DELMAS FRANCE, MUMBAI V. ASST DIT (IT) 1(2), MUMBAI

ITA 1587/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88656 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 06-01-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 07-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R N DSOUZA
• Keywords: Transfer pricing; Double taxation relief; Permanent establishment

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE HONBLE S/SHRI VIJAY PAL RAO ( JM ) , AND B.R.BASKARAN (AM) , . . , ./ I.T .A. NO . 1587 /MUM/20 1 4 ( / ASSESSMENT YEAR : 200 1 - 02 ) DELMAS FRA N CE (NOW MERGED WITH CMA CGM S . A) C/OF CMA CGM AGENCIES (INDIA) PVT LTD., INDIA BULLS FINANCE CENTRE, TOWER 3,8 TH FLOOR, SENAPATI BAPAT MARG, ELPHISTONE WEST, MUMBAI - 400013 / VS. ASSTT.DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) - 1(2), 1 ST FLOOR, SCINDIA HOUSE, BALLARD ESTATE, N M ROAD, MUMBAI - 400038 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AABC C9048G / : ASSESSEE BY SHRI FARROKH IRANI / REVENUE BY : SHRI R N DSOUZA / DATE OF HEARING : 20.3. 201 5 / DATE OF PRONOUNCEMENT : 24. 3.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER : THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31.10.2013 PASSED BY LD CIT(A) - 10, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2001 - 02. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE PENALTY OF RS.20,18,282/ - LEVIED BY THE AO U/S 271(1)(C) OF THE ACT FOR ASSESSMENT YEAR 2001 - 02. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS A TAX RESIDENT OF FRANCE AND IS ENGAGED IN THE BUSINESS OF TRANSPORTATION O F CARGO IN THE INTERNATIONAL TRAFFIC BY SEA. IT TRANSPORTED CARGO FROM INDIAN ITA NO. 1587 /M/ 20 1 4 2 PORTS TO THE PORT OF DESTINATION IN FRANCE AND DECLARED THE INCOME DERIVED THERE FROM AS PER THE PROVISIONS OF ARTICLE 9(2) OF THE DTAA BETWEEN INDIA AND FRANCE. DURING THE COU RSE OF ENQUIRY BY AO, IT WAS FOUND THAT THE MOTHER VESSELS WERE NOT BROUGHT TO INDIAN PORTS AND THE ASSESSEE HAS CLAIMED TO HAVE TRANSPORTED THE CARGO FROM INDIAN PORTS THROUGH THE FEEDER VESSELS TO MOTHER VESSELS. THE FEEDER VESSELS WERE NOT OWNED BY THE ASSESSEE, BUT THE ASSESSEE FURNISHED DETAILS OF MOTHER VESSELS OWNED BY IT. THE AO ASKED THE ASSESSEE TO LINK THE VOYAGE FEEDER VESSEL WISE WITH THE MOTHER VESSEL, BUT THE ASSESSEE FAILED TO DO THE SAME. HENCE THE AO DECLINED THE BENEFIT OF ARTICLE 9(2) OF THE DTAA REFERRED ABOVE. THOUGH THE LD CIT(A) ALLOWED THE RELIEF TO THE ASSESSEE, THE TRIBUNAL, VIDE ITS ORDER DATED 28 - 11 - 2008 PASSED IN ITA NO.5824 & 6076/MUM/2006, HELD THAT THE ASSESSEE IS REQUIRED TO LINK VOYAGES BETWEEN THE FEEDER VESSELS AND MO THER VESSELS. ACCORDINGLY THE TRIBUNAL RESTORED THIS MATTER TO THE FILE OF THE LD CIT(A) AFFORDING ANOTHER OPPORTUNITY TO THE ASSESSEE. 3. IN THE SET ASIDE PROCEEDINGS BEFORE LD CIT(A), THE ASSESSEE COULD RECONCILE THE FREIGHT INCOME ONLY PARTIALLY, I.E., IT COULD NOT LINK THE VOYAGES BETWEEN THE FEEDER VESSELS AND MOTHER VESSELS TO THE EXTENT OF RS.4.20 CRORES. ACCORDINGLY, THE LD CIT(A) HELD THAT THE GROSS EARNINGS RELATABLE TO THE ABOVE SAID FREIGHT RECEIPTS IS TAXABLE AS BUSINESS PROFITS IN INDI A, SINCE THE ASSESSEE HAD A PE IN INDIA. SUBSEQUENT THERETO, THE AO LEVIED PENALTY U/S 271(1)(C) OF THE ACT ON THE INCOME REPRESENTING THE ABOVE SAID FREIGHT RECEIPTS. SINCE THE PENALTY ORDER WAS CONFIRMED BY LD CIT(A), THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS FILED APPEAL BEFORE HONBLE HIGH COURT OF BOMBAY CHALLENGING THE ORDER DATED 28 - 11 - 2008 PASSED BY THE TRIBUNAL IN HOLDING THAT THE ASSESSEE IS REQUIRED TO LINK THE VOYAGES BETWEEN THE FEEDER VE SSELS AND MOTHER VESSELS. SINCE THE LD CIT(A), IN THE SET ASIDE PROCEEDINGS, HELD THAT THE ASSESSEE HAS GOT ITA NO. 1587 /M/ 20 1 4 3 PERMANENT ESTABLISHMENT AND HENCE THE UN - RECONCILED FREIGHT RECEIPTS ARE TAXABLE IN INDIA AND SINCE THE ASSESSEES VIEW IS THAT IT DOES NOT HAVE A PE, IT CHALLENGED THE ORDER OF THE LD CIT(A) PASSED IN THE SECOND ROUND BY FILING APPEAL BEFORE THE ITAT. THE TRIBUNAL, VIDE ITS ORDER DATED PASSED ON 19.11.2014, RESTORED THE SAID MATTER RELATING TO THE PE TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE AS TO WHETHER THE TRANSACTIONS BETWEEN THE AGENT IN INDIA AND THE ASSESSEE WAS AT ARMS LENGTH PRICE AND THEN DECIDE THE ISSUE OF EXISTENCE OF PE. THUS, THE ISSUE RELATING TO THE PE HAS BEEN RESTORED BACK TO THE FILE OF AO. THE LD A.R SUBMITTED THAT THE ASSESSEE DID NOT CONTEND BEFORE THE TRIBUNAL IN THE SECOND ROUND, THE ISSUE RELATING TO THE LINKING OF VOYAGES BETWEEN FEEDER VESSELS AND MOTHER VESSELS, SINCE IT HAD ALREADY FILED APPEAL BEFORE THE HIGH COURT CHALLENGING THE ORDER PASSED BY THE T RIBUNAL IN THE FIRST ROUND OF PROCEEDINGS. 5. ON ASSIMILATION OF THESE FACTS, THE POINTS THAT EMERGE ARE THAT (A) THE ASSESSEE HAS CHALLENGED THE ORDER OF THE TRIBUNAL PASSED IN THE FIRST ROUND OF APPEAL IN RESPECT OF THE FREIGHT CHARGES INCOME (I. E., IT IS NECESSARY TO LINK THE VOYAGES BETWEEN FEEDER VESSELS AND MOTHER VESSELS IN ORDER TO CLAIM CONCESSIONAL RATE OF TAXATION UNDER ARTICLE 9 OF INDO FRANCE DTAA) BY FILING APPEAL BEFORE THE HONBLE HIGH COURT OF BOMBAY. ACCORDING TO LD A.R, THE APPEA L HAS BEEN ADMITTED BY THE HIGH COURT OF BOMBAY. (B) ALTERNATIVELY, THE LD CIT(A) HAS HELD THAT THE INCOME OF THE ASSESSEE IS TO BE ASSESSED AS BUSINESS PROFITS, SINCE THE ASSESSEE HAS GOT PE IN INDIA. NOW THE ASSESSEES CONTENTION IS THAT IT DOES NOT HAVE PE IN INDIA AND HENCE ITS INCOME, CONSIDERED AS BUSINESS PROFITS, IS NOT TAXABLE. THERE SHOULD NOT BE ANY DOUBT THAT THE ALTERNATIVE CONTENTION SHALL HAVE BEARING ON THE QUANTUM OF INCOME OF THE ASSESSEE. WE HAVE ALREADY NOTICED THAT THE QUESTION RE LATING TO EXISTENCE OF PE IN INDIA IS RESTORED ITA NO. 1587 /M/ 20 1 4 4 BACK TO THE FILE OF THE AO AND HENCE THE DECISION TAKEN BY THE AO ON THAT ISSUE SHALL HAVE BEARING ON THE QUANTUM OF INCOME. IN THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE PENALTY ISSUE UNDER CONSIDERAT ION ALSO NEEDS TO BE RESTORED TO THE FILE OF THE AO IN ORDER TO CONSIDER THE SAME AFRESH IN THE LIGHT OF THE DECISION TAKEN BY HIM ON THE ISSUE RELATING TO PE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) AND RESTORE THE PENALTY MATTER TO THE FILE O F THE ASSESSING OFFICER FOR HIS FRESH CONSIDERATION. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 24TH MAR , 2015 . 2 4TH MAR, 201 5 SD SD ( / VIJAY PAL RAO ) ( . . , / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 24TH MAR , 201 5 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. 6. , , / DR, ITAT, MUMBAI CONCERNED / GUARD FILE. TRUE COPY / BY ORDER, (ASSTT. REGISTRAR) , /ITAT, MUMBAI