M/s. Shaan Marine Services Private Ltd., Mumbai V. Deputy Director of Income-tax,

ITA 2089/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79887 (ITAT-PUNE)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 29-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Double taxation relief
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.2089/PN/2013 (A.Y: 2012-13) SHAAN MARINE SERVICES PRIVATE LIMITED 7, KUMTHA STREET, BALLARD ESTATE, MUMBAI - 400001 PAN: AACCC8571D APPELLANT VS. DY.DIT (INTL. TAXN-I), PUNE RESPONDENT APPELLANT BY : SHRI SUNIL PATHAK AND SHRI NIKHIL PATHAK RESPONDENT BY : SHRI P.L . PATHADE DATE OF HEARING: 08.05.2014 DATE OF ORDER : 27.05.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-IT/TP [IN SH ORT CIT(A)] PUNE, DATED 06.09.2013 FOR A.Y. 2012-13 ON THE FOLL OWING GROUNDS. 1. THE LD. COMMISSIONER OF INCOME TAX APPEALS HAS ERRE D IN LAW AND IN FACTS IN CONFIRMING THE INCOME OF RS.42,61,950/- ASSESSED BY THE AO U/S.172(4) OF THE ACT IN THE HANDS OF THE APPELLANT AS AN AGENT. 2. THE LD. COMMISSIONER OF INCOME TAX APPEALS HAS ERRE D IN CONFIRMING THE CONTENTION OF THE AO THAT THE INCOME HAS ACCRUED IN INDIA IN THE HANDS OF THE APPELLANT AS A N AGENT ALTHOUGH THE SAME DOES NOT ACCRUE OR ARISE IN INDIA IN VIEW OF APPLICABLE LAW AND FACTS OF THE CASE. 2 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE AP PELLANT WAS ASSESSABLE ONLY AS AN AGENT OF GLENDIVE ENTERPR ISES AND NOT OF ANY OTHER PARTY AND THUS, THE ABOVE INC OME OF RS.42,61,950/- WAS NOT ASSESSABLE IN THE HANDS OF THE APPELLANT AT ALL. 4. THE LD. COMMISSIONER OF INCOME TAX APPEALS HAS ERRE D IN LAW AND IN FACTS IN NOT FOLLOWING THE TERMS OF THE TAX TREATY ENTERED BETWEEN INDIA AND OTHER COUNTRY (CYP RUS). 5. THE LD. COMMISSIONER OF INCOME TAX APPEALS ERRED IN NOT APPRECIATING THAT GLENDIVE ENTERPRISES WAS HAVING EFFECTIVE MANAGEMENT IN CYPRUS AND ACCORDINGLY, THE INCOME ARISING TO GLENDIVE WAS NOT TAXABLE AS PER A RTICLE 8 DTAA BETWEEN INDIA AND CYPRUS. 6. THE COMMISSIONER OF INCOME TAX APPEALS HAS ERRED IN HOLDING CONCLUDING THAT THE EFFECTIVE MANAGEMENT OF GLENDIVE WAS NOT IN CYPRUS WITHOUT ANY BASIS OR ANY EVIDENCE AND CONTRARY TO THE FACTS OF THE CASE AND ACCORDINGLY, THE INCOME ASSESSED IN THE HANDS OF TH E APPELLANT AS AN AGENT WAS NOT JUSTIFIED IN LAW. 7. THE APPELLANT CONTESTS THE CONSEQUENTIAL LEVY OF IN TEREST U/S. 234A, 234B AND 234C OF THE ACT. 8. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AMEND AND / OR DELETE IN ALL THE FOREGOING GROUNDS OF APPEAL. 2. THE ASSESSEE SHAAN MARINE SERVICES PVT. LTD. (HE REINAFTER REFERRED TO AS SHAAN) IS AN AGENT MASTER OF THE VES SEL M V THELISIS AND A NON-RESIDENT COMPANY M/S. GLENDIVE ENTERPRISES LTD. (HEREINAFTER REFERRED TO AS GLENDIVE) FOR THE CARRIAGE OF GOODS FROM SAKHARI PORT, INDIA. DURING THE YEAR, GLENDIV E HAS EARNED FREIGHT OF USD 11,00,000 WHICH WORKS OUT TO @ 49.25 TO 1 USD, EQUIVALENT TO 5,41,75,000/-. THE ASSESSEE IN ITS RETURN OF INCOME HAS STATED THAT ACCORDING TO PROVISIONS OF I NDIAN DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA), TAX IS NOT PAY ABLE BY GLENDIVE IN INDIA AS ITS INCOME IS NOT TAXABLE IN I NDIA. THE ASSESSING OFFICER DID NOT ACCEPT THE CLAIM OF ASSES SEE. HE STATED THAT THE BENEFIT OF DTAA CANNOT BE GIVEN TO GLENDIV E AS IT HAS FAILED TO PROVE WITH THE DOCUMENTARY EVIDENCE THAT GLENDIVE HAS 3 ITS PLACE OF EFFECTIVE MANAGEMENT IN CYPRUS. WITH THE RESULT, THE ASSESSING OFFICER CALCULATED TOTAL FREIGHT RECEIVED BY GLENDIVE OF 5,68,26,000/- (USD 1100000 X 51.66). ON THIS AMOUNT, INCOME @ 7.5% WAS DETERMINED AT 42,61,950/- ON WHICH TAX PAYABLE WAS COMPUTED @ 40% AND WITH SURCHARGE AND EDUCATION CESS WAS DETERMINED AT 17,99,210/-. AGGRIEVED BY THE OR DER OF THE ASSESSING OFFICER, THE ASSESSEE HAS FILED AN APPEAL BEFORE CIT(A), WHO HAS CONFIRMED THE ORDER OF ASSESSING OFFICER. 2.1 BEFORE US, THE STAND OF THE ASSESSEE HAS BEEN T HAT GLENDIVE IS TAXABLE IN CYPRUS IN ACCORDANCE WITH THE ARTICLE 8 OF INDIA- CYPRUS DTAA. FOR THE SAKE OF CONVENIENCE, THE SAME IS REPRODUCED HEREUNDER: PROFITS DERIVED BY AN ENTERPRISE REGISTERED AND HA VING HEADQUARTERS (I.E. EFFECTIVE MANAGEMENT) IN A CONTR ACTING STATE FROM THE OPERATION BY THAT ENTERPRISE OF SHIP S OR AIRCRAFT IN INTERNATIONAL TRAFFIC SHALL BE TAXABLE ONLY IN THAT STATE. 2.2 IT WAS EXAMINED BY THE LOWER AUTHORITIES AS TO WHETHER GLENDIVE HAS ITS HEAD QUARTERS OR PLACE OF EFFECTIV E MANAGEMENT IN CYPRUS OR NOT. IN THIS CONNECTION, PARA 24 OF O ECD COMMENTARY ON ARTICLE 4 OF OECD MODEL CONVENTION HA S DESCRIBED PLACE OF EFFECTIVE MANAGEMENT AS UNDER: THE PLACE OF EFFECTIVE MANAGEMENT IS THE PLACE WHE RE KEY MANAGEMENT AND COMMERCIAL DECISIONS THAT ARE NECESS ARY FOR THE CONDUCT OF ENTITYS BUSINESS AS A WHOLE ARE IN SUBSTANCE MADE. ALL RELEVANT FACTS AND CIRCUMSTANC ES MUST BE EXAMINED TO DETERMINE THE PLACE OF EFFECTIVE MANAGEMENT. AN ENTITY MAY HAVE MORE