M/s. Poompuhar Shipping Corporation Ltd., CHENNAI V. ADIT, CHENNAI

ITA 153/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61242 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 23-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: R VIJAYARAGHAVAN; ARVIND P DATAR
• Keywords: Double taxation relief; Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS.149 TO 153/MDS/2012 (ASSESSMENT YEARS: 2002-03 TO 2006-07) M/S. POOMPUHAR SHIPPING CORPORATION LTD., M/S.SUBBARAYA AIYAR PADMANABHAN & RAMAMANI, ADVOCATES NEW NO.75A OLD NO.105A, DR.RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI-4. PAN:AAACP4383J VS. THE ASSISTANT DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION, CHENNAI . (APPELLANT) (RESPONDENT) APPELLANT BY : MR.ARVIND P.DATAR, SR. ADVOCA TE & MR. R.VIJAYARAGHAVAN, ADVOCATE RESPONDENT BY : DR. S.MO HARANA, CIT DR DATE OF HEARING : 8 TH MAY, 2012 DATE OF PRONOUNCEMENT : 29 TH JUNE, 2012 O R D E R PER BENCH: THE PRESENT SET OF APPEALS I.E. ITA NOS.149 TO 153/MDS/2012 RELEVANT TO THE ASSESSMENT YEARS 2002 -03 TO 2006-07 RESPECTIVELY ARE FILED BY THE ASSESSEE AGAI NST THE ORDER OF CIT(A)-IV, CHENNAI DATED 01.11.2011. 2. THE ASSESSEE IS A STATE GOVERNMENT UNDERTAKING ESTABLISHED EXCLUSIVELY TO TRANSPORT COAL FROM VARI OUS PORTS IN INDIA REQUIRED FOR VARIOUS THERMAL STATIONS OF TNE B (NOW ITA NOS.149 TO 153/MDS/201 2 2 KNOWN AS TAMIL NADU GENERATION & DISTRIBUTION COMPA NY LTD.) . THE ASSESSEE IS HAVING ITS OWN VESSELS FOR TRANSPORTATION OF COAL. APART FROM ITS OWN VES SELS, THE ASSESSEE IS ALSO HIRING VESSELS FROM INDIAN AND FOR EIGN SHIPPING COMPANIES. 3. THE ASSISTANT DIRECTOR OF INCOME TAX (INTERNATI ONAL TAXATION) VIDE ASSESSMENT ORDER RELEVANT TO THE RES PECTIVE ASSESSMENT YEARS TREATED THE ASSESSEE AS A REPRESE NTATIVE ASSESSEE OF THE FOREIGN SHIPPING COMPANIES. THE AS SESSEE HAD MADE PAYMENTS TOWARDS HIRE CHARGES TO FOREIGN SHIPPING COMPANIES BELONG TO VARIOUS NON-RESIDENT. ALLEGEDL Y TAX WAS NOT DEDUCTED AT SOURCE ON PAYMENT OF THE HIRE CHARG ES MADE TO NON-RESIDENT FOREIGN SHIPPING COMPANIES. SINCE T HE FOREIGN SHIPPING COMPANIES HAD NOT FILED THEIR RETURNS OF I NCOME AND HAD NOT PAID TAX ON THE INCOME RECEIVED BY THEM VIZ . HIRE CHARGES, THE ASSESSEE WAS TREATED AS AGENT OF THE S AID FOREIGN SHIPPING COMPANIES UNDER THE PROVISIONS OF SECTION 163(2) OF THE ACT. THE ASSESSING OFFICER TREATED T HE ITA NOS.149 TO 153/MDS/201 2 3 ASSESSEE AS REPRESENTATIVE ASSESSEE UNDER SECTION 160(1)(I) READ WITH SECTION 163(1) OF THE ACT. 4. AGGRIEVED AGAINST THE ADDITIONS MADE BY THE ASSE SSING OFFICER IN HIS ASSESSMENT ORDER, THE ASSESSEE PREF ERRED APPEAL BEFORE THE CIT(A). THE CIT(A) UPHELD THE ORD ER OF THE ASSESSING OFFICER AND DISMISSED THE APPEALS OF THE ASSESSEE FOR ALL THE RELEVANT ASSESSMENT YEARS. NOW, THE ASS ESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL IMPUGNING THE ORD ER OF THE CIT(A) DATED 1.11.2011 FOR THE ASSESSMENT YEARS 200 2-03, 2003-04, 2004-05, 2005-06 & 2006-07. SINCE SIMILAR ISSUES WERE INVOLVED IN THESE APPEALS, THEY ARE TAKEN UP T OGETHER AND DECIDED BY THIS COMMON ORDER. 5. THE COMMON GROUNDS OF APPEALS BEFORE THE TRIBUNA L IN ALL THE APPEALS ARE AS FOLLOWS:- 1. THE ORDER OF THE CIT(A) IS CONTRARY TO LAW, FA CTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) ERRED IN HOLDING THAT THE CHARTER HIRE CHARGES PAID TO FSC WOULD CONSTITUTE ROYALTY UNDER EXPLANATION 2 TO SECTION 9(1)(IV)(A) AND HENC E TAXABLE IN INDIA. 3. THE CIT(A) ERRED IN HOLDING THAT ASSESSEE COMPANY WAS RIGHTLY TREATED AS REPRESENTATIVE ASSESSEE U/S.163 OF THE ACT SINCE IT DID NOT DEDUCT ITA NOS.149 TO 153/MDS/201 2 4 OR WITHHELD TAX ON HIRE CHARGES PAID TO FOREIGN SHIPPING COMPANIES. 4. THE CIT(A) FAILED TO APPRECIATE THAT THE TRANSACTION/RELATIONSHIP OF THE ASSESSEE COMPANY WITH FSC DOES NOT FULFILL ANY OF THE CONDITIONS STIPULATED IN SEC.163(1) OF THE ACT AND HENCE THE ASSESSEE CANNOT BY ANY STRETCH OF IMAGINATION BE TREATED AS AN AGENT OF NON-RESIDENT. 5. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE TRANSACTIONS BETWEEN THE ASSESSEE COMPANY AND THE SHIP OWNER WERE ON THE BASIS OF PRINCIPAL AND NOT ON PRINCIPAL TO AGENT BASIS. 6. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT ASSESSEE HAD AVAILED THE SERVICES OF FOREIGN SHIPPING COMPANIES ONLY WHEN IT DID NOT GET THE INDIAN SHIP TO TRANSPORT ITS GOODS. HENCE THERE IS NO CONTINUITY BETWEEN THE BUSINESS OF THE NON-RESIDENT AND THE BUSINESS IN INDIA SO AS TO CONSTITUTE BUSINESS CONNECTION. 7. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE CHARTER HIRE CHARGES PAID TO NON-RESIDENTS ARE NOT LIABLE TO TAX IN INDIA AND HENCE NOT LIABLE TO TAX DEDUCTION AT SOURCE. 8. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT PROVISIONS OF SECTION 163 DOES NOT ENVISAGE THAT NON-COMPLIANCE OF WITHHOLDING TAX OBLIGATIONS DOES GIVE RISE TO RELATIONSHIP ENVISAGED U/S.163. 9. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSING OFFICER HAS TREATED THE ASSESSEE COMPANY AS AN ASSESSEE IN DEFAULT U/S.201(1) FOR NON-DEDUCTION OF TAX U/S.195 AND HENCE TREATING THE ASSESSEE AS AN AGENT U/S.163 OF THE ACT WOULD AMOUNT TO DOUBLE TAXATION. 6. DURING THE PENDENCY OF THE APPEALS, THE APPELLANT/ASSESSEE FILED AN APPLICATION FOR TAKING ADDITIONAL ITA NOS.149 TO 153/MDS/201 2 5 GROUNDS OF APPEAL. THE ADDITIONAL GROUNDS ON WHICH THE ASSESSEE HAD ASSAILED THE ORDER OF THE ASSESSING OF FICER IS AS FOLLOWS:- 1. THE ASSESSING OFFICER ERRED IN PASSING A SINGLE ORDER UNDER SECTION 163 TREATING THE CORPORATION AS AGENT OF MORE THAN ONE NON- RESIDENT. 2. THE ASSESSING OFFICER OUGHT TO HAVE APPRECIATED THAT UNDER THE SCHEME OF CHAPTER- XV DEALING WITH LEGAL REPRESENTATIVE AND SECTION 163 IN PARTICULAR AN INDIAN RESIDENT CAN BE CONSIDERED AS AN AGENT OR REPRESENTATIVE ASSESSEE IN RESPECT OF AN INDIVIDUAL NON- RESIDENT. ORDER U/S.163 HAS TO BE IN RESPECT OF EACH OF THE NON-RESIDENT IN RESPECT OF WHOM AN INDIAN RESIDENT IS TREATED AS REPRESENTATIVE ASSESSEE. 7. MR. R.VIJAYARAGHAVAN, COUNSEL APPEARING ON BEHAL F OF THE ASSESSEE SUBMITTED THAT ASSESSEE HIRE SHIPS FRO M FOREIGN SHIPPING COMPANIES FOR TRANSPORTATION OF COAL. AN A GREEMENT BETWEEN THE ASSESSEE AND THE SHIP OWNER IS THAT OF TIME CHARTER AGREEMENT, ACCORDING TO WHICH SHIP IS LEASE D WITH CREW. THE ASSESSEE IS ONLY GETTING SHIP FOR TRANSPO RTATION AND IT HAS NO CONTROL OVER THE CREW OF THE SHIP. HE SUB MITTED THAT WHERE THE CHARACTER OF THE AGREEMENT IS TIME CHARTE R, THEN THE ITA NOS.149 TO 153/MDS/201 2 6 SAID AGREEMENT IS OUTSIDE THE PURVIEW OF SECTION 9( 1)(IV)(A). THE CONSIDERATION PAID BY THE ASSESSEE IS NOT FOR T HE USE OF THE SHIP BUT FOR THE SERVICES HIRED BY THE ASSESSEE FOR TRANSPORTATION OF COAL. HE CONTENDED THAT THE AUTHO RITIES BELOW HAVE ERRED IN COMING TO THE CONCLUSION THAT A GREEMENT IS BARE CHARTER AGREEMENT. IN ORDER TO SUPPORT HI S CONTENTION, THE COUNSEL FOR THE ASSESSEE POINTED OU T THAT MAIN FEATURES OF TIME CHARTER AGREEMENT ARE I) THE POSSESSION OF THE SHIP IS ALWAYS UNDER THE C ONTROL OF ITS OWNER; II) SHIP IS BEING USED BY OWNER TO TRANSPORT THE GO ODS OF THE ASSESSEE; HE FURTHER SUBMITTED THAT OECD MODEL DOES NOT APPL Y TO TIME CHARTER AGREEMENT. IT ONLY APPLIES TO BARE BOAT . AN AMENDMENT TO SECTION 9(1)(VI) EXPLANATION 2(IV)(A) WAS BROUGHT OUT ONLY TO BRING IT IN LINE WITH OECD MODE L. THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT TIME CHART ER DOES NOT INVOLVE PAYMENT OF ROYALTY. THE PAYMENT IS ON LY FOR THE SERVICES PROVIDED BY THE SHIPPING COMPANY. TO DISTI NGUISH BETWEEN THE EXPRESSION USED AND/OR RIGHT TO USE , HE RELIED ITA NOS.149 TO 153/MDS/201 2 7 ON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT I N THE CASE OF STATE OF TAMIL NADU VS. ESSAR SHIPPING LTD. , REPORTED AS 47 VST (2009) (MAD). 8. THE COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED T HAT THE DEPARTMENT CANNOT TAKE INCONSISTENT PLEAS AND ONCE IT HAS INVOKED THE PROVISIONS OF SECTION 201, THE DEPARTME NT CANNOT INVOKE PROVISIONS OF SECTION 163 OF THE ACT AS WELL . IF THE DEPARTMENT HAS CONSIDERED THE ASSESSEE AS REPRESEN TATIVE ASSESSEE, THEN THE ASSESSEE IS NOT LIABLE TO DEDUC T TAX AT SOURCE. 9. ON THE OTHER HAND, THE D.R. APPEARING ON BEHALF OF THE REVENUE SUBMITTED THAT THE ISSUE WITH REGARD TO NAT URE OF PAYMENT AND DEDUCTIBILITY OF TAX AT SOURCE HAS ALRE ADY BEEN SETTLED IN ASSESSEES OWN CASE BY THE TRIBUNAL RELE VANT TO THE ASSESSMENT YEAR 2002-03 TO 2004-05 REPORTED AS 109 ITD 226(CHENNAI). HE SUBMITTED THAT AS PER THE CHARTER AGREEMENT, THE ASSESSEE HAD CONTROL OVER THE SHIP A S WELL AS CREW. HE REFERRED TO PAGE 8 - PARA 7 (H) OF THE O RDER PASSED ITA NOS.149 TO 153/MDS/201 2 8 BY THE CIT(A) THE RELEVANT EXTRACT OF PARA 7(H) IS REPRODUCED HEREIN BELOW:- H. SINCE THE ASSESSEE HAS NOT DEDUCTED OR WITHHELD TAX ON HIRE CHARGES PAID TO FOREIGN SHIPPI NG COMPANIES, THE ASSESSEE WAS RIGHTLY TREATED AS REPRESENTATIVE ASSESSEE UNDER SECTION 163 OF THE I.T. ACT. THESE TIME CHARTER AGREEMENTS ENTERED INT O BY THE ASSESSEE COMPANY WITH VARIOUS FOREIGN COMPANIES ARE OF IN A STANDARD TIME CHARTER GOVERNMENT FORM WHICH IS APPROVED BY THE NEW YORK PRODUCTS EXCHANGE. ON PERUSAL OF THESE AGREEMENTS, IT CAN BE SEEN THAT THE NATURE OF PAYMENTS OF FOREIGN COMPANIES IS ONLY FOR HIRING OF SHIPS AND IT IS SIMILAR TO HIRING OF A CAR ALONG WI TH A CHAUFFEUR. THE CLAUSES IN THE TIME CHARTER AGREEMENTS CAN BE GONE THROUGH AS MENTIONED BY THE ASSESSING OFFICER. CLAUSE 77 OF THE TIME CHARTE R AGREEMENT SAYS THAT THE CAPTAIN OF THE SHIP WHO IS APPOINTED BY THE OWNER OF THE SHIP SHALL BE UNDER THE ORDERS AND OF THE CHARACTERS AS REGARDS EMPLOYMENT AND AGENCY. CLAUSE 145 SAYS THAT THE VESSEL HAS TO WORK NIGHT AND DAY, IF REQUIRED BY TH E CHARACTERS AND ALL THE CRANES SHOULD BE AT THE DISPOSAL OF CHARACTERS DURING LOADING AND DISCHARGING THE STEAMER. CLAUSE 18 SAYS THAT THE VESSEL SHOULD BE PLACED AT THE DISPOSAL OF CHARTER TILL DISPOSAL OF GOODS. ALL THESE CLAUSES SHOW THAT THE ASSESSEE COMPANY HAS GOT CONTROL OVER THE SHIP OWNER/CAPITAL AS FAR AS TRANSPORTATION AND DELIVERY OF ITS GOODS. HENCE, THERE IS PRINCIPAL TO AGENT RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND THE SHIP OWNER BUT NOT PRINCIPAL TO PRINCIPAL RELATIONSHIP AS CLAIMED BY THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. ITA NOS.149 TO 153/MDS/201 2 9 THE DR SUBMITTED THAT THE AUTHORITIES BELOW HAD PAS SED A WELL REASONED AND DETAILED ORDER TREATING THE ASSE SSEE AS REPRESENTATIVE ASSESSEE UNDER THE PROVISIONS OF S ECTION 163 OF THE ACT. THE DR FURTHER SUBMITTED THAT THE CIT( A) HAS RIGHTLY HELD THAT THE HIRE CHARGES PAID BY THE ASSE SSEE PARTAKE THE CHARACTER OF ROYALTY AND IS THUS LIABL E TO THE TAXED IN VIEW OF THE AMENDMENT TO EXPLANATION 2(4) OF SEC TION 9(1)(VI) OF THE ACT. THE DR RELIED ON THE ORDER O F THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF WEST ASIA MARI TIME LTD., VS. ITO IN ITA NOS. 2376 & 2377/MDS/2005 DECIDED O N 19.05.2006 WHEREIN SHIP IS HELD TO BE AN EQUIPM ENT AND HIRE CHARGES PAID FOR ITS USE ARE TREATED AS ROYAL TY UNDER THE PROVISIONS OF SECTION 9(I)(VI) OF THE ACT. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS MADE BY THE PARTIES AND HAVE ALSO GONE THROUGH THE JUDGEMENTS RELIED ON BY THE RESPECTIVE PARTIES. THE FIRST SUBMISSION OF THE ASSESSEE IS THAT HIRE CHARGES PAID TO FOREIGN SHIPP ING COMPANIES DO NOT PARTAKE CHARACTER OF ROYALTY AND T HUS ARE NOT COVERED BY THE PROVISIONS OF SECTION 9(1)(VI) O F THE ACT. A ITA NOS.149 TO 153/MDS/201 2 10 PERUSAL OF THE RECORD SHOWS THAT AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND FOREIGN SHIPPING COMPANIES IS IN THE NATURE OF TIME CHARTER AGREEMENT. THE HONBLE M ADRAS HIGH COURT IN THE CASE OF ESSAR SHIPPING LTD. HAS R EFERRED TO LAW OF CARRIAGE BY SEA BY B.C.MITRA, ACCORDING T O WHICH A TIME CHARTER IS ONE IN WHICH THE OWNERSHIP AND ALSO POSSESSION OF THE SHIP REMAIN IN THE ORIGINAL OWNER , WHOSE REMUNERATION OR HIRE IS GENERALLY CALCULATED AT A M ONTHLY RATE ON THE TONNAGE OF SHIP WHILE A VOYAGE CHARTER IS A CONTRACT TO CARRY SPECIFIED GOODS ON A DEFINED VOYAGE ON A REMUNERATION OR FREIGHT USUALLY CALCULATED ACCORDI NG TO THE QUANTITY OF CARGO CARRIED. THE CONSISTENT VIEW OF THE COURTS IN INDIA IS THAT UNDER THE TIME CHARTER THE OWNERS PROVIDE SERVICES FOR THE CHARTERER WITH THEIR SHIP, THEIR O FFICERS AND A CREW FOR AN AGREED PERIOD OF TIME. AS PER THE REFER ENCE CONTAINED IN VENKATARAMAIYAS LAW LEXICON WITH LEG AL MAXIMS VARIOUS TERMS ARE DEFINED. ACCORDING TO WHI CH THE MODERN FORM OF TIME CHARTERPARTY PARTY IS, IN ESSE NCE, ONE UNDER WHICH THE SHIPOWNER AGREES WITH THE TIME-CHAR TERER THAT, DURING A CERTAIN NAMED PERIOD, THE SHIPOWNER WILL RENDER ITA NOS.149 TO 153/MDS/201 2 11 SERVICE AS A CARRIER BY HIS SERVANTS AND CREW TO CA RRY THE GOODS WHICH ARE PUT ON BOARD HIS SHIP BY THE TIME-C HARTERER. CERTAIN PHRASES SURVIVING IN THE PRINTED FORM NOW U SED ARE ONLY PERTINENT TO THE OLDER FORM OF DEMISE CHARTER- PARTY. THOSE PHRASES ARE, AS IN THE PRESENT CASE, THE OWNERS AGR EE TO LET THE STEAMER, AND THE CHARTERERS AGREED TO HIRE THE STEAMER. THERE IS NO LETTING OR HIRING OF THE STEAMER, OR ANYTHING OF THE SORT, HERE. THEN, AT THE END OF THE PERIOD, IT WAS SOLEMNLY PROVIDED THAT THE VESSEL SHOULD BE REDELIVERED BY THE TIME CHARTERERS TO THE SHIPOWNERS. REDELIVERY IS ONLY A PERTINENT EXPRESSION IF THERE HAS BEEN A DELIVERY OR HANDING OVER BY THE SHIPOWNERS, TO THE CHARTERERS. THERE NEVER HAS BEEN ANYTHING OF THAT SORT HERE. THE SHIP HAS AT ALL TIMES BEEN I N THE POSSESSION OF THE SHIPOWNERS AND THEY SIMPLY UNDERT OOK TO DO SERVICES WITH THEIR CREW IN CARRYING THE GOODS O F THE CHARACTERS. 11. THUS, IT CAN BE SAID THAT IN CASE OF TIME CHART ER AGREEMENT WHICH IS NOT CHARTERED BY DEVICE NEITHER LEGAL OWNERSHIP NOR BENEFICIAL OWNERSHIP OR EQUITABLE OWN ERSHIP IS GIVEN IN THE HANDS OF THE CHARTERER. THE CHARTERER HAS ONLY ITA NOS.149 TO 153/MDS/201 2 12 CONTRACTUAL RIGHT TO HIS SERVICES OF SHIP. A CHARTE RPARTY CREATES NO RIGHT OF PROPERTY IN A SHIP NOR HAD ANY INTEREST IN THE SHIP EXCEPT THAT IT IS A VEHICLE WITH WHICH THE SHIP OWN ER IS TO DO THE AGREED WORK. 12. FROM THE PERUSAL OF DOCUMENTS ON RECORD, WE HA VE OBSERVED THAT NOTICE UNDER SECTION 163 OF THE ACT W AS ISSUED TO THE ASSESSEE BEING THE REPRESENTATIVE ASSESSEE OF THE FOREIGN SHIPPING COMPANIES. THE SPECIAL PROVISIONS WITH REGARD TO TAXATION OF SHIPPING COMPANIES IS UNDER S ECTION 172 OF THE ACT. ACCORDING TO WHICH THE FOLLOWING CONDI TIONS HAVE TO BE SATISFIED:- I) THE ASSESSEE IS A NON-RESIDENT; II) THE ASSESSEE OWNS A SHIP OR SHIP CHARTERED BY A NON-RESIDENT; III) SHIP CARRIES PASSENGERS , LIVESTOCK, MAIL OR GOODS SHIPPED AT A PORT IN INDIA; & IV) NON-RESIDENT MAY (OR MAY NOT) HAVE AN AGENT/ REPRESENTATIVE IN INDIA. ITA NOS.149 TO 153/MDS/201 2 13 IF ALL THE ABOVE CONDITIONS ARE SATISFIED 7.5% OF T HE AMOUNT PAID OR PAYABLE ON ACCOUNT OF SUCH CARRIAGE TO THE NON- RESIDENT SHALL BE DEEMED TO BE THE INCOME OF THE NON- RESIDENT. THE SAID INCOME SHALL BE TAXABLE IN THE S AME YEAR IN WHICH SUCH PAYMENT IS MADE. IN THE PRESENT CASE, THE ASSESSEE HAS PAID HIRE CHARGES FOR THE SERVICES REN DERED BY THE FOREIGN SHIPPING COMPANIES. THE SAID HIRE CHARG ES PAID BY THE ASSESSEE TO FOREIGN SHIPPING COMPANIES IS IN COME IN THE HANDS OF FOREIGN SHIPPING COMPANIES FOR THE SER VICES RENDERED IN INDIA. THE ASSESSEE HAS NOT PLACED ON R ECORD ANY DOCUMENT TO SHOW THAT FOREIGN SHIPPING COMPANIES WE RE EXEMPTED BY DTAA FROM PAYMENT OF TAX. AS PER THE PROVISIONS OF SECTION 195 OF THE INCOME TAX ACT, IT WAS THE DUTY OF THE ASSESSEE TO DEDUCT TAX AT SOURCE BEFORE MAKING PAYMENT TO THE FOREIGN SHIPPING COMPANIES/(NON-RESI DENT). NON-COMPLIANCE OF THE PROVISIONS OF SECTION 195 OF THE ACT RESULTS IN THE INITIATION OF PROCEEDINGS UNDER SECT ION 201 OF THE ACT. THUS, THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE. ITA NOS.149 TO 153/MDS/201 2 14 13. WE FIND THAT IN THE INSTANT CASE, THE ASSESSEE WAS USING THE SERVICES OF FOREIGN SHIPPING COMPANIES FO R TRANSPORTATION OF COAL FROM ONE PORT TO ANOTHER 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 F OREIGN SHIPPING COMPANY DO NOT PARTAKE THE CHARACTER OF R OYALTY. 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 CONSTITUTE ROYA LTY FOR THE USE OF INDUSTRIAL OR COMMERCIAL OR SCIENTIFIC EQUIP MENTS. THUS, THE PROVISIONS OF SECTION 9(1)(VI) OF THE ACT ARE N OT 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 IN STANT CASE, THE ASSESSEE IS LIABLE TO DEDUCT TAX ON THE HIRE CH ARGES PAID TO FOREIGN SHIPPING COMPANIES. THE COUNSEL FOR THE ASSESSEE ITA NOS.149 TO 153/MDS/201 2 15 SUBMITTED THAT PROCEEDINGS HAS BEEN INITIATED AGAIN ST THE ASSESSEE UNDER THE PROVISIONS OF SECTION 201 OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE. AGAINST WHICH THE A SSESSEE HAS APPROACHED THE HONBLE MADRAS HIGH COURT. THE H ONBLE MADRAS HIGH COURT HAS GRANTED STAY IN THE MATTER RE LEVANT 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 A SSESSEE REPRESENTATIVE UNDER THE PROVISIONS OF SECTION 16 3. AT THE SAME TIME, THE ASSESSEE IS ALSO NOT COMPLYING WITH THE PROVISIONS OF SECTION 195 AGAINST WHICH THE DEPART MENT HAS ALREADY INITIATED PROCEEDINGS UNDER THE PROVISIONS OF SECTION 201 OF THE ACT. THE ASSESSEE CANNOT BE ALLOWED TO TAKE BENEFIT OF BOTH THE PROVISIONS OF THE ACT TO GET AW AY FROM THE TAX LIABILITY. THE ASSESSEE CANNOT ESCAPE FROM LIA BILITY OF TAXATION BY CHALLENGING THE PROVISIONS OF ACT IN DI FFERENT FORUMS. WE REMIT THE MATTER BACK TO THE ASSESSING O FFICER TO INITIATE PROCEEDINGS AGAINST THE ASSESSEE UNDER ONE OF THE PROVISIONS OF THE ACT IN THE LIGHT OF THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PREMIER T YRES ITA NOS.149 TO 153/MDS/201 2 16 LTD. REPORTED AS 134 ITR 17 (WITH RESPECT TO THE PR OVISION UNDER SECTION 201 OF THE ACT) AFTER DISPOSAL OF TH E MATTER SUBJUDICE BEFORE THE HONBLE MADRAS HIGH COURT. 16. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY , TH E 29 TH DAY OF JUNE, 2012 AT CHENNAI. SD/- SD/- ( ABRAHAM P.GEORGE ) ( VIKAS AWASTHY ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 29 TH JUNE, 2012. SOMU COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F .