WSA SHIPPING (BOMBAY) P. LTD RE -WORLD SYST INTL SINGAPORE, MUMBAI V. ADDL DIT (IT)2(2), MUMBAI

ITA 1236/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48827 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 04-05-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 24-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D P BAPAT
• Assessee Lawyers: G GURUSWAMI
• Keywords: Capital asset; Business income; Double taxation relief; Opportunity of being heard; Services rendered outside India; Deemed to accrue or arise in india; Retrospective amendment; Permanent establishment; Right to appeal
• Section: 201(1); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH L, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI B.RAMAKOTAIA H (A.M) ITA NO. ASSTT.YEAR APPELLANT RESPONDENT ITA 1173/M/09 2002-03 WSA SHIPPING (BOMBAY) PVT. LTD. RE WILSON LOGISTICS, NETHERLANDS, B-101-105 SAGAR TECH PLAZA, ANDHERI KURLA ROAD, SAKI NAKA, ANDHERI (EAST), MUMBAI - 72. PAN: AAACW 2373B ADIT(IT) CIR 2(2), ROOM NO.116, SCINDIA HOUSE, BALLARD ESTATE, MUMBAI -38 ITA 1174/M/09 2002-03 WSA SHIPPING (BOMBAY) PVT. LTD. RE WSA 1994 PTE LTD. SINGAPORE MUMBAI. ADIT(IT) CIR 2(2), MUMBAI ITA 1175/M/09 2002-03 WSA SHIPPING (BOMBAY) PVT. LTD. RE MIRACLECONT LINES SINGAPORE MUMBAI. ADIT(IT) CIR 2(2), MUMBAI ITA 1176/M/09 2002-03 WSA SHIPPING (BOMBAY) PVT. LTD. RE- SEA ROAD TRANS CORP.KOREA MUMBAI. ADIT(IT) CIR 2(2), MUMBAI ITA 1232/M/09 2003-04 WSA SHIPPING (BOMAY) P. LTD. RE-WILSON LOGISTICS NETHERLANDS, MUMBAI ADIT(IT) CIR 2(2), MUMBAI ITA 1233/M/09 2003-04 WSA SHIPPING (BOMBAY) P. LTD. RE- TROY CONTAINER LINE LTD. USA MUMBAI. ADIT(IT) CIR 2(2), MUMBAI ITA 1234/M/09 2003-04 WSA SHIPPING (BOMBAY) P. LTD. RE WSA LINES INTERNATIONAL LTD., HONG KONG, MUMBAI. ADIT(IT) CIR 2(2), MUMBAI WSA SHIPPING (BOMBAY) PVT. LTD. 2 ITA 1235/M/09 2003-04 WSA SHIPPING (BOMBAY) P. LTD. RE-WSA 1994 PTE.LTD. SINGAPORE MUMBAI ADIT(IT) CIR 2(2), MUMBAI ITA 1236/M/09 2003-04 WSA SHIPPING (BOMBAY) P LTD. RE-WORLD SYSTEMS INTL LTD., SINGAPORE, MUMBAI. ADIT(IT) CIR 2(2), MUMBAI ITA 1237/M/09 2003-04 WSA SHIPPING (BOMBAY) P. LTD. RE-FAN CHENG INTL TRANSPORT CHINA, MUMBAI. ADIT(IT) CIR 2(2), MUMBAI ITA 1238/M/09 2003-04 WSA SHIPPING (BOMBAY) P. LTD. RE-AWARDS CONSOLIDATION SERVICES-SINGAPORE, MUMBAI. ADIT(IT) CIR 2(2), MUMBAI ITA 1239/M/09 2003-04 WSA SHIPPING (BOMBAY) P. LTD. RE-CAS AGENCIES UK, MUMBAI ADIT(IT) CIR 2(2), MUMBAI ITA 1240/M/09 2003-04 WSA SHIPPING (BOMBAY) P. LTD. RE- PERFECT EXPRESS CORPORATION-USA, MUMBAI ADIT(IT) CIR 2(2), MUMBAI ITA 1241/M/09 2003-04 WSA SHIPPING (BOMBAY) P. LTD. RE-SEA ROAD TRNS. KOREA MUMBAI ADIT(IT) CIR 2(2), MUMBAI ITA 1242/M/09 2003-04 WSA SHIPPING (BOMBAY ) P.LTD. RE-WSA MANAGEMENT PTE. LTD., SINGAPORE, MUMBAI. ADIT(IT) CIR 2(2), MUMBAI ITA 1243/M/09 2003-04 WSA SHIPPING (BOMBAY) P. LTD. RE-FORDABLE GROUP LTD.- HONG KONG, MUMBAI ADIT(IT) CIR 2(2), MUMBAI ITA 1244/M/09 2003-04 WSA SHIPPING (BOMBAY) P. LTD. RE-WSA LINES (THAILAND ) CO. LTD. THAILAND, MUMBAI. ADIT(IT) CIR 2(2), MUMBAI ITA 1245/M/09 2003-04 WSA SHIPPING (BOMBAY) P. LTD. ADIT(IT) CIR 2(2), MUMBAI WSA SHIPPING (BOMBAY) PVT. LTD. 3 RE-TIANJIN CONSOLE INTERNATIONAL, CHINA, MUMBAI. ITA 1784/M/09 2003-04 WSA SHIPPING (BOMBAY) P. LTD. RE-WSA LINES INTERNATIONAL LTD., HONG KONG, MUMBAI. ADIT(IT) CIR 2(2), MUMBAI ITA 1785/M/09 2003-04 WSA SHIPPING (BOMBAY) P. LTD. RE-FORDABLE GROUP LTD.- HONG KONG, MUMBAI ADIT(IT) CIR 2(2), MUMBAI APPELLANT BY : SHRI D.P.BAPAT ASSESSEE BY : G.GURUSWAMI ORDER PER BENCH, THESE ARE 20 APPEALS BY WSA SHIPPING(BOMBAY) PVT. LTD., (HEREINAFTER REFERRED TO AS APPELLANT), A COMPANY ENGAGED IN THE BUSINESS OF CARGO CONSOLIDATION COMMONLY KNOWN IN THE BUSINESS AS NON -VESSEL OWNERS CARGO CARRIERS (NVOCC). THE APPELLANT IS REGISTERED AS A MULTIMODAL TRANSPORT OPERATOR (MTO) WITH THE MINISTRY OF SHIPPING DIRECT ORATE GENERAL OF SHIPPING, GOVT. OF INDIA. 2. THE FIRST 18 APPEALS ARE AGAINST ORDERS ALL DATED 31/12/08 OF CIT(A) XXXI, MUMBAI AND LAST TWO APPEALS ARE AGAINST ORDER S 23/1/2009. ITA NO.1173 TO 1176/M/09 ARE IN RELATION TO A.Y. 2002-0 3, WHILE ITA NO.1232 TO 1245/M/09 ARE WITH REFERENCE TO ASSESSMENT YEAR 200 3-04. 3. FIRST, WE SHALL TAKE UP FOR CONSIDERATION, THE FIRST 18 APPEALS BEING ITA NO.1173 TO 1176/M/09 AND ITA NO.1232 TO 1245/M/09. THE COMMON ISSUE THAT HAS TO BE DECIDED IN THESE APPEALS IS AS TO WH ETHER THE CIT(A) WAS JUSTIFIED IN TREATING THE APPELLANT AS AGENT OF VAR IOUS NON-RESIDENTS(18 NON- WSA SHIPPING (BOMBAY) PVT. LTD. 4 RESIDENTS) REFERRED TO IN THE ORDERS OF CIT(A) UNDE R SECTION 163 OF THE INCOME TAX ACT 1961 (THE ACT). 4. THE FACTS GIVING RISE TO THESE APPEALS ARE AS FO LLOWS: THE APPELLANT IS ENGAGED IN THE BUSINESS OF CARGO CONSOLIDATION COMMONLY KNOWN IN THE BUSINESS AS NON VESSEL OWNERS CARGO CARRIERS (NVOCC). THE APPELLANT IS REGISTERED AS A MULTIMOD AL TRANSPORT OPERATOR (MTO) WITH THE MINISTRY OF SHIPPING; DIRECTORATE GE NERAL OF SHIPPING, GOVT. OF INDIA. THE APPELLANT RECEIVES CARGO FROM VARIOU S SHIPPERS / CONSIGNORS AT MUMBAI PORT / CONTAINER FREIGHT STATION MUMBAI / JN PT FOR SHIPMENTS TO VARIOUS DESTINATIONS WORLDWIDE. ONCE THE CARGO IS RECEIVED A DOCUMENT CALLED BILL OF LADING (B/L) IS ISSUED BY THE APPELL ANT TO THE SHIPPER. THE B/L SPECIFIES THE CONSIGNOR, THE CONSIGNEE, CARGO DESCR IPTION, DESTINATION OF THE CARGO WHERE THE DELIVERY HAS TO BE MADE TO THE CONS IGNEE. BASED ON THE VOLUMES OF THE CARGO AND BUSINESS EXPERIENCE THE AP PELLANT OBTAINS A CONTAINER FROM AGENTS OF SHIPPING LINES OR SHIPPING LINES. IN THE PROCESS OF CARGO CONSOLIDATION, THE CONTAINER OBTAINED FROM TH E AGENTS OF SHIPPING LINES OR SHIPPING LINES CANNOT BE STUFFED FULLY FOR A PARTICULAR DESTINATION. AS THE DELIVERY SCHEDULE OF THE CARGO HAS TO BE STR ICTLY ADHERE TO, THE APPELLANT STUFFS THE CARGO OF VARIOUS DESTINATIONS ON A PARTICULAR ROUTE IN ONE CONTAINER AND LOADS THE CONTAINER WITH THE SHIPPING LINE. THIS CONCEPT CAN BE FULLY UNDERSTOOD WITH THE FOLLOWING EXAMPLES: 1. A SHIPPER HANDS OVER THE CARGO TO THE APPELLANT FO R DELIVERY AT SYDNEY, AUSTRALIA. THE VOLUME OF THE AVAILABLE CARGO AS ON DATE FOR SYDNEY MAY NOT BE EQUIVALENT TO FULL CONTAINER LOAD. AS T HE APPELLANT IS UNDER AN OBLIGATION TO DELIVER THE CARGO WITHIN TIME IT S TUFFS THIS CARGO IN A CONTAINER ALONG WITH CARGOES FOR OTHER DESTINATIONS EN ROUTE TO SYDNEY AND DISPATCHES THE CONTAINER TO SINGAPORE. SINGAPO RE IS A HUB PORT WHEREIN THE CARGOES COME FROM VARIOUS PORTS FOR RER OUTING TO FINAL DESTINATIONS. WSA SHIPPING (BOMBAY) PVT. LTD. 5 2. THE APPELLANT HAS A BUSINESS ASSOCIATE IN SINGAPORE WHO TURNS AROUND THE CARGO AND ROUTES THE SAME TO SYDNEY WHERE THE C ARGO IS ULTIMATELY DESTINED. FOR THIS SERVICES RENDERED IN SINGAPORE THE SAID BUSINESS ASSOCIATE RAISES AN INVOICE FOR ON CARRIAGE FROM SI NGAPORE TO SYDNEY. 3. AS THE APPELLANT HAS COLLECTED THE FREIGHT FROM MUM BAI TO SYDNEY, THE COST OF CARRIAGE I.E. SINGAPORE TO SYDNEY IS REMITT ED TO THE BUSINESS ASSOCIATE IN SINGAPORE. 5. THE AO NOTICED THAT THE APPELLANT HAS MADE PAYME NT TO THE NON- RESIDENT DURING THE RELEVANT ASSESSMENT YEARS UNDER CONSIDERATION ON WHICH NO TAX WAS DEDUCTED AT SOURCE AT THE TIME OF MAKING PAYMENT. THE AO, THEREFORE, ISSUED A SHOWCAUSE NOTICE TO APPELLANT CALLING UPON THE APPELLANT TO SHOW CAUSE AS TO WHY IT SHOULD NOT BE TREATED AS AN AGENT OF THE NON- RESIDENTS TO WHOM THE APPELLANT MADE PAYMENTS, U/S. 163 OF THE INCOME TAX ACT, 1961 (THE ACT). IN RESPONSE TO THE SAME, THE APPELLANT SUBMITTED THAT THE NON-RESIDENTS TO WHOM PAYMENT WAS MADE BY THE APPELLANT WERE BUSINESS ASSOCIATES OF THE APPELLANT BUT THERE WAS NO PRINCIPAL-AGENT RELATIONSHIP WITH THEM. THE APPELLANT SUBMITTED TH AT THE BUSINESS ASSOCIATES OF THE APPELLANT HAD RENDERED SERVICES A T THE RESPECTIVE PORT IN RESPECT OF CARGOES WHICH ARE TO BE SENT TO FURTHER ONWARD DESTINATIONS AND FOR WHICH ALL EXPENSES SUCH AS ONWARD FREIGHT, FREI GHT CHARGES, PORT CHARGES, DETENTION CHARGES ARE TO BE BORNE BY THEM. THE REM ITTANCES MADE BY THE APPELLANT ARE IN RESPECT OF INVOICES RAISED BY THE BUSINESS ASSOCIATES FOR THESE CHARGES IN RESPECT OF SERVICES RENDERED OUTSI DE INDIAN TERRITORIAL WATERS. IT WAS ALSO CLAIMED THAT THE APPELLANT TH AT IT WAS NOT BOUND TO SEND THE CARGO ONLY TO THE LISTED BUSINESS ASSOCIATES AN D IT WAS FREE TO SEND THE CARGO FOR ONWARD MOVEMENT TO ANYONE WHO OFFER BETTE R QUOTATION FOR ONWARD MOVEMENT. THE APPELLANT SUBMITTED THAT THE BUSINES S ASSOCIATES DID NOT HAVING PERMANENT ESTABLISHMENT (PE) IN INDIA. THE APPELLANT SUBMITTED THAT THE RECIPIENTS OF PAYMENT FROM THE APPELLANT W ERE NON-RESIDENT, AND INCOME HAD NOT ACCRUED OR ARISEN OR DEEMED TO HAVE ACCRUED OR ARISEN TO WSA SHIPPING (BOMBAY) PVT. LTD. 6 THEM IN INDIA. THE APPELLANTS THUS SUBMITTED THAT THE RECEIPTS FROM THE APPELLANTS WERE CHARGEABLE TO TAX UNDER THE ACT IN THE HANDS OF THE NON- RESIDENTS. THEREFORE THE APPELLANT WAS NOT REQUIR ED TO DEDUCT TAX AT SOURCE IN RESPECT OF REMITTANCES MADE TO THEM. 6. THE AO DID NOT ACCEPT THE EXPLANATION OF THE APP ELLANT AND HE HELD AS FOLLOWS: THAT TO TREAT A PERSON AS AN AGENT U/S. 163, WHAT IS REQUIRED IS TO PROVE THAT THE REPRESENTATIVE ASSESSEE HAS BUSINESS CONNECTION WITH THE NON-RESIDENT AND FROM WHOM OR THROUGH WHOM THE NON-RESIDENT IS IN RECEIPT OF ANY INCOME, WHETHER DIRECTLY OR INDIR ECTLY. BOTH THESE FACTS HAVE NOT BEEN DISPUTED BY M/S. WSA SHIPPING ( BOMBAY) P LTD. IT HAS REMITTED THE FREIGHT COLLECTED FROM MUMBAI T O THE ULTIMATE DESTINATION WITHOUT ANY DEDUCTION OF TAX. IN THE CIRCUMSTANCES, MS/ WSA SHIPPING (BOMBAY) P. LTD. IS TREATED AS AN AGE NT OF WSA 1994 PTE LTD. SINGAPORE. 7. BEFORE CIT(A) THE APPELLANT SUBMITTED THAT IN T ERMS OF SECTION 163(1)(B) THE APPELLANT COULD BE REGARDED AS AN AGENT IN RELA TION TO A NON-RESIDENT, IF HE HAS BUSINESS IN CONNECTION WITH THE NON-RESIDENT . EXPLANATION TO SECTION 163 (1) PROVIDES THAT THE EXPRESSION BUSINESS CONNE CTION SHALL HAVE THE MEANING ASSIGNED TO IT IN EXPLANATION-2 TO CLAUSE(I ) OF SUB-SECTION (1) OF SECTION 9 OF THE ACT. REFERRING TO EXPLANATION 2 T O CLAUSE(I) OF SUB-SECTION(1) OF SECTION 9 OF THE ACT THE APPELLANT SUBMITTED THA T THE APPELLANT DOES NOT ACT ON BEHALF OF THE NON-RESIDENT IN INDIA. IN TH IS REGARD THE APPELLANT POINTED OUT THAT IT PROCURES THE CARGO WITHOUT KNOW ING AT THE TIME OF PROCUREMENT WHETHER THE CARGO WOULD BE DIRECTLY SHI PPED TO FINAL DESTINATION OR IT WILL BE ROUTED THROUGH A SPECIFIC BUSINESS AS SOCIATE AND A FINAL DECISION IN THIS REGARD IS ALWAYS TAKEN BY THE APPELLANT. T HE APPELLANT FURTHER DREW THE ATTENTION TO CBDT CIRCULAR NO. 23 DATED 23 RD JULY, 1969 WHEREIN IT HAS BEEN CLARIFIED THAT WHERE THERE ARE TRANSACTIONS WI TH THE NON-RESIDENT ON A PRINCIPAL TO PRINCIPAL BASIS THERE WILL BE NO LIABI LITY ON ACCRUAL BASIS TO THE NON-RESIDENT ON THE PROFITS MADE BY HIM. IT HAS FU RTHER BEEN CLARIFIED THAT WSA SHIPPING (BOMBAY) PVT. LTD. 7 THE REAL RELATIONSHIP BETWEEN THE PARTIES HAS TO BE LOOKED INTO ON THE BASIS OF THE AGREEMENT EXISTING BETWEEN THE RESIDENT AND THE NON-RESIDENT. THE APPELLANT SUBMITTED THAT THE AFORESAID CIRCULAR WAS IN THE CONTEXT OF SALE OF GOODS AND THE SAME WILL EQUALLY APPLY TO PROVISION OF SERVICES ALSO. IN THIS REGARD THE APPELLANT SUBMITTED THAT THE (A) NON RES IDENT DOES NOT HAVE ANY BRANCH OFFICE IN INDIA; (B) THERE WAS NO AGENCY IN INDIA. (C) THE APPELLANT WAS NOT A SUBSIDIARY OF THE NON-RESIDENT. (D) THER E WAS NO FINANCIAL ASSOCIATION BETWEEN THE NON-RESIDENT AND THE APPELL ANT OTHERWISE THAN THE PAYMENT OF CONSIDERATION FOR THE SERVICES RENDERED OUTSIDE INDIA. (E ) THERE WAS NO FORMAL WRITTEN AGREEMENT BETWEEN THE APPELLA NT AND THE NON- RESIDENT. (F) IT WAS SUBMITTED THAT PARA 3 OF THE CIRCULAR SHOULD BE READ AS SELLING OF SERVICES BY THE NON-RESIDENT TO THE INDI AN RESIDENT, IN THE CONTEXT OF THE FACTS OF THE APPELLANTS CASE. IF SO READ, THE CONCLUSIONS ARE AS UNDER: I. THE SERVICES ARE AVAILED BY THE APPELLANT IN INDIA FROM THE NON- RESIDENT ON ITS OWN ACCOUNT. THAT IS TO SAY, THE ASSESSEE IN INDIA AVAILS THE SERVICES AS AN INDEPENDENT ENTERPR ISE AND NOT ON BEHALF OF ANY OTHER PERSON. II. THE TRANSACTIONS BETWEEN THE APPELLANT AND THE NON- RESIDENT ARE ON PRINCIPAL TO PRINCIPAL BASIS AT ARMS LENGTH PRIC E. III. THE NON-RESIDENT DOES NOT EXERCISE ANY CONTROL OVER THE BUSINESS OF THE APPELLANT. IV. THE PAYMENT TO THE NON-RESIDENT BY THE APPELLANT IS NOT DEPENDANT UPON THE SERVICE CHARGES REALIZED BY THE APPELLANT IN INDIA. IT WAS, THEREFORE, SUBMITTED THAT NOT A SINGLE TEST OF BUSINESS CONNECTION SPECIFIED IN THE BOARD CIRCULAR APPLIES TO THE ASSE SSEES CASE. 8. WITH REGARD TO THE CONCLUSION OF THE AO THAT TH E NON-RESIDENT IS IN RECEIPT OF INCOME FROM THE ASSESSE AND THEREFORE SEC.163(1) ( C ) OF THE ACT, WOULD BE APPLICABLE, THE APPELLANT SUBMITTED THAT THE TAXABI LITY OF THE INCOME UNDER THE ACT HAS TO BE EXAMINED BEFORE HOLDING THAT SEC. 163(1)( C) OF THE ACT WSA SHIPPING (BOMBAY) PVT. LTD. 8 APPLIES TO THE CASE OF THE APPELLANT. IN THIS REGA RD THE APPELLANT POINTED OUT THAT THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI IN THE CASE OF ASST. COMMISSIONER OF INCOME TAX CIR. 12(2), MUMBAI VS. DHL OPERATIONS B.V. NETHERLANDS ( REF. ITA NOS.7987 AND 7988/BOM/9 2) HAS HELD THAT WHERE ONLY THAT PART OF THE INCOME WHICH IS ATTRIBU TABLE TO THE ACTIVITIES OF THE NON-RESIDENT IN INDIA IS TAXABLE IN INDIA. ACC ORDING TO THE APPELLANT, THE BUSINESS ASSOCIATES OF THE APPELLANT WERE RENDERING SERVICES OUTSIDE INDIA AND THE APPELLANT CANNOT BE TREATED AS AGENT SO AS TO BRING TO TAX IN INDIA IN RESPECT OF INCOME ON THE BUSINESS ACTIVITY RENDERE D OUTSIDE TERRITORIAL WATERS. IT WAS FURTHER ARGUED THAT AS HELD BY THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF ABDULLABHAI KADER ( 22 ITR 241), THE TESTS LAID DOWN UNDER SECTION 163 OF THE INCOME TAX ACT, 1961, CORRESPOND ING TO SECTION 43 OF THE 1922 ACT CAN BE INVOKED AND APPLIED ONLY IF THE INC OME OF THE NON-RESIDENT IS TAXABLE IN INDIA. 8. THE CIT(A) HOWEVER DID NOT AGREE WITH THE SUBMIS SIONS MADE ON BEHALF OF THE ASSESSEE. THE CIT(A) FIRSTLY FOUND THAT THE APPELLANT COLLECTS THE FREIGHT FROM EXPORTER FOR THE ULTIMATE DESTINATION OF CARGO AND SAME IS LOADED IN CONTAINER AND SENT TO SINGAPORE WHERE ITS BUSINE SS ASSOCIATES TAKES DELIVERY AND AFTER LOADING AND UNLOADING IT IS LOAD ED TO SHIPMENT FOR FINAL DESTINATION. THE BUSINESS ASSOCIATES RAISES BILL F OR FREIGHT FROM SINGAPORE TO FINAL DESTINATION OF CARGO. THE APPELLANT HAS A BU SINESS ASSOCIATE IN SINGAPORE WHO TURNS AROUND THE CARGO AND ROUTES THE SAME TO SYDNEY WHERE THE CARGO IS ULTIMATELY DESTINED. FOR THIS SERVICE S RENDERED IN SINGAPORE THE SAID BUSINESS ASSOCIATE RAISES AN INVOICE FOR ON CA RRIAGE FROM SINGAPORE TO SYDNEY. HE NOTICED FROM TARIFF OF BUSINESS ASSOCI ATES, THAT, THE FREIGHT CHARGEABLE AS PER TARIFF OF WSA PTE SINGAPORE (ASSO CIATE OF THE APPELLANT IN SINGAPORE) IS ALSO INCLUSIVE OF PRE PAID FREIGHT CO LLECTED BY THE APPELLANT AND A INVOICE IS RAISED ON EXPORTER. AGAINST THIS INVO ICE, THE WSA PTE SINGAPORE ISSUES A DEBIT NOTE WHICH INCLUDED FREIGHT AS WELL AS OTHER CHARGES INCURRED WSA SHIPPING (BOMBAY) PVT. LTD. 9 BY IT. ACCORDING TO THE CIT(A), THERE WAS A TACIT UNDERSTANDING, THAT THE APPELLANT IS ACTING ON BEHALF OF WSA PTE SINGAPORE WITHOUT ANY WRITTEN AGREEMENT. THE APPELLANT IS UNDER OBLIGATION TO CO LLECT FREIGHT FROM ONWARDS TRANSMISSION AT THE RATE PRESCRIBED BY THE NON-RESI DENT. THE CIT(A) ALSO FOUND THAT AS PER VARIOUS CLAUSES OF TARIFF RATE I SSUED BY THE WSA PTE SINGAPORE, THE APPELLANT HAD TO OBTAINED PRIOR APPR OVAL BEFORE ACCEPTING PARTICULAR CARGO ALSO. THUS THE FREIGHT REMITTED B Y THE APPELLANT IS NOTHING BUT INCOME OF THE NON-RESIDENT THAT ACCRUED IN INDI A BECAUSE OF ITS BUSINESS CONNECTION. THIS CAN ALSO BE TERMED AS SHARING OF CARGO BUSINESS AS THE PART OF FREIGHT COLLECTED BELONGS TO APPELLANT AND LATER PART BELONGS TO NON- RESIDENT. THE APPELLANT, THEREFORE, SATISFIES THE CONDITION LAID DOWN U/S. 163(1)(B) AND 163(C) AND HAS BEEN CORRECTLY HELD TO BE AGENT OF THE NON- RESIDENT. 9. THE CIT(A) THEREAFTER REFERRED TO THE RULING OF THE HONBLE PRIVY COUNCIL IN THE CASE OF CURRIMBHOY EBRAHIM & SONS LTD. 3 ITR 39 5, THE RULING OF THE HONBLE SUPREME COURT CIT VS. R.D.AGGARWAL & CO. 56 ITR 20 (SC) AND HONBLE A.P.HIGH COURT IN THE CASE OF CIT VS. HINDU STAN SHIPYARD LTD,. 109 ITR 158 (AP). THE PROPOSITION LAID DOWN IN THE ABO VE DECISIONS BRIEFLY WERE THAT BUSINESS CONNECTION WOULD MEAN A RELATION BETW EEN A BUSINESS CARRIED ON BY A NON-RESIDENT WHICH YIELDS PROFITS OR GAINS AND SOME ACTIVITY IN INDIA WHICH CONTRIBUTES DIRECTLY OR INDIRECTLY TO THE EAR NING OF THE PROFITS OR GAINS AND THAT COMMON THREAD OF MUTUAL INTEREST MUST RUN THROUGH THE FABRIC OF THE TRADING ACTIVITIES CARRIED ON OUTSIDE AND INSID E INDIA WHICH HAS TO BE REAL AND INTIMATE CONNECTION, THE COMMONNESS OF INTEREST MAY BE MANAGEMENT CONTROL OR FINANCIAL CONTROL OR SHARING OF PROFITS. 10. THE CIT(A) FOUND THAT THE APPELLANT WAS REMITT ING FREIGHT REGULARLY TO VARIOUS ASSOCIATES AT SINGAPORE. THE APPELLANT HAD CONTINUED BUSINESS RELATIONSHIP WITH THE ASSOCIATES AT SINGAPORE REGUL ARLY. EVEN THE APPELLANT REFERRED TO THE NON-RESIDENT AS BUSINESS ASSOCIATE. THE APPELLANT AND THE WSA SHIPPING (BOMBAY) PVT. LTD. 10 NON-RESIDENT WERE CARRYING ON THE SAME BUSINESS ACT IVITY. THE BUSINESS FREIGHT FOR ONWARD TRANSMISSION FROM HUB (AT SINGAP ORE) WAS BEING COLLECTED BY THE APPELLANT AND BEING REMITTED TO NON- RESIDEN T. THIS ACTIVITY IS BEING CONDUCTED IN A SYSTEMATIC MANNER WITH CONTINUITY. 11. THE CIT(A) ALSO HELD THAT ONWARD FREIGHT CHAR GES ARE PAID IN INDIA IN THE SHAPE OF REMITTANCE ON THE PRESCRIBED TARIFF RATE O N THE BASIS OF PRE-ARRANGED FREIGHT. THOUGH THE ONWARD TRANSSHIPMENT WAS BEYON D THE TERRITORY OF INDIA, THE SAME ORIGINATED FROM THE SOURCE OF INDIA AND WA S PART AND PARCEL OF WHOLE TRANSMISSION CHARGES COLLECTED BY THE APPELLA NT. THUS THE FREIGHT COLLECTED FOR THE ULTIMATE DESTINATION IS BEING SHA RED BY THE NON-RESIDENT COMPANY. IN THIS REGARD, THE CIT(A) ALSO REFERRED TO SOME CLAUSES OF THE TARIFF CARD OF ON THE NON-RESIDENT, WHEREIN IT HAS BEEN PROVIDED THAT THE APPELLANT HAS TO PRE CHECK THE AVAILABILITY AND ONW ARD CARGO BEFORE ACCEPTING THE SPECIFIC CARGO. THIS ACCORDING TO TH E CIT(A) SHOWED THAT THERE WAS SOME SORT OF CONTROL BEING EXERCISED BY THE NON -RESIDENT COMPANY. THEREFORE, THERE WAS A BUSINESS CONNECTION AND ALSO THAT THE NON-RESIDENT HAD RECEIVED INCOME THROUGH OR FROM THE ASSESSEE IN INDIA. HENCE, THE APPELLANT WOULD BE AGENT UNDER SECTION 163(1)(B) AN D (C) OF THE ACT AND THERE WOULD BE A DEEMED ACCRUAL UNDER SECTION 9(1)( I) TO THE NON-RESIDENT. 12. ON THE DECISION OF THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF ABDULLABHAI KADER (221 ITR 241)(BOM) WHICH LAYS THA T WE MUST FIRST FIND OUT THAT WHETHER THE NON-RESIDENT IS LIABLE TO TAX U/S. 42 (CORRESPONDING TO S.9) BEFORE APPOINTING THE AGENT UNDER SECTION 43 (CORRE SPONDING TO S.163), THE CIT(A) HELD THAT THE SAID DECISION WAS IN THE CONTE XT OF THE PROVISIONS UNDER THE INCOME TAX ACT, 1922, UNDER WHICH THE PROCEDURE WITH REGARD TO ASSESSMENT OF NON-RESIDENTS WERE DIFFERENT 13. ON THE APPLICABILITY OF THE BOARD CIRCULAR 23 DT. 23/7/1969, THE CIT(A) WAS OF THE OF THE VIEW THAT THE APPELLANT COLLECTE D FOR ITSELF AND THE NON- RESIDENT ASSOCIATE AND A DEBIT NOTE WAS RAISED FOR THE AMOUNT PAYABLE TO THE WSA SHIPPING (BOMBAY) PVT. LTD. 11 NON-RESIDENT ASSOCIATE FOR ONWARD MOVEMENT. ACCORD ING TO THE CIT(A), THE FREIGHT COLLECTED BY THE APPELLANT ALSO INCLUDED FR EIGHT COLLECTED FOR ONWARDS DESTINATION FOR WHICH NON-RESIDENT. THUS INCOME HA S ACCRUED IN INDIA TO NON-RESIDENT AS THE FREIGHT FOR ONWARD IS COLLECTED BY THE APPELLANT BEHALF OF THE NON-RESIDENT AND THEREFORE THERE WAS DEEMED AGE NCY ESTABLISHED. 14. AGGRIEVED BY THE ORDER OF THE CIT(A) THE APPELL ANTS HAVE FILED THE PRESENT APPEALS BEFORE THE TRIBUNAL. THE GROUND OF APPEAL RAISED IN ALL THE APPEALS ARE COMMON AND FOR THE SAME OF REFERENCE T HE GROUND FROM ITA NO.1174/M/09 IS REPRODUCED. BEING AGGRIEVED BY THE ORDER PASSED BY THE COMMISS IONER OF INCOME TAX (APPEALS) XXXI MUMBAI, YOUR APPELLANT SUBMITS THE FOLLOWING GROUNDS OF APPEAL FOR YOUR KIND CONSIDERATION. THE COMMISSIONER OF INCOME TAX (APPEALS) XXXI MUMBA I ERRED IN TREATING THE APPELLANT AS THE AGENT OF WSA 1994 PTE LTD.- SINGAPORE THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, M ODIFY OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL STATED HEREIN ABOVE. 15. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED C OUNSEL FOR THE APPELLANT AND THE LEARNED D.R. THE LEARNED COUNSEL FOR THE A PPELLANT AT THE OUTSET SUBMITTED THAT SOME OF THE FINDINGS GIVEN BY THE CI T(A) REGARDING THE MANNER IN WHICH THE APPELLANTS WERE CARRYING ON BUS INESS IS FACTUALLY NOT CORRECT. IN THIS REGARD, HE FILED A CHART BEFORE U S HIGHLIGHTING THE FACTUAL MISTAKES IN THE FINDINGS OF THE CIT(A). WE DEAL WI TH THEM LATER. HIS SUBMISSION WAS THAT THE NON-RESIDENT HAD NO BUSINES S CONNECTION IN INDIA. IN THIS REGARD, HE FILED SAMPLE COPIES OF INVOICE, DEBIT NOTES RAISED BY THE NON-RESIDENT. HE ALSO HIGHLIGHTED AS TO HOW THE AP PELLANT IS A MULTI MODAL TRANSPORT OPERATOR AND FILED COPY OF THE MULTIMODAL TRANSPORTATION OF GOODS WSA SHIPPING (BOMBAY) PVT. LTD. 12 ACT, 1993 BY WHICH CAME INTO EFFECT FROM 16.10.1992 AND HOW THE DOCUMENTS OF CONSIGNMENT IN THE CASE OF MULTI MODAL TRANSPORT HAVE TO BE MAINTAINED AND HOW THE MODE OF DOCUMENTATION MAINTA INED BY THE APPELLANT WAS IN ACCORDANCE WITH THOSE PROVISIONS. IN THIS REGARD THE MAIN EMPHASIS OF THE LEARNED COUNSEL FOR THE APPELLANT W AS THE FACT THAT BETWEEN THE CUSTOMER AND INDIA AND THE NON-RESIDENT THERE W AS NO CONNECTION WHATSOEVER. THE APPELLANT ACTED INDEPENDENTLY AND THE TRANSSHIPMENT WAS DONE AT SINGAPORE. THE CONTRACT BY WHICH TRANSSHIP MENT WAS ENTRUSTED TO THE NON-RESIDENT AT SINGAPORE DOES NOT HAVE ANY BUS INESS CONNECTION WITH INDIA. IT WAS HIS SUBMISSION THAT THE APPELLANT W AS NEITHER A DEPENDENT AGENT NOR AN INDEPENDENT AGENT. HE RELIED ON THE F OLLOWING OBSERVATIONS IN THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF BLUE STAR ENGINEERING CO. (BOMBAY) (P) LTD. VS. CIT 73 ITR 28 3 (BOM) THAT TO CONSTITUTE BUSINESS CONNECTION THERE MUST BE AN ACT IVITY OF THE NON-RESIDENT IN THE TAXABLE TERRITORIES HAVING AN INTIMATE AND R EAL RELATION OF A CONTINUOUS CHARACTER WITH THE BUSINESS OF THE NON-RESIDENT AND CONTRIBUTING TO THE EARNING OF PROFITS BY THE NON-RESIDENT IN HIS BUSIN ESS. THE BUSINESS CONNECTION MUST UNDOUBTEDLY BE A COMMERCIAL CONNECT ION BUT ALL COMMERCIAL CONNECTIONS WILL NOT NECESSARILY CONSTIT UTE BUSINESS CONNECTION WITHIN THE MEANING OF THE CONCEPT UNLESS THE COMMER CIAL CONNECTION IS REALLY AND INTIMATELY CONNECTED WITH THE BUSINESS ACTIVITY OF THE NON-RESIDENT IN THE TAXABLE TERRITORIES AND IS CONTRIBUTORY TO THE EARNING OF PROFITS IN THE SAID TRADING ACTIVITY. HE REITERATED THE ARGUMENT BASED ON THE CBDT CIRCULAR. THIS HAS ALREADY BEEN SET OUT IN THE EARLIER PART O F THIS ORDER AND THE SAME IS NOT BEING REPEATED. 16. HIS NEXT SUBMISSION WAS BASED ON THE OBSERVATI ONS OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS.M/S.ELI LILLY & COMPANY (INDIA) PVT.LTD. 312 ITR 225 (SC). THE HONBLE SUPREME COU RT IN THE AFORESAID CASE WAS DEALING WITH THE QUESTION OF LIABILITY TO DEDUC T TAX AT SOURCE ON SALARIES PAID ABROAD. THE ASSESSEES IN THAT CASE WAS JOINT VENTURE COMPANY A FOREIGN WSA SHIPPING (BOMBAY) PVT. LTD. 13 COMPANY AND AN INDIAN COMPANY. THE FOREIGN PARTNER HAD APPOINTED FOUR EXPATRIATES TO THE ASSESSEE IN INDIA. ONLY PART OF THEIR AGGREGATE REMUNERATION WAS PAID IN INDIA BY THE ASSESSEE. IT WAS FOUND THAT THE TOTAL REMUNERATION PAID WAS ONLY ON ACCOUNT OF SERVICES R ENDERED IN INDIA. NO WORK WAS PERFORMED BY THE EXPATRIATES FOR THE FOREI GN COMPANY. IT WAS HELD THAT THE ASSESSEE WAS BOUND TO DEDUCT TAX AT SOURCE IN RESPECT OF THE HOME SALARY PAID ABROAD BY THE FOREIGN COMPANY TO THE EX PATRIATE EMPLOYEES. THE HONBLE SUPREME COURT EXPLAINED THE PURPOSE OF THE PROVISIONS RELATING TO DEDUCTION OF TAX AND SOURCE BY OBSERVING THAT SECTI ON 9(1)(I) OF THE ACT PERFORMS TWO FUNCTIONS : 1. IT DEEMS FIVE CATEGORIE S OF INCOME TO ACCRUE IN INDIA AND APPLIES TO RESIDENTS AND NON-RESIDENTS AL IKE ; BUT IT HAS NO APPLICATION WHERE INCOME ACTUALLY ACCRUES IN INDIA OR IS RECEIVED IN INDIA. 2. IT SPECIFIES THE CATEGORIES OF INCOME IN RESPECT OF WHICH A VICARIOUS LIABILITY IS IMPOSED BY SECTIONS 160 AND 161 ON AN AGENT TO BE ASSESSED IN RESPECT OF A NON-RESIDENT'S INCOME. IN PERFORMING THIS FUNCTION, CLAUSE (I) APPLIES TO THE INCOME OF THE NON-RESIDENT ALONE ; AND CLAUSE (II) SPECIFIES THE CATEGORIES OF INCOME IN RESPECT OF WHICH THE AGENT IS VICARIOUSLY LIABLE EVEN IF THE INCOME ACTUALLY ACCRUES IN INDIA OR IS RECEIVED IN INDIA. THEREAFTER THE HONBLE SUPREME COURT HELD THAT THE INCOME TAX ACT, 1961 IS AN INTEGRATED CODE IN WHICH ONE CANNOT SEGREGATE THE COMPUTATION MACHINER Y FROM THE COLLECTION AND RECOVERY MACHINERY. TO EXPLAIN THE ABOVE, THE HONBLE SUPREME COURT OBSERVED AS FOLLOWS: EXAMPLES SHOWING INTER-LINKING OF VARIOUS PROVIS IONS OF THE 1961 ACT: (A) IT MAY BE NOTE THAT SECTIONS 160(1)(I), 161, 162 AN D 163 ARE MACHINERY SECTIONS. THEY DO NOT AFFECT THE INCIDEN CE OF TAXATION UNDER SECTIONS 4 AND 5 WHICH ARE THE CHARGING SECTI ONS. SECTIONS 160 AND 161 PROVIDE A MACHINERY FOR COLLECTION OF A CHARGE WHICH IS IMPOSED IN GENERAL TERMS ELSEWHERE AND YET SECTI ONS 160 AND 161 ARE THE SECTIONS WHICH LIKE SECTION 201(1) IMPO SES A VICARIOUS LIABILITY ON AN AGENT TO BE ASSESSED IN RESPECT OF THE INCOME OF THE PRINCIPAL. THE LIABILITY IS IMPOSED UNDER SECTIONS 160 AND 161 IN RESPECT OF THE INCOME OF NON-RESIDENT PRINCIPAL AND IT IS ONLY IN RESPECT OF THE INCOME FALLING WITHIN SECTION 9(1) A ND NOT ANY OTHER INCOME. THEREFORE, ONE HAS TO READ SECTION 9(1) WI TH SECTION 160 AND SECTION 161 WHICH ARE MACHINERY SECTIONS (THE L AW AND WSA SHIPPING (BOMBAY) PVT. LTD. 14 PRACTICE OF INCOME TAX BY KANGA & PALKHIVALA, EIGHT H EDITION, AT PP.1268 AND 1269) RELYING ON THE ABOVE OBSERVATIONS, THE LEARNED COUN SEL FOR THE APPELLANT SUBMITTED THAT UNLESS THE INCOME OF THE NON-RESIDEN T FALLS WITHIN THE AMBIT OF SEC.9(1) OF THE ACT, PERSON IN INDIA CANNOT BE R EGARDED AS AGENT OF THE NON-RESIDENT U/S.163 OF THE ACT. 17. THE LEARNED D.R. SUBMITTED THAT THE APPELLANT WAS ONLY A CARGO COLLECTOR. THE APPELLANT COLLECTS FREIGHT FOR TRAN SPORT OF CARGO AND DOES NOT DO THE JOB OF TRANSPORTATION. THE FREIGHT COLLECTE D BY THE APPELLANT IS THEREFORE ON BEHALF OF THE NON-RESIDENT AT LEAST TO THE EXTENT IT RELATES TO TRANSSHIPMENT OF THE CARGO FROM SINGAPORE TO ITS UL TIMATE DESTINATION. THEREFORE IT CAN BE SAID THAT THE NON-RESIDENT HAD A BUSINESS CONNECTION IN INDIA. HE POINTED OUT THAT THE CBDT CIRCULAR ON WH ICH THE LEARNED COUNSEL FOR THE APPELLANT PLACED RELIANCE HAS BEEN WITHDRAW N (VIDE CIRCULAR NO. 7/2009 DATED 22-10-2009). EVEN OTHERWISE HIS SUBMISSION W AS THAT THE SAID CIRCULAR IS APPLICABLE ONLY TO SALE OF GOODS A ND NOT FOR SERVICES RENDERED. IN OTHER RESPECTS, HE PLACED RELIANCE ON THE ORDER OF THE CIT(A). 18. THE LEARNED COUNSEL FOR THE APPELLANT SUBMITTE D THAT THE WITHDRAWAL OF THE CBDT CIRCULAR HAS BEEN HELD TO BE PROSPECTIVE B Y THE ITAT MUMBAI IN THE CASE OF SIEMENS (2010) TAX INDIA ONLINE 109 IT AT (MUM). 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE PROVISIONS REGARDING LIABILITY IN RESPECT OF TAXES PAYABLE BY A NON-RESI DENT HAVE BEEN LAID DOWN IN SEC.160, 161 OF ACT. SEC.160 OF THE ACT LAYS DOWN THAT IN RESPECT OF THE INCOME OF A NON-RESIDENT SPECIFIED IN CLAUSE(I) OF SUB-SECTION (1) OF SECTION 9, THE AGENT OF THE NON-RESIDENT, INCLUDING PERSON WHO IS TREATED AS AN AGENT U/S.163 OF THE ACT WILL BE REGARDED AS REPRESENTATI VE ASSESSEE OF THE NON- RESIDENT. SEC.161 CASTS LIABILITY ON A REPRESENTAT IVE ASSESSEE AND IT LAYS DOWN THAT HIS LIABILITY, AS REGARDS THE INCOME IN R ESPECT OF WHICH HE IS A WSA SHIPPING (BOMBAY) PVT. LTD. 15 REPRESENTATIVE ASSESSEE, SHALL BE SUBJECT TO THE SA ME DUTIES, RESPONSIBILITIES AND LIABILITIES AS IF THE INCOME WERE INCOME RECEIV ED BY OR ACCRUING TO OR IN FAVOUR OF HIM BENEFICIALLY, AND SHALL BE LIABLE TO ASSESSMENT IN HIS OWN NAME IN RESPECT OF THAT INCOME. THE SECTION THUS CREATE S A VICARIOUS LIABILITY, IN SO FAR AS THE AGENT IS CONCERNED, FOR THE TAX WHICH TH E NON-RESIDENT HAS TO PAY. BECAUSE OF THE AFORESAID LIABILITY, AN AGENT OR ANY PERSON WHO APPREHENDS THAT HE MAY BE ASSESSED AS SUCH AN AGENT CAN RETAIN OUT OF THE MONEY PAYABLE TO THE NON-RESIDENT A SUM EQUAL TO THE ESTI MATED LIABILITY. SEC.163 OF THE ACT LAYS DOWN AS TO WHO CAN BE REGARDED AS AGEN T FOR THE PURPOSE OF THE ACT. 163. (1) FOR THE PURPOSES OF THIS ACT, AGENT, IN RELA TION TO A NON- RESIDENT, INCLUDES ANY PERSON IN INDIA ( A ) WHO IS EMPLOYED BY OR ON BEHALF OF THE NON-RESIDE NT; OR ( B ) WHO HAS ANY BUSINESS CONNECTION WITH THE NON-RESI DENT; OR ( C ) FROM OR THROUGH WHOM THE NON-RESIDENT IS IN RECEI PT OF ANY INCOME, WHETHER DIRECTLY OR INDIRECTLY; OR ( D ) WHO IS THE TRUSTEE OF THE NON-RESIDENT; AND INCLUDES ALSO ANY OTHER PERSON WHO, WHETHER A R ESIDENT OR NON- RESIDENT, HAS ACQUIRED BY MEANS OF A TRANSFER, A CA PITAL ASSET IN INDIA : PROVIDED THAT A BROKER IN INDIA WHO, IN RESPECT OF ANY TRANSACTIONS, DOES NOT DEAL DIRECTLY WITH OR ON BEH ALF OF A NON-RESIDENT PRINCIPAL BUT DEALS WITH OR THROUGH A NON-RESIDENT BROKER SHALL NOT BE DEEMED TO BE AN AGENT UNDER THIS SECTION IN RESPECT OF SUCH TRANSACTIONS, IF THE FOLLOWING CONDITIONS ARE FULFI LLED, NAMELY: ( I ) THE TRANSACTIONS ARE CARRIED ON IN THE ORDINARY C OURSE OF BUSINESS THROUGH THE FIRST-MENTIONED BROKER; AND ( II ) THE NON-RESIDENT BROKER IS CARRYING ON SUCH TRANS ACTIONS IN THE ORDINARY COURSE OF HIS BUSINESS AND NOT AS A PR INCIPAL. EXPLANATION. FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSIO N BUSINESS CONNECTION SHALL HAVE THE MEANING ASSIGN ED TO IT IN EXPLANATION 2 TO CLAUSE ( I ) OF SUB-SECTION (1) OF SECTION 9 OF THIS ACT. (2) NO PERSON SHALL BE TREATED AS THE AGENT OF A NO N-RESIDENT UNLESS HE HAS HAD AN OPPORTUNITY OF BEING HEARD BY THE ASSESS ING OFFICER AS TO HIS LIABILITY TO BE TREATED AS SUCH. EXPLN.TO SEC.163(1) WHICH LAYS DOWN THAT THE EXPRES SION BUSINESS CONNECTION SHALL HAVE THE MEANING ASSIGNED TO IT I N EXPLN.2 TO CLAUSE(I) OF WSA SHIPPING (BOMBAY) PVT. LTD. 16 SUB-SECTION (1) OF SECTION 9 OF THE ACT. THIS EXPL ANATION WAS INSERTED BY THE FINANCE ACT, 2003 W.E.F 1-4-2004. EXPLN.-2 TO CLAU SE(I) OF SUB-SECTION (1) OF SEC.9 WAS ALSO SIMULTANEOUSLY INSERTED BY THE FINAN CE ACT, 2003, W.E.F. 1-4- 2004 READS AS FOLLOWS: INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. 9. (1) THE FOLLOWING INCOMES SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA: ( I )ALL INCOME ACCRUING OR ARISING, WHETHER DIRECTLY O R INDIRECTLY, THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA, OR THROUGH OR FROM ANY PROPERTY IN INDIA, OR THROUGH OR FROM ANY ASSET OR SOURCE OF INCOME IN INDIA, OR THROUGH THE TRANSFER OF A CAPITAL ASSET SITUATE IN INDIA. EXPLANATION 2. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT BUSINESS CONNECTION SHALL INCLUDE ANY BUSINESS ACTIVITY CARRIED OUT THROUGH A PERSON WHO, ACTING ON BEHALF OF THE NON-RESIDENT, ( A ) HAS AND HABITUALLY EXERCISES IN INDIA, AN AUTHORITY TO CONCLUDE CONTRACTS ON BEHALF OF THE NON-RESIDENT , UNLESS HIS ACTIVITIES ARE LIMITED TO THE PURCHASE OF GOODS OR MERCHANDISE FOR THE NON-RESIDENT; OR ( B ) HAS NO SUCH AUTHORITY, BUT HABITUALLY MAINTAINS I N INDIA A STOCK OF GOODS OR MERCHANDISE FROM WHICH HE REGULARLY DELIVERS GOODS OR MERCHANDISE ON BEHALF O F THE NON-RESIDENT; OR ( C ) HABITUALLY SECURES ORDERS IN INDIA, MAINLY OR WHO LLY FOR THE NON-RESIDENT OR FOR THAT NON-RESIDENT AND O THER NON- RESIDENTS CONTROLLING, CONTROLLED BY, OR SUBJECT TO THE SAME COMMON CONTROL, AS THAT NON-RESIDENT: PROVIDED THAT SUCH BUSINESS CONNECTION SHALL NOT INCLUDE ANY BUSINESS ACTIVITY CARRIED OUT THROUGH A BROKER, GENERAL COMMISSION AGENT OR ANY OTHER AGENT HAVING AN INDEPENDENT STATUS, IF SUCH BROKER, GENERAL COMMISS ION AGENT OR ANY OTHER AGENT HAVING AN INDEPENDENT STAT US IS ACTING IN THE ORDINARY COURSE OF HIS BUSINESS : PROVIDED FURTHER THAT WHERE SUCH BROKER, GENERAL COMMISSION AGENT OR ANY OTHER AGENT WORKS MAINLY OR WHOLLY ON BEHALF OF A NON-RESIDENT (HEREAFTER IN TH IS PROVISO REFERRED TO AS THE PRINCIPAL NON-RESIDENT) OR ON BE HALF OF SUCH NON-RESIDENT AND OTHER NON-RESIDENTS WHICH ARE CONTROLLED BY THE PRINCIPAL NON-RESIDENT OR HAVE A CONTROLLING INTEREST IN THE PRINCIPAL NON-RESIDENT OR ARE SUBJECT TO THE SAME COMMON CONTROL AS THE PRINCIPAL NON- WSA SHIPPING (BOMBAY) PVT. LTD. 17 RESIDENT, HE SHALL NOT BE DEEMED TO BE A BROKER, GE NERAL COMMISSION AGENT OR AN AGENT OF AN INDEPENDENT STAT US. THE EXPLANATION TO SEC.163(1) AND EXPLN.2 TO SEC.9( 1)(I) WHICH ARE APPLICABLE ONLY FROM 1-4-2004 WOULD NOT BE RELEVANT FOR THE PR ESENT CASES WHICH RELATES TO ASSESSMENT YEARS PRIOR TO 04-05. EVEN AS PER TH E EXPLANATION-2 TO SEC.9(1)(I) OF THE ACT, THE TERM BUSINESS CONNECTI ON HAS ONLY BEEN DEFINED TO INCLUDE CERTAIN BUSINESS ACTIVITY. THE TERM BUS INESS CONNECTION CANNOT THEREFORE BE CONFINED TO ONLY BUSINESS ACTIVITY AS MENTIONED IN EXPLN.-2 TO SEC.9(1)(I) OF THE ACT. THEREFORE THE EXPRESSION BUSINESS CONNECTION AS USED IN SEC.163(1)(B) AND SEC.9(1)(I) OF THE ACT HA S ALSO TO BE UNDERSTAND AS IT WAS EXPLAINED IN VARIOUS DECIDED CASES, PRIOR TO THE INSERTION OF THE AFORESAID EXPLANATION. 21. WE HAVE ALREADY SEEN THE MANNER IN WHICH THE A PPELLANT CARRIES ON ITS BUSINESS. THE SAME HAS BEEN EXPLAINED IN PARA-4 OF THIS ORDER. THE CIT(A) HAS GIVEN A FINDING THAT THE APPELLANT CHARGES ITS CUSTOMERS FREIGHT PAYABLE INCLUSIVE OF THE FREIGHT FROM THE PORT OF TRANSSHI PMENT TO THE ULTIMATE DESTINATION AND THIS IS DONE WITH THE TACIT UNDERST ANDING WITH THE NON- RESIDENT WHO DOES TRANSSHIPMENT OUTSIDE INDIA. ACC ORDING TO THE CIT(A), THE AFFAIRS OF THE APPELLANT AND THE NON-RESIDENT APPEA R TO BE IN A WAY THAT THE TARIFF CHARGED BY THE NON-RESIDENT BUSINESS ASSOCIA TE FOR TRANSSHIPMENT DOES NOT INCLUDE THE TARIFF FROM THE INDIAN PORT TO THE TRANSSHIPMENT PORT. IT HAS BEEN THE STAND OF THE APPELLANT THAT THE NON-RESIDE NT IS NOT A PARTY TO THE TERMS OF CONTRACT BETWEEN THE APPELLANT AND THE EXP ORTER. SIMILARLY THE EXPORTER IS NOT A PARTY TO THE TERMS OF THE CONTRAC T BETWEEN THE APPELLANT AND NON-RESIDENT FOR TRANSSHIPMENT OF THE CARGO. F ROM THESE FACTS IT CANNOT BE SAID THAT THERE WAS ONLY A PRINCIPAL TO PRINCIPA L RELATIONSHIP AS BETWEEN THE APPELLANT AND THE NON-RESIDENT. THIS IS BECAUS E THE TERMS OF THE AGREEMENT BETWEEN THE APPELLANT AND THE NON-RESIDEN T HAVE NOT BEEN BROUGHT ON RECORD. FURTHER WE ALSO DO NOT KNOW THE SHAREHOLDING PATTERN OF WSA SHIPPING (BOMBAY) PVT. LTD. 18 THE APPELLANT. THIS COULD BE MATERIAL FOR ASCERTAI NING THE CONTROL THAT THE NON-RESIDENTS MIGHT EXERCISE ON THE APPELLANT. THO UGH THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE APPELLANTS WERE ACTIN G AS AGENTS WHEN THEY DEALT WITH THE INDIAN CUSTOMER SENDING CARGO, THERE IS EQUALLY NO MATERIAL TO SHOW THAT THE APPELLANTS WERE DEALING WITH THE NON- RESIDENTS ONLY ON A PRINCIPAL TO PRINCIPAL BASIS. IT CANNOT BE SAID WI TH CERTAINTY THAT THE EXPORTER IN INDIA HAS NO KNOWLEDGE ABOUT THE TRANSS HIPMENT AND THE APPELLANT UTILIZING THE SERVICES OF NON-RESIDENT FO R ONWARD MOVEMENT OF THE CARGO TO THE ULTIMATE DESTINATION. IN THE ABSENCE OF THE TERMS OF THE AGREEMENT BETWEEN THE APPELLANT AND THE NON-RESIDEN T IT CANNOT BE SAID THAT THE NON-RESIDENT HAD NO CONTROL OVER THE FREIGHT CH ARGES COLLECTED BY THE APPELLANTS OR THE TERMS OF CONTRACT AS BETWEEN THE APPELLANT AND THE EXPORTER FROM INDIA. AS PER THE CONDITIONS OF TRAN SSHIPMENT AS GIVEN BY M/S. WNS 1994 PTE LTD., SINGAPORE, ONE OF THE NON-R ESIDENT, IT IS SEEN THAT THE NON-RESIDENT CHARGES ARE EX-SINGAPORE. ANOTHER CONDITION IS THAT BECAUSE OF REGULATIONS IMPOSED AT DIFFERENT PORTS, THE CLIENTS ARE REQUESTED TO CHECK WITH THE TRANSSHIPPER FOR ACCEPTANCE OF AN Y HAZARDOUS CARGO BEFORE ACCEPTING ANY SHIPMENT. SIMILARLY THE NON-RESIDENT HAS IMPOSED A CONDITION THAT ONLY CERTAIN CATEGORIES OF GOODS ARE ALLOWED F OR TRANSSHIPMENT AND THEREFORE ONE HAS TO CHECK WITH THEM AS TO WHETHER THE GOODS PROPOSED TO BE SENT FOR TRANSSHIPMENT ARE ACCEPTABLE FOR TRANSSHIP MENT. THESE TERMS HAVE BEEN RELIED UPON BY THE CIT(A) TO GIVE A FINDING TH AT THE NON-RESIDENTS CONSENT IS REQUIRED FOR ACCEPTING CARGO BY THE APPE LLANT. IT IS ALSO A FACT THAT THE APPELLANT HAVE NOT PLACED ON RECORD THE TERMS O F THE CONTRACT BETWEEN THE APPELLANT AND THE NON-RESIDENT. IN SUCH CIRCUMS TANCES IN OUR VIEW THE FINDING OF THE CIT(A) IN THIS REGARD CANNOT BE SAID TO BE BASELESS. IT CANNOT ALSO BE SAID THAT THE NON-RESIDENT HAS NO CONTROL O VER THE MANNER IN WHICH THE APPELLANT ACCEPTS THE CARGO AND THAT THE NON-RE SIDENT ONLY UNDERTAKES THE CARGO FROM THE PLACE OF TRANSSHIPMENT TILL THE PORT OF DESTINATION AND CHARGES FEE FOR DOING SO. IT IS ALSO A FACT THAT T HE APPELLANT HAS BEEN DEALING WITH THE NON-RESIDENT OVER A PERIOD OF TIME AND IT WAS NOT A CASE OF SINGLE, WSA SHIPPING (BOMBAY) PVT. LTD. 19 ISOLATED OR SPORADIC TRANSACTIONS. IN THE BACKGROU ND OF THE ABOVE FACTS, LET US EXAMINE THE QUESTION AS TO WHETHER THE APPELLANT HAD ANY BUSINESS CONNECTION WITH THE NON-RESIDENT. 22. BEFORE WE DEAL WITH THE CASE LAWS ON THE SUBJE CT RELIED UPON BY THE PARTIES (WHICH WERE DECIDED UNDER THE 1922 ACT), WE HAVE TO HIGHLIGHT THE PROVISIONS BY WHICH A PERSON IN INDIA WAS TREATED A S AGENT OF NON-RESIDENT AND MADE LIABLE FOR TAXES PAYABLE BY THE NON-RESIDE NT UNDER THE INCOME TAX ACT, 1922( 1922 ACT). THESE ARE CONTAINED IN SEC.42 AND 43 OF THE 1922 ACT, WHICH READ AS FOLLOWS: SEC.42(1) IN THE CASE OF ANY PERSON RESIDING OUT OF BRITISH I NDIA, ALL PROFITS OR GAINS ACCRUING OR ARISING TO SUCH PE RSON, WHETHER DIRECTLY OR INDIRECTLY, THOUGH OR FROM ANY BUSINESS CONNECTION OR PROPERTY IN BRITISH INDIA, SHALL BE DEEMED TO BE IN COME ACCRUING OR ARISING WITHIN BRITISH INDIA, AND SHALL BE CHARGEAB LE TO INCOME-TAX IN THE NAME OF THE AGENT OF ANY SUCH PERSON, AND SU CH AGENT SHALL BE DEEMED TO BE, FOR ALL THE PURPOSES OF THIS ACT, THE ASSESSEE IN RESPECT OF SUCH INCOME-TAX: PROVIDED THAT ANY ARREARS OF TAX MAY BE RECOVERED A LSO IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT FROM ANY ASSETS OF THE NON-RESIDENT PERSON WHICH ARE, OR MAY AT ANY TIME C OME, WITHIN BRITISH INDIA. SEC.43. ANY PERSON EMPLOYED BY OR ON BEHALF OF A PERSON RES IDING OUT OF BRITISH INDIA, OR HAVING ANY BUSINESS CONNEC TION WITH SUCH PERSON, OR THROUGH WHOM SUCH PERSON IS IN THE RECEI PT OF ANY INCOME, PROFITS OR GAINS UPON WHOM THE INCOME-TAX O FFICER HAS CAUSED A NOTICE TO BE SERVED OF HIS INTENTION OF TR EATING HIM AS THE AGENT OF THE NON-RESIDENT PERSON SHALL, FOR ALL THE PURPOSES OF THIS ACT BE DEEMED TO BE SUCH AGENT: PROVIDED THAT NO PERSON SHALL BE DEEMED TO BE THE A GENT OF A NON- RESIDENT PERSON, UNLESS HE HAD AN OPPORTUNITY OF BE ING HEARD BY THE INCOME-TAX OFFICER AS TO HIS LIABILITY. 23. UNDER THE 1922 ACT, THERE WERE NO SEPARATE PRO CEEDINGS BY WHICH A PERSON IN INDIA IS TREATED AS AGENT OF NON-RESIDENT . UNDER 1922 ACT, IN SECTION 42, IT WAS PROVIDED THAT INCOME OF THE NON- RESIDENT COULD BE WSA SHIPPING (BOMBAY) PVT. LTD. 20 ASSESSED EITHER IN HIS NAME OR IN THAT OF HIS AGENT , IF THERE WAS A BUSINESS CONNECTION. HOWEVER, UNDER THE 1961 ACT, AS NOTED A BOVE, LIABILITY OF A NON- RESIDENT IS FIXED AS PER SEPARATE PROVISION AND NOT CLUBBED WITH AGENT AS WAS DONE U/S 42 OF THE OLD ACT. UNDER THE INCOME TAX ACT, 1961, THE PROVISIONS CONTEMPLATE SEPARATE PROCEEDINGS FOR TREATING A PER SON IN INDIA AS AGENT OF A NON-RESIDENT AND A RIGHT OF APPEAL TO THE PERSON SO TREATED AS AGENT OF NON- RESIDENT. THESE ARE CONTAINED IN SEC.163 OF THE AC T, WHICH WE HAVE ALREADY REFERRED IN THE EARLIER PARAGRAPHS. UNDER THE PRO CEDURE FOR TREATING A PERSON IN INDIA AS AGENT OF NON-RESIDENT, IT DOES N OT APPEAR THAT THE LIABILITY OF NON-RESIDENT TO TAX HAS TO BE ESTABLISHED. THE PROVISIONS OF SEC.163 DO NOT LAY DOWN ANY SUCH CONDITION. THE PURPOSE OF SE C.163 IS TO ENABLE THE REVENUE TO PROCEED AGAINST THE PERSON IN INDIA WHO IS REGARDED AS AGENT OF A NON-RESIDENT, SO THAT VICARIOUS LIABILITY CAN BE IM POSED ON HIM, IF IT IS FOUND THAT THE INCOME OF NON-RESIDENT IS CHARGEABLE TO TA X IN INDIA. THE INCOME OF NON-RESIDENT WHETHER IS CHARGEABLE TO TAX OR NOT, A ND DETERMINATION OF INCOME SO LIABLE TO TAX ARE TO BE DETERMINED IN SEP ARATE ASSESSMENT PROCEEDINGS IN WHICH THE PERSON IN INDIA WHO IS TRE ATED AS AGENT OF THE NON- RESIDENT, WILL HAVE FULL OPPORTUNITY AND RIGHT OF A PPEAL, AS IS AVAILABLE TO ANY OTHER ASSESSEE. AT THE STAGE OF TREATING A PERSON IN INDIA AS AGENT OF A NON- RESIDENT, THE LIABILITY TO TAX OF THE NON-RESIDENT NEED NOT BE ESTABLISHED. IF ANY OF THE PARAMETERS LAID DOWN IN SEC.163(1) (A) T O (D) ARE SATISFIED, THEN THE PERSON IN INDIA CAN BE TREATED AS AGENT OF THE NON -RESIDENT. 24. THE LEARNED COUNSEL FOR THE APPELLANT HAD RELIE D ON COMMENTARY ON INCOME TAX ACT, BY SAMPATH IYENGAR PAGE 8786 10 TH EDITION SYNOPSIS-9, WHEREIN IT HAS BEEN OPINED THAT A PERSON IN INDIA C ANNOT BE TREATED AS AGENT IF THERE IS NO LIABILITY ON THE PART OF THE NON-RES IDENT TO PAY TAX. THE CASES DIGESTED IN THIS REGARD WERE NARENDRA NARAYAN CHOWD HURY VS. PROVINCE OF ASSAM 17 ITR 243 (CAL) WHICH IS A CASE UNDER THE 19 22 ACT. THE NEXT CASE IS CIT VS. TOSHOKU LTD. 125 ITR 525 (SC) WHICH IS A CASE OF ASSESSMENT AND NOT A CASE U/S.163(1) OF THE ACT. THE NEXT CASE IS ONE OF BARENDRA PRASAD WSA SHIPPING (BOMBAY) PVT. LTD. 21 RAY VS. ITO 129 ITR 295 (SC) WHICH IS A CASE U/S.16 3(1) OF THE ACT, WHERE THE PERSON IN INDIA WHO WAS TREATED AS AGENT OF A N ON-RESIDENT, FILED A WRIT PETITION CHALLENGING THE ORDER U/S.163 OF THE ACT, WAS DISMISSED. ON FURTHER APPEAL THE HONBLE SUPREME COURT HELD THAT THE NON- RESIDENT HAD BUSINESS CONNECTION IN INDIA. WE HAVE PERUSED THE SAID DECI SION AND WE DO NOT FIND ANY PROPOSITION THAT IF THE NON-RESIDENT IS NOT LIA BLE TO TAX THEN THE PERSON IN INDIA CANNOT BE TREATED AS AGENT OF NON-RESIDENT. NO SUCH INFERENCE CAN BE DRAWN FROM THE FACT THAT THE LIABILITY OF THE NON-R ESIDENT TO TAX WAS FOUND TO EXIST IN THAT CASE. THE NEXT CASE IS THAT OF CIT V S. NEW CONSOLIDATED GOLD FIELDS LTD. 143 ITR 599 (PAT) WHICH IS A CASE WHICH RELATES TO AY 60-61, WHEREIN IT WAS HELD THAT IN ORDER TO BRING WITHIN T HE NET OF TAXATION UNDER THE I.T. ACT THE INCOME DERIVED BY A NON-RESIDENT, IT HAS TO BE ESTABLISHED THAT THERE WAS AN ELEMENT OF CONTINUITY BETWEEN THE BUSINESS OF THE NON- RESIDENT AND THE ACTIVITY IN THE TAXABLE TERRITORIE S. ON APPEAL BY THE REVENUE AGAINST THE DECISION OF THE HONBLE PATNA HIGH COUR T, THE HONBLE SUPREME COURT IN ACIT VS. NEW CONSOLIDATED GOLD FIELDS LTD. 257 ITR 770 (SC) FOUND THAT THE ISSUE RELATES TO ASSESSMENT YEAR 1960-61, MORE THAN FORTY YEARS OLD AND THAT IN ABSENCE OF DETAILS AS TO THE SERVICE RE NDERED IN INDIA, WHEN SUCH SERVICE WAS CARRIED OUT BOTH IN INDIA AND ENGLAND, IT WAS TOO LATE AFTER A LAPSE OF ALMOST FORTY YEARS TO ATTEMPT TO DETERMINE THE EXTENT OF ACTIVITIES IN INDIA AND THE CONSEQUENT LIABILITY. THIS CASE IS NO T AN AUTHORITY FOR THE PROPOSITION CANVASSED BY THE LEARNED COUNSEL FOR TH E APPELLANT BEFORE US. THE NEXT CASE IS THAT OF SHRI HAZOORA SINGH VS. CIT 160 ITR 746 (P& H) IS A CASE ARISING OUT OF AN ASSESSMENT AND NOT AGAINST O RDER U/S.163 OF THE ACT. THE CASE OF T I & M SALES LTD. 151 ITR 286 (CAL) AN D CIT VS. TALBOT TIM SALES LTD. 175 ITR 437 (CAL) ARE CASES ARISING UNDE R THE 1922 ACT. FOR THE VERY SAME REASON, THE DECISIONS IN THE CASE OF BLUE STAR ENGINEERING (SUPRA) AND ABDULLABHAI KADER (SUPRA) ARE ALSO NOT RELEVANT TO THE PROPOSITION CANVASSED BY THE LEARNED COUNSEL FOR THE APPELLANT. THUS THE CASES RELIED UPON BY THE LEARNED COUNSEL FOR THE APPELLANT DOES NOT SUPPORT THE PLEA RAISED BY HIM. WSA SHIPPING (BOMBAY) PVT. LTD. 22 25. THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF ELI LILLY (SUPRA) IS AGAIN QUOTED OUT OF CONTEXT BY THE LEARNED COUNS EL FOR THE APPELLANT. WE DISAGREE WITH THE STAND TAKEN BY THE LEARNED COUNSE L FOR THE APPELLANT FOR THE FOLLOWING REASONS. FIRSTLY, THE HONBLE SUPREM E COURT WAS NOT DEALING WITH A CASE WHETHER A PERSON IN INDIA CAN BE APPOIN TED AS AGENT OF A NON- RESIDENT. SECONDLY, THE HONBLE SUPREME COURT WAS EXPLAINING THE CONCEPT OF VICARIOUS LIABILITY AND HOW THE MACHINERY PROVIS IONS LIKE DEDUCTION OF TAX AT SOURCE AND LIABILITY OF PERSONS IN INDIA WHO ARE REGARDED AS AGENTS OF NON- RESIDENT HAVE TO BE READ AS PART OF THE CHARGING PR OVISION. THAT DOES NOT MEAN THAT FOR REGARDING A PERSON IN INDIA AS AGENT OF NON-RESIDENT, THE LIABILITY OF NON-RESIDENT TO TAX HAS TO BE ESTABLIS HED. THE PROVISIONS OF SEC.163 DO NOT LAY DOWN ANY SUCH CONDITION. THE PU RPOSE OF SEC.163 IS TO ENABLE THE REVENUE TO PROCEED AGAINST THE PERSON IN INDIA WHO IS REGARDED AS AGENT OF A NON-RESIDENT, SO THAT VICARIOUS LIABILIT Y CAN BE IMPOSED ON HIM, IF IT IS FOUND THAT THE INCOME OF NON-RESIDENT IS CHAR GEABLE TO TAX IN INDIA. THE INCOME OF NON-RESIDENT WHETHER IS CHARGEABLE TO TAX OR NOT, AND DETERMINATION OF INCOME SO LIABLE TO TAX ARE TO BE DETERMINED IN SEPARATE ASSESSMENT PROCEEDINGS IN WHICH THE PERSON IN INDIA WHO IS TREATED AS AGENT OF THE NON-RESIDENT, WILL HAVE FULL OPPORTUNITY AND RIGHT OF APPEAL AS IS AVAILABLE TO ANY OTHER ASSESSEE. AT THE STAGE OF T REATING A PERSON IN INDIA AS AGENT OF A NON-RESIDENT, THE LIABILITY TO TAX OF TH E NON-RESIDENT NEED NOT BE CONCLUSIVELY ESTABLISHED. 26. NOW WE WILL EXAMINE AS TO WHETHER THE PARAMETE RS LAID DOWN IN SEC.163(1)(B) OF THE ACT ARE SATISFIED IN THE CASE OF THE APPELLANT. THE TERM BUSINESS CONNECTION AS EXPLAINED IN VARIOUS JUDIC IAL PRONOUNCEMENTS HAVE TO BE SEEN. IN R.D. AGARWAL AND CO.(SUPRA), T HE HONBLE SUPREME COURT HELD AS FOLLOWS: BUSINESS CONNECTION CONTEMPLATED BY SECTION 42 INV OLVES A RELATION BETWEEN A BUSINESS CARRIED ON BY A NON-RESIDENT WHI CH YIELDS PROFITS WSA SHIPPING (BOMBAY) PVT. LTD. 23 OR GAINS AND SOME ACTIVITY IN THE TAXABLE TERRITORI ES WHICH CONTRIBUTES DIRECTLY OR INDIRECTLY TO THE EARNING OF THOSE PROF ITS OR GAINS. IT PREDICATES AN ELEMENT OF CONTINUITY BETWEEN THE BUS INESS OF THE NON- RESIDENT AND THE ACTIVITY IN THE TAXABLE TERRITORIE S, A STRAY OR ISOLATED TRANSACTION NOT BEING NORMALLY REGARDED AS A BUSINE SS CONNECTION. BUSINESS CONNECTION MAY TAKE SEVERAL FORMS: IT MAY INCLUDE CARRYING ON A PART OF THE MAIN BUSINESS OR ACTIVITY INCIDENT AL TO THE MAIN BUSINESS OF THE NON-RESIDENT THROUGH AN AGENT, OR I T MAY MERELY BE A RELATION BETWEEN THE BUSINESS OF THE NON-RESIDENT A ND THE ACTIVITY IN THE TAXABLE TERRITORIES, WHICH FACILITATES OR ASSIS TS THE CARRYING ON OF THAT BUSINESS. IN SUCH CASES THE QUESTION WHETHER T HERE IS BUSINESS CONNECTION FROM OR THROUGH WHICH INCOME, PROFITS OR GAINS ARISE OR ACCRUE TO A NON-RESIDENT MUST BE DETERMINED UPON TH E FACTS AND CIRCUMSTANCES OF THE CASE. THE EXPRESSION 'BUSINESS CONNECTION' POSTULATES A REAL AND INTIMATE RELATION BETWEEN THE TRADING ACTIVITY CARRIED ON OUTSIDE THE TAXABLE TERRITORIES AND THE TRADING ACTIVITY WITHIN THE TERRITORIES, THE RELATION BETWEEN THE TW O CONTRIBUTING TO THE EARNING OF INCOME BY THE NON-RESIDENT IN HIS TRADIN G ACTIVITY. 27. WE ALSO NOTICE A RELEVANT OBSERVATION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ABDULLABHAI KADER (SUPRA), AT PAGE 2 53 11 TH LINE FROM THE BOTTOM, WHICH IS AS FOLLOWS .NOW, IT IS NO USE CONCEALING THE FACT THAT THE EX PRESSION ' ANY BUSINESS CONNECTION IN THE TAXABLE TERRITORIES ' IS BY NO MEANS A VERY PRECISE EXPRESSION CAPABLE OF BEING CONSTRUED WITH ANY PRECISION. IT MAY BE THAT THE LEGISLATURE ADVISEDLY USED A VAGUE AND UNCERTAIN EXPRESSION SO THAT THE INTERPRETATION SHOULD NOT BE RESTRICTED TO ANY NARROW LIMITS. BUT.. 28. WE HAVE ALREADY SEEN THAT THE TERM 'BUSINESS C ONNECTION' IS SO BROAD IN SCOPE. EXPLANATION 2 INSERTED BELOW SEC. 9(1) BY THE FINANCE ACT, 2003 WITH EFFECT FROM 1-4-2004 EXPANDS THE SCOPE OF THE EXPRE SSION. THOUGH THE EXPLANATION DOES NOT APPLY TO THE YEAR UNDER CONSID ERATION, EVEN APPLYING THE TESTS LAID DOWN IN DECIDED CASES, THE ISSUE HAS TO BE RESOLVED AGAINST THE ASSESSEE. THERE WAS AN ELEMENT OF CONTINUITY BETWEE N THE BUSINESS OF THE NON-RESIDENT AND THE ACTIVITY IN THE TAXABLE TERRIT ORY. A MERE RELATION BETWEEN THE BUSINESS OF THE NON-RESIDENT AND THE AC TIVITY IN INDIA WHICH FACILITATES OR ASSISTS THE CARRYING ON OF THE BUSIN ESS OF THE NON-RESIDENT WOULD RESULT IN A BUSINESS CONNECTION. WE ARE OF T HE VIEW THAT APPLYING WSA SHIPPING (BOMBAY) PVT. LTD. 24 THESE TESTS TO THE PRESENT CASE, IT MUST BE HELD TH AT THERE WAS A BUSINESS CONNECTION. THE BUSINESS OF THE NON-RESIDENT WAS TR ANSHIPMENT OF CARGO AND THE APPELLANT ENGAGED THEIR SERVICES FOR SHIPMENT O F CARGO FROM INDIA TO A DESTINATION WHICH THE APPELLANT COULD NOT REACH WIT HOUT THE ASSISTANCE OF THE TRANSHIPMENT THROUGH THE NON-RESIDENT. THE APP ELLANT CANNOT SEGREGATE THE BUSINESS ACTIVITY OF SHIPMENT OF CARGO AS ONE U PTO THE PORT OF TRANSHIPMENT AND THE OTHER FROM THE PORT OF TRANSHI PMENT TO THE PORT OF FINAL DESTINATION. BOTH THESE ACTIVITIES ARE INTEGRATED ACTIVITIES. THE ABSENCE OF PRIVITY OF CONTRACT BETWEEN THE CUSTOMER IN INDIA A ND THE NON-RESIDENT WILL NOT BE A GROUND TO HOLD THAT THE NON-RESIDENT DID N OT HAVE BUSINESS CONNECTION IN INDIA. THE TRANSACTION AS BETWEEN T HE PERSON IN INDIA AND THE CUSTOMER IN INDIA, WOULD NOT BE COMPLETE UNLESS THE CARGO REACHES THE FINAL PORT OF DESTINATION. ALL THESE FACTS IN OUR OPINION ARE SUFFICIENT TO JUSTIFY THE CONCLUSION THAT THERE WAS A BUSINESS CO NNECTION WITHIN THE MEANING OF SEC. 163(1)(B) AS WELL AS SEC.9(1)(I) OF THE ACT. WE UPHOLD THE CONCLUSION OF THE INCOME-TAX AUTHORITIES TO THIS EF FECT. 29. WE ARE ALSO OF THE VIEW THAT THE PARAMETERS LA ID DOWN IN SEC.163(1)(C) OF THE ACT ARE SATISFIED. UNDER THE ABOVE PROVISIONS AGENT INCLUDES A PERSON FROM OR THROUGH WHOM THE NON-RESIDENT IS IN RECEIPT OF ANY INCOME, WHETHER DIRECTLY OR INDIRECTLY. THE APPELLANTS BASED ON TH E DEBIT NOTES RAISED BY THE NON-RESIDENT MAKE PAYMENT FOR TRANSHIPMENT OF CARGO . THUS THE NON- RESIDENT IS IN RECEIPT OF INCOME FROM THE APPELLANT . IT IS NOT A CASE WHERE THE NON-RESIDENT IS IN RECEIPT OF INCOME THROUGH THE APPELLANT BUT FROM THE APPELLANT. WE ALSO DO NOT FIND ANY QUALIFICATION T HAT INCOME SO RECEIVED FROM THE NON-RESIDENT FROM THE RESIDENT IN INDIA SHOULD BE FOUND TO BE CHARGEABLE TO TAX AT THE TIME WHEN THE PERSON IN INDIA IS TREA TED AS AGENT OF THE NON- RESIDENT. WE SEE NO REASON AS TO WHY THIS CLAUSE S HOULD NOT APPLY TO THE CASE OF THE APPELLANT. FOR THE REASONS GIVEN ABOVE , WE UPHOLD THE ORDERS OF CIT(A) CONFIRMING THE ORDER OF THE AO PASSED U/S.1 63 OF THE ACT. ALL THESE APPEALS BY THE ASSESSEE ARE ACCORDINGLY DISMISSED. WSA SHIPPING (BOMBAY) PVT. LTD. 25 30. WE SHALL NOW TAKE UP THE APPEALS BY THE ASSESS EES THROUGH THEIR REPRESENTATIVE ASSESSEE VIZ., THE NON-RESIDENTS WSA SHIPPING (BOMBAY) P. LTD.RE-WSA LINES INTERNATIONAL LTD., HONG KONG, WSA SHIPPING (BOMBAY) P. LTD.RE-FORDABLE GROUP LTD.-HONG KONG, MUMBAI IN ITA NO. 1784 AND 1785/MUM/09 RESPECTIVELY FOR AY 03-04. 31. WE HAVE ALREADY SEEN THAT THE APPELLANTS WERE TREATED AS AGENTS OF THE NON-RESIDENTS. IN RESPECT OF TWO NON-RESIDENTS REF ERRED TO IN THE EARLIER PARAGRAPH, THE AO INITIATED PROCEEDINGS AGAINST THE APPELLANT AS REPRESENTATIVE ASSESSEE OF THE NON-RESIDENTS. THE APPELLANTS CONTENDED BEFORE THE AO, THAT NO INCOME ACCRUED OR AROSE TO T HE NON-RESIDENTS IN INDIA AND THEREFORE THE QUESTION OF BRINGING TO TAX ANY A MOUNT RECEIVED FROM THE NON-RESIDENTS FROM THE APPELLANT DOES NOT ARISE FOR CONSIDERATION. THE AO HOWEVER REJECTED THE STAND OF THE APPELLANT AND REL YING ON THE FINDINGS GIVEN IN THE PROCEEDINGS U/S.163 OF THE ACT, HE HELD THAT INCOME ACCRUED AND AROSE TO THE NON-RESIDENTS IN INDIA AND CONSEQUENTL Y HELD THAT THE INCOME RECEIVED BY THE NON-RESIDENTS FROM THE APPELLANTS A RE CHARGEABLE TO TAX IN INDIA. THE AO FOUND THAT A SUM OF RS.16,82,025 AND A SUM OF RS.5,33,628 WAS THE OUTWARD REMITTANCES TO WSA LINES INTERNATIO NAL LTD., HONG KONG AND FORDABLE GROUP LTD.-HONG KONG, RESPECTIVELY. H E HELD THAT THE DETAILS OF EXPENSES HAD NOT BEEN FURNISHED AND IN THE CIRCU MSTANCES HE ESTIMATED 10% OF THE FREIGHT INCOME EARNED BY THE NON-RESIDEN TS REFERRED TO ABOVE AS BUSINESS INCOME OF THE NON-RESIDENTS AND BROUGHT TH E SAME TO TAX THROUGH THE APPELLANT AS REPRESENTATIVE ASSESSEE OF THE NON -RESIDENTS. THE CIT(A) CONFIRMED THE ORDERS OF THE AO BUT REDUCED THE ESTI MATION OF INCOME TO 7.5% OF THE OUTWARD REMITTANCES TO THE NON-RESIDENTS INS TEAD OF 10% DETERMINED BY THE AO. THE CIT(A) ALSO HELD THAT THERE WAS NO TREATY FOR AVOIDANCE OF DOUBLE TAXATION BETWEEN INDIA AND HONGKONG AND THER EFORE THE BENEFIT OF ANY TREATY PROVISIONS COULD NOT ALSO BE AVAILED BY THE NON-RESIDENTS. WSA SHIPPING (BOMBAY) PVT. LTD. 26 AGGRIEVED BY THE ORDERS OF THE CIT(A), THE APPELLAN TS HAVE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 32. BEFORE US, THE LEARNED COUNSEL FOR THE APPELLA NT SUBMITTED THAT THE FACTS OF THE APPELLANTS CASE IS IDENTICAL TO THE CASE DE CIDED BY THE HONBLE ITAT IN THE CASE OF ACIT VS. DHL OPERATIONS B.V. 2005 (142 TAXMAN 1 (TRI) (BOM). THE LEARNED COUNSEL FOR THE APPELLANT SUBMITTED BEF ORE US THAT THE APPELLANT WAS TRANSPORTING CARGO FROM INDIA AND WAS NOT DOING ANY INWARD TRANSPORT OF CARGO TO INDIA. IN THE CASE OF DHL OPERATIONS B .V.(SUPRA) THE FACTS WERE AS FOLLOWS. THE ASSESSEE NON-RESIDENT ENTERED INTO AN AGREEMENT DATED 19/5/1989 WITH AIRFREIGHT LTD., AN INDIAN COMPANY, WITH RETROSPECTIVE EFFECT FROM 1/1/1989. AS PER THE TERMS OF THE NEW AGREEME NT, IT WAS PROVIDED THAT AIRFREIGHT LTD. WOULD RENDER SERVICES TO THE ASSESS EE AS FORWARDERS, COURIERS AND TRANSPORTERS OF URGENT BUSINESS DOCUMENTS AND S MALL PARCELS IN INDIA AND THAT THE ASSESSEE WILL RENDER SUCH SERVICES TO AIRFREIGHT LTD. OUTSIDE INDIA. IN THE AGREEMENT IT WAS SPECIFICALLY PROVID ED THAT THE SERVICES WOULD BE RENDERED ON A PRINCIPAL TO PRINCIPAL BASIS. T HE NEW AGREEMENT DATED 19/5/1989 BETWEEN THE ASSESSEE AND AIRFREIGHT LTD. WAS GRANTED PERMISSION UNDER SECTION 27 OF THE FOREIGN EXCHANGE REGULATION ACT BY THE DEPARTMENT OF ECONOMIC AFFAIRS, MINISTRY OF FINANCE. IT WAS CLAIMED BY THE ASSESSEE THAT AS PER THE AGREEMENT IT WAS REQUIRED TO DISPAT CH THE DOCUMENTS; SMALL PARCELS, ETC. FROM OUTSIDE INDIA FOR DELIVERY IN IN DIA TO DELHI OR MUMBAI. THE CLEARANCE, CONSOLIDATION AND DISTRIBUTION OF THESE CONSIGNMENTS IN INDIA WOULD BE DONE BY AIRFREIGHT LTD. SIMILARLY CONSIG NMENTS FOR DELIVERY OUTSIDE INDIA ARE SENT BY AIRFREIGHT LTD. TO DUBAI, LONDON AND SINGAPORE, DEPENDING UPON THE ULTIMATE DESTINATION OF THE CONSIGNMENTS. THE CLEARANCE, CONSOLIDATION AND FORWARDING OF THESE CONSIGNMENTS THEREAFTER TO THEIR ULTIMATE DESTINATION IS REQUIRED TO BE DONE BY THE ASSESSEE. IT WAS THE CLAIM OF THE ASSESSEE THAT THEY DO NOT CARRY ON ANY ACTIV ITY IN INDIA. THE SHIPMENTS FROM FOREIGN COUNTRIES DISPATCHED BY ASSE SSEE TO DELHI OR MUMBAI ARE CLEARED, CONSOLIDATED AND DISPATCHED BY AIRFREI GHT LTD. AS A PRINCIPAL TO WSA SHIPPING (BOMBAY) PVT. LTD. 27 VARIOUS DESTINATIONS IN INDIA. FOR THIS SERVICE AI RFREIGHT LTD. RAISES INVOICES ON THE ASSESSEE. SIMILARLY THE ASSESSEE RAISES INV OICES ON AIRFREIGHT LTD FOR RENDERING SERVICES TO THEM OUTSIDE INDIA. IT IS AL SO THE CLAIM OF THE ASSESSEE THAT THEY DO NOT HAVE ANY OFFICE IN INDIA NOR HAD T HEY AT ANY STAGE STATIONED THEIR EMPLOYEES IN INDIA. NEITHER THE DIRECTORS NO R THE SHAREHOLDERS OF THE ASSESSEE ARE STATIONED IN INDIA OR ARE RESIDENTS IN INDIA. ON THE ABOVE FACTS, THE QUESTION BEFORE THE TRIBUNAL WAS WHETHER THE IN COME ON ACCOUNT OF INCOMING CONSIGNMENT AND OUTGOING CONSIGNMENT COULD BE HELD TO HAVE ACCRUED IN INDIA. IT WAS HELD THAT NO INCOME ACCRU ED IN RESPECT OF THE OUTWARD CONSIGNMENT. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THIS REGARD WERE AS FOLLOWS: WE NOW PROCEED TO CONSIDER AS TO WHETHER THE INCO ME ATTRIBUTABLE TO THE OUTBOUND CONSIGNMENTS IS ALSO TAXABLE IN INDIA BY VIRTUE OF ARTICLE 7 OF THE DTAA. THE ASSESSING OFFICER HAS TAXED SU CH INCOME ALSO ON THE GROUND THAT THE BUSINESS OF THE RESPONDENT HAS BEEN CARRIED ON UNDER THE TRADE NAME OF DHL WORLDWIDE EXPRESS. HE HAS THEREFORE IGNORED THE TERMS & CONDITIONS OF THE AGREEMENT BE TWEEN THE PARTIES. IN OUR CONSIDERED VIEW THE AGREEMENT BETWEEN THE PA RTIES HAVING BEEN APPROVED BY THE GOVERNMENT OF INDIA, THE REVENUE CA NNOT IGNORE THE SAME ON THE BASIS OF A MERE SUSPICION. WE DO AGREE THAT THERE IS SCOPE FOR A STRONG SUSPICION ON ACCOUNT OF THE RESP ONDENT HAVING ALLOWED AIRFREIGHT LTD. TO USE ITS TRADE NAME IN IN DIA IN RESPECT OF INBOUND CONSIGNMENTS AS WELL AS FOR OUTBOUND CONSIG NMENTS WITHOUT ANY APPARENT CONSIDERATION. NEVERTHELESS, IT IS WE LL ESTABLISHED PRINCIPLE OF LAW THAT SUSPICION DOES NOT TAKE THE P LACE OF PROOF. SUSPICION IS MOTHER INVESTIGATION BUT NOT A SUBSTIT UTE FOR EVIDENCE . SINCE THERE IS NOTHING ON RECORD EXCEPT THE SUSPICI ON, WE ARE BOUND TO GIVE EFFECT TO THE TERMS & CONDITIONS OF THE AGREEM ENT BETWEEN THE PARTIES ESPECIALLY WHEN THE SAID AGREEMENT HAS BEEN APPROVED BY THE GOVERNMENT OF INDIA. REVERTING BACK TO THE AGREEME NT, IT IS CLEAR THAT THE RESPONDENT HAD AGREED TO PROVIDE SERVICES TO AI RFREIGHT LTD. OUTSIDE INDIA IN REGARD TO OUTBOUND CONSIGNMENTS. AIRFREIG HT LTD. WAS ALLOWED TO COLLECT THE CONSIGNMENT AS PRINCIPAL WITHOUT THE RESPONDENT BEING INVOLVED IN REGARD TO SUCH CONSIGNMENTS. IT WAS TH E OBLIGATION OF AIRFREIGHT LTD. TO DELIVER THE CONSIGNMENTS TO RESP ONDENT OUTSIDE AFTER NECESSARY CLEARANCE FROM CUSTOM AUTHORITIES. THERE FORE, IN REGARD TO OUTBOUND CONSIGNMENTS, NO ACTIVITY WAS CARRIED OUT BY THE RESPONDENT IN INDIA. BY ALLOWING THE USE OF TRADE NAME IN RE SPECT OF EVEN OUTBOUND CONSIGNMENTS, THE RESPONDENT WAS ALSO BENE FITED IN GETTING SUBSTANTIAL BUSINESS CARRIED OUT OUTSIDE INDIA. HO WEVER, THE BUSINESS WSA SHIPPING (BOMBAY) PVT. LTD. 28 ATTRIBUTABLE TO OUTBOUND CONSIGNMENTS WAS RESTRICTE D TO PROVIDING SERVICES OF DELIVERY TO AIRFREIGHT LTD. OUTSIDE IND IA FOR WHICH COMPENSATION WAS RECEIVED BY THE RESPONDENT. ONE P OSSIBLE VIEW IS THAT ONCE THE NON-RESIDENT IS FOUND TO HAVE CARRIED ON PART OF ITS BUSINESS THROUGH A PERMANENT ESTABLISHMENT IN INDI A, ENTIRE PROFITS ATTRIBUTABLE TO SUCH ESTABLISHMENT ARE LIABLE FOR T AX IN INDIA. THE PROFITS ATTRIBUTABLE TO OUTBOUND CONSIGNMENTS IS AL SO ATTRIBUTABLE TO THE PERMANENT ESTABLISHMENT. BUT AS PER AMENDED P ROVISIONS OF SECTION 90(2) THE PROVISIONS OF THE ACT AND DTAA AR E TO BE APPLIED IN THE MANNER AS PER BENEFICIAL TO THE NON-RESIDENT. SINCE UNDER EXPLANATION TO SECTION 9(1)(I) THE INCOME TAXABLE I N INDIA IS ONLY SUCH PORTION AS IS ATTRIBUTABLE TO THE ACTIVITIES OF THE NON-RESIDENT IN INDIA, WE HOLD THAT ONLY THAT PART OF THE INCOME WHICH IS ATTRIBUTABLE TO THE ACTIVITIES OF THE NON-RESIDENT IN INDIA IS TAXABLE IN INDIA. SINCE NO PART OF THE SERVICES RELATING TO OUTBOUND PARCELS WAS CA RRIED OUT IN INDIA BY THE RESPONDENT, ARTICLE 7, IN OUR VIEW , DOES NOT I MPOSE ANY TAX LIABILITY IN RESPECT OF SUCH ACTIVITIES OF THE NON- RESIDENT. WE ACCORDINGLY HOLD THAT THE RESPONDENT IS NOT LIABLE TO TAX IN REGARD TO THE INCOME ATTRIBUTABLE TO THE OUTBOUND CONSIGNMEN TS. THE DECISION OF THE CIT(A) IN THIS REGARD IS HEREBY CONFIRMED. IN REGARD TO THE INBOUND CONSIGNMENTS THE DECISION OF THE CIT(A) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. BASED ON THE ABOVE DECISION, THE LEARNED COUNSEL FO R THE APPELLANT SUBMITTED THAT THE RECEIPTS IN QUESTION ARE NOT CHARGEABLE TO TAX. AS ALREADY STATED, THE APPELLANT WAS ADMITTEDLY DOING THE BUSINESS ONL Y OF SENDING CONSIGNMENT OF CARGO OUT OF INDIA. THE LEARNED D.R . SUBMITTED THAT THE APPELLANT AS WELL AS THE NON-RESIDENTS IN THE PRESE NT CASE HAVE NOT PRODUCED THE TERMS OF THE AGREEMENT BETWEEN THEM FOR TRANSSH IPMENT. IT WAS HIS SUBMISSION THAT THE DECISION IN THE CASE OF DHL OPE RATIONS B.V. (SUPRA) IS PURELY BASED ON THE TERMS OF THE AGREEMENT. ACCORD ING TO HIM THERE WAS NO SUCH AGREEMENT BETWEEN THE APPELLANT AND THE NON-RE SIDENT. ACCORDING TO HIM THE REVENUE WAS JUSTIFIED IN DRAWING ADVERSE IN FERENCE IN THE ABSENCE OF FURNISHING OF THE NECESSARY DETAILS BY THE APPELLAN T AS WELL AS THE NON- RESIDENTS. 33. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE ARE OF THE VIEW THAT IN THE LIGHT OF THE FINDINGS WHICH WE HAVE GIVEN IN PA RA-21 OF THIS ORDER, THE WSA SHIPPING (BOMBAY) PVT. LTD. 29 FACTS OF THE PRESENT CASE ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE DECIDED BY THE ITAT IN THE CASE OF DHL OPERATIONS B V (SUPRA). THE TERMS OF THE AGREEMENT WAS THE MAIN REASON WHY THE TRIBUNAL HELD THAT THERE WAS NO ACCRUAL OF INCOME IN THE HANDS OF THE NON-RESIDENT IN INDIA. HOWEVER IN THE PRESENT CASE, WE HAVE ALREADY SEEN THAT NO SUCH TER MS EXISTED AS BETWEEN THE APPELLANT AND THE NON-RESIDENTS. IN SUCH CIRCU MSTANCES, WE ARE OF THE VIEW THAT THE DECISION OF THE ITAT IN THE CASE OF D HL OPERATIONS BV (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. WE HAVE ALREADY HELD WHILE DECIDING THE APPEALS ARISING OUT OF THE ORDER U/S.1 63 OF THE ACT THAT THE NON- RESIDENT HAD BUSINESS CONNECTION IN INDIA AND THERE FORE INCOME HAD ACCRUED AND ARISEN IN INDIA TO THE NON-RESIDENT WHICH IS CH ARGEABLE TO TAX. THE REVENUE AUTHORITIES HAVE HELD THAT THE INCOME SO CH ARGED TO TAX IS BUSINESS INCOME. IN THE ABSENCE OF TREATY BETWEEN INDIA AND HONG KONG, WE HAVE TO PROCEED TO TAX INCOME THAT ACCRUES TO THE NON-RESID ENT IN INDIA. HOWEVER IN THE CASE OF NON-RESIDENT WHO IS A RESIDENT OF THE O THER STATE WHICH HAS A TREATY WITH INDIA, THE QUESTION WHETHER BUSINESS IN COME WILL BE TAXABLE BECAUSE OF EXISTENCE OF PERMANENT ESTABLISHMENT IN INDIA OR NOT HAS TO BE EXAMINED. BUT IN THE PRESENT TWO APPEALS, SUCH QUE STION WILL NOT ARISE BECAUSE OF THE ABSENCE OF TREATY BETWEEN INDIA AND HONG KONG. IN VIEW OF THE ABOVE, WE CONFIRM THE ORDERS OF THE CIT(A) AND DISMISS BOTH THESE APPEALS ALSO. 34. IN THE RESULT, ALL THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 13 TH DAY OF MAY, 2011. SD/- SD/- (B.RAMAKOTAIAH ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 13 TH MAY.2011 WSA SHIPPING (BOMBAY) PVT. LTD. 30 COPY TO: 1. THE APPELLANT 2. THE ASSESSEE 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RL BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. WSA SHIPPING (BOMBAY) PVT. LTD. 31 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 4/5/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 11 /5/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. A PPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER