH THE OTHER INDIAN COASTAL VESSELS. THE FACILITIES AT THE ENNORE PORT BY RESERVING TWO BERTHS WERE FOR THE USE BY SHIPS CHARTERED BY THE ASSESSEE FOR LOADING AND UNLOADING OF THE COAL CARRIED FROM THE PORTS SPECIFIED. THE VESSELS WERE PUT TO USE FOR MORE THAN 90 DAYS CONTINUOUSLY BETWEEN THE NAMED PORTS IN INDIA. THUS THE HIRING WAS NOT AN OCCASIONAL FEATURE AND THE HIRING WAS FOR A CONTINUOUS PERIOD SOLELY AT THE DISPOSAL OF THE ASSESSEE FOR THE ENTIRE PER IOD OF HIRE. THUS IT IS EVIDENT THAT THE VESSELS SAILED ALONG THE INDIAN COAST ON THE I.T.A. NO . 537 /M/1 3 & C.O. NO. 8 9 /M /16 10 EASTERN SIDE ON A REGULAR EXCLUSIVE BASIS AND THE PORTS ARE USED FOR BERTHING OF THE SHIPS. THE AGREEMENT BETWEEN THE FRENCH COMPANY AND THE ASSESSEE AND THE ASSESSEE AN D THE GERMAN COMPANY SHOWED THAT THEY HAD LOCAL AGENTS EMPLOYED IN INDIA. THE MOVING SHIP HAD A PLACE OF BUSINESS IN THE PLACE WHERE THE SHIP WAS DOCKED AND THE FACT THAT THE SHIP MOVED FROM ONE POINT TO ANOTHER WAS THE RESULT OF THE NATURE OF BUSINESS CON TRACT AND THE MOVEMENT WAS AN INTEGRATED ONE HAVING BUSINESS AND GEOGRAPHICAL COHERENCE. THIS LED TO THE INFERENCE THAT THE FOREIGN ENTERPRISE HAD A PLACE OF PERMANENT ESTABLISHMENT IN THIS COUNTRY. THE FOREIGN ENTERPRISE THUS SATISFIED THE PRESENCE OF A P ERMANENT ESTABLISHMENT BUT EVEN THOUGH THE BERTH WAS A PERMANENT ESTABLISHMENT OF THE FOREIGN ENTERPRISE THE ROYALTIES PAID OR CREDITED NOT BEING EFFECTIVELY CONNECTED WITH OR ATTRIBUTED TO SUCH PERMANENT ESTABLISHMENT THE PAYMENT WOULD FALL FOR CONSIDER ATION ONLY UNDER ARTICLE 12 AND NOT UNDER ARTICLE 7. IT WAS NOT NECESSARY THEREFORE TO CONSIDER THE ASPECT OF APPORTIONMENT FOR ARTICLE 7 OF THE DTAA OR FOR THAT MATTER SECTION 44B OF THE ACT. (V) THAT THOUGH IN RESPECT OF SEVERAL OF THE NON - RESIDENTS A SINGLE ASSESSMENT HAD BEEN DONE AT THE HANDS OF THE ASSESSEE THIS TECHNICALITY DID NOT CUT AT THE LEGALITY OF THE ASSESSMENT. THE ASSESSMENT IN RESPECT OF EACH OF THE NON - RESIDENTS FOR WHOM THE ASSESSEE WAS TO BE ASSESSED IN A REPRESENTATIVE CAPACITY HAD BEEN SPECIFICALLY QUANTIFIED AND IN EACH CASE THE ASSESSEE HAD BEEN TREATED AS A REPRESENTATIVE ASSESSEE. THERE WAS NO ILLEGALITY. ORDER OF THE APPELLATE TRIBUNAL IN POOMPUHAR SHIPPING CORPORATION LTD. V. ITO (INTERNATIONAL TAXATION) [2008] 297 ITR (AT) 219 (CHENNAI) AFFIRMED. ORDER OF THE APPELLATE TRIBUNAL IN WEST ASIA MARITIME LTD. V. ITO [2008] 297 ITR (AT) 202 (CHENNAI) AFFIRMED. ORDER OF THE APPELLATE TRIBUNAL IN POOMPUHAR SHIPPING CORPORATION LTD. V. ASST. DIT (INTERNATIONAL TAXATION) [201 4] 2 ITR (TRIB) - OL 1 (CHENNAI) AFFIRMED. 7. A GAINST THE ORDER OF THE TRIBUNAL IN I.T.A. NOS. 145 TO 148/MDS/2012 DATED 29.06.2012 THE DEPARTMENT FILED APPEALS BEFORE THE HON BLE HIGH COURT WHICH WAS DULY AFFIRMED BY THE HON BLE HIGH COURT IN ITS ORDER DATED I.T.A. NO . 537 /M/1 3 & C.O. NO. 8 9 /M /16 11 09.10.2013 ( SUPRA ) WE ARE OF THE OPINION THAT THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE ORDER OF THE TRIBUNAL AND THUS WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON BOTH THE ISSUES RAISED BY THE DEPARTMENT. ACCORD INGLY THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. THE CROSS OBJECTION OF THE ASSESSEE IS FOUND TO HAVE BEEN FILED LATE BY TWO DAYS AND NO PETITION TO CONDONE THE DELAY HAS BEEN FILED BY THE ASSESSEE. ACCORDINGLY THE CROSS OBJECTION FILED BY TH E ASSESSEE IS UNADMITTED AND THE SAME STANDS DISMISSED. 9. IN THE RESULT THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THE 30 TH SEPTEMBER 201 6 AT CHENNAI. SD/ - SD/ - (A.MOHAN ALANKAMO NY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI DATED THE 30 .0 9 .201 6 VM/ - / COPY TO: 1. / APPELLANT 2. / RESPONDENT 3. ( ) / CIT(A) 4. / CIT 5. / DR & 6. / GF.