THAN ONE PLACE OF MANAGEMENT, BUT, IT CAN HAVE ONLY ONE PLACE OF EFFE CTIVE MANAGEMENT AT ANY ONE TIME 2.3 THE CONCEPT OF PLACE OF EFFECTIVE MANAGEMENT RE QUIRES THAT DECISIONS ON THE CONDUCT OF ENTITYS BUSINESS AS A WHOLE AND IN SUBSTANCE ARE MADE. THE DECISIONS SHOULD BE KEY MA NAGEMENT 4 AND COMMERCIAL DECISION. THE LOWER AUTHORITIES OBS ERVED THAT GLENDIVE HAS PAID AN AMOUNT RECEIVED FROM ARABIAN R ESOURCES TO AQUAVITA INTERNATIONAL (HEREINAFTER REFERRED TO AS AQUAVITA) ON THE SAME DAY I.E. 08.12.2011. THEREFORE, TO EXAMINE TH E ROLE PLAYED BY GLENDIVE AND TO DETERMINE AS TO WHETHER CYPRUS C OMPANY IS WITH SUBSTANCE OR NOT. THE FOLLOWING QUERIES WERE ASKED VIDE ORDER SHEET DATED 02.09.2013 REQUIRING THE ASSESSEE TO FURNISH THE INFORMATION OF GLENDIVE WITH REGARD TO NUMBER O F EMPLOYEES, AREA OF OFFICE PREMISES, OFFICE EQUIPMENT USED AND MONTHLY OFFICE EXPENSES FOR EACH MONTH SEPARATELY 2.4 THE ASSESSEE HAS REPLIED THAT GLENDIVE HAS CARR IED OUT BUSINESS FROM CYPRUS ITSELF AS THESE DAYS, MAJOR AC TIVITIES OF BUSINESS ARE BEING CARRIED OUT WITH THE OUTSOURCING THE SAME, FOR WHICH THE COMPANY NEED NOT HAVE EMPLOYEES ON ITS RO LE. IT WAS STATED ON BEHALF OF ASSESSEE THAT CONSIDERING THE B USINESS PRACTICE THE FACT OF GLENDIVE ISSUE OF EMPLOYEES SH OULD NOT BE GIVEN UNDUE IMPORTANCE. THE ASSESSEE HAS FURNISHED TAX RESIDENCY CERTIFICATE ISSUED BY AUTHORITIES OF CYPR US AS PLACED ON PAGE 9 OF PAPER BOOK FILED BY THE ASSESSEE. THE SAID CERTIFICATE HAS BEEN ISSUED BY CONCERNED AUTHORITIE S ON THE BASIS OF STATEMENT MADE BY THE COMPANY REGISTERED IN CYPR US. THE LOWER AUTHORITIES OBSERVED THAT IN VIEW OF THE PROV ISIONS OF DOMESTIC LAW, TAX RESIDENCY CERTIFICATE ALONE WOULD NOT BE SUFFICIENT TO CONCLUDE THAT GLENDIVES PLACE OF EFF ECTIVE MANAGEMENT IS IN CYPRUS. 2.5 IT WAS STATED THAT GLENDIVE HAS ONLY ONE SHAREH OLDER HOLDING 1000 SHARES VIZ. MR. LORRETA LOANNOU. ACCO RDING TO THE CYPRUS LAW, A COMPANY HAVING SINGLE SHAREHOLDER CAN BE FORMED. THE ASSESSEE HAS FURNISHED MINUTES OF MEETING HELD AT COMPANYS REGISTERED OFFICE ON 04.07.2012. THE MIN UTES ARE SIGNED BY THE CHAIRMAN AND SECRETARY OF THE COMPANY . THE 5 LOWER AUTHORITIES OBSERVED THAT ONLY ONE PERSON HAS SIGNED FOR BOTH; FOR SECRETARY AND CHAIRMAN I.E. LORRETTA LOAN NOU. DURING THE SAID MEETING, THE ONLY BUSINESS TRANSACTED WAS OF THE GRANTING APPROVAL OF FINANCIAL STATEMENTS AND THE D IRECTORS REPORT. THE APPROVAL OF THE FINANCIAL STATEMENTS I S ONE OF THE KEY BUSINESS EVENTS OF THE COMPANY. ACCORDING TO L OWER AUTHORITIES, CONSIDERING THE BUSINESS MODEL OF GLEN DIVE IN WHICH THE ENTIRE BUSINESS WAS CONDUCTED ON BEHALF OF AQUA VITA, KEY MANAGEMENT AND COMMERCIAL DECISIONS ON BUSINESS OF SHIPPING WERE NOT TAKEN BY GLENDIVE AS NO EVIDENCE WAS FURNI SHED IN SUPPORT OF THIS PARTICULAR ASPECT. IT CANNOT BE SA ID THAT THE GLENDIVE HAS NOT CONDUCTED BUSINESS OF SHIPPING BUT HAS CONDUCTED BUSINESS BY GETTING SHIPPING BUSINESS DON E THROUGH AQUAVITA. IN SUCH A CASE, BUSINESS OF GLENDIVE WOU LD BE A MAJOR AND NOT OF SHIPPING BUSINESS AND THE BENEFIT OF ART ICLE 8 OF TAX TREATY WOULD NOT BE AVAILABLE TO GLENDIVE. THE CIT (A) OBSERVED THAT THE TREATY BENEFITS AVAILABLE TO THE ONE, WHO CONDUCTS BUSINESS IN AN ACTIVE MANNER AND NOT THE ONE, WHO C ONDUCTS BUSINESS IN A PASSIVE MANNER BY CREATING SHELL COMP ANIES. IN VIEW OF ABOVE, THE CIT(A) CONCLUDED THAT GLENDIVE I S A COMPANY WITHOUT ANY SUBSTANCE. ACCORDING TO INDIAN LAWS, C OMPANYS RESIDENCE SHOULD BE DETERMINED ON THE BASIS OF COMP ANYS ECONOMIC NEXUS WITH A PARTICULAR COUNTRY. FROM THI S, THE CIT(A) CONCLUDED THAT GLENDIVE DOES NOT FULFILL ANY OF THE CRITERIA, UNDER WHICH IT COULD BE STATED THAT ITS PLACE OF EFFECTIV E MANAGEMENT IS IN CYPRUS AND HE CONCLUDED THAT THE FUNDAMENTAL REQ UIREMENTS OF EFFECTIVE MANAGEMENT ARE NOT FULFILLED BY GLENDI VE AND ULTIMATELY, THE CIT(A) HELD THAT THE ASSESSING OFFI CER WAS CORRECT IN DENYING THE BENEFIT OF CYPRUS DTAA AS THE PLACE OF EFFECTIVE MANAGEMENT OF GLENDIVE DOES NOT EXISTS IN CYPRUS. 3. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT THE CIT(A) HAS ERRED IN LAW AND IN F ACTS IN 6 CONFIRMING THE INCOME OF 42,61,950/- ASSESSED BY THE ASSESSING OFFICER U/S.172(4) OF THE ACT IN THE HAND S OF THE ASSESSEE AS AN AGENT. THE CIT(A) HAS ERRED IN CONF IRMING THE CONTENTION OF THE ASSESSING OFFICER THAT THE INCOME HAS ACCRUED IN INDIA IN THE HANDS OF THE ASSESSEE AS AN AGENT A LTHOUGH THE SAME DOES NOT ACCRUE OR ARISE IN INDIA IN VIEW OF A PPLICABLE LAW AND FACTS OF THE CASE. THE CIT(A) FAILED TO APPREC IATE THAT THE ASSESSEE WAS ASSESSABLE ONLY AS AN AGENT OF GLENDIV E AND NOT OF ANY OTHER PARTY AND THUS, THE ABOVE INCOME OF 42,61,950/- WAS NOT ASSESSABLE IN THE HANDS OF THE ASSESSEE AT ALL. THE CIT(A) HAS ERRED IN LAW AND IN FACTS IN NOT FOLLOWING THE TERM S OF THE TAX TREATY ENTERED INTO BETWEEN INDIA AND CYPRUS. THE CIT(A) ERRED IN NOT APPRECIATING THAT GLENDIVE WAS HAVING EFFECT IVE MANAGEMENT IN CYPRUS AND ACCORDINGLY, THE INCOME AR ISING TO GLENDIVE WAS NOT TAXABLE AS PER ARTICLE 8 DTAA BETW EEN INDIA AND CYPRUS. THE CIT(A) HAS ERRED IN HOLDING THAT T HE EFFECTIVE MANAGEMENT OF GLENDIVE WAS NOT IN CYPRUS WITHOUT AN Y BASIS OR ANY EVIDENCE. HIS VIEW IS CONTRARY TO THE FACTS OF THE CASE AND ACCORDINGLY, THE INCOME ASSESSED IN THE HANDS OF TH E ASSESSEE AS AN AGENT WAS NOT JUSTIFIED. THE LEARNED AUTHORIZED REPRESENTATIVE HAS RELIED ON VARIOUS CASE LAWS TO SUPPORT HIS STAN D WHICH WOULD BE DEALT BY US WHILE CONCLUDING THE ISSUE AT HAND. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS S UPPORTED THE ORDER OF AUTHORITIES BELOW AND SUBMITTED THAT T HE CIT(A) WAS JUSTIFIED IN HOLDING THAT GLENDIVE IS NOT HAVING IT S EFFECTIVE MANAGEMENT IN CYPRUS. IT IS A ONE PERSON COMPANY. IT DOES NOT HAVE ANY OFFICE, WHEREIN SOME STAFF IS WORKING ACCO RDING TO HIM. AS PER OECD COMMENTARY, EFFECTIVE MANAGEMENT IS TO BE DETERMINED ON THE BASIS OF CASE AND FOR THIS PURPOS E, IT HAS TO BE SEEN AS TO WHERE THE CONTROL / MANAGEMENT / STAFF / OFFICE, ETC. OF A COMPANY ARE LOCATED. THE PLACE FROM WHICH THE AC TUAL SERVICE IS RENDERED BY THE COMPANY IS TO BE SEEN. WHILE, I N THIS CASE, GLENDIVE HAS NO BIG OFFICE ESTABLISHMENT, STAFF, ET C. IN CYPRUS. 7 ACCORDING TO ARTICLE 8 OF DTAA, IT DOES NOT APPLY TO IN ASSESSEES FAVOUR. IN THIS CASE, THE INCOME OF GLENDIVE IS TA XABLE IN INDIA U/S.172. UNDER THE CIRCUMSTANCES, AUTHORITIES BELO W WERE JUSTIFIED IN ASSESSING THE INCOME IN THE HANDS OF S HAN AS AN AGENT OF GLENDIVE U/S.172(4), THE SAME SHOULD BE CO NFIRMED. 4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT ASSESSEE SHAAN WAS APPOINTED A S AN AGENT IN INDIA BY GLENDIVE WHICH IS A COMPANY REGISTERED IN CYPRUS AND IT IS IN THE BUSINESS OF SHIPPING. GLENDIVE GO T AN ENQUIRY FROM ARABIAN RESOURCES FZC, SHARJAH UAE (HEREINAFTE R REFERRED TO AS ARABIAN) FOR A SHIP TO TRANSPORT BAUXITE ORE FROM INDIA TO SHARJAH. ARABIAN WAS TO PURCHASE THIS ORE FROM ASH APURA MINES LTD. IN INDIA TO BE TAKEN TO SHARJAH. FOR THIS PUR POSE, GLENDIVE CHARTERED A SHIP FROM AQUAVITA ENTERED INTO AN AGRE EMENT WITH THEM FOR CHARTERING A SHIP ON 11.10.2011. THE SAID AGREEMENT IS PLACED AT PAGE NO.L OF PAPER BOOK FILED BY THE ASSE SSEE. FURTHER, GLENDIVE ENTERED INTO AN AGREEMENT WITH ARABIAN AS DETAILED ON PAGE 9 OF THE PAPER BOOK ON 11.10.2011 FOR MAKING A VAILABLE THE SHIP FOR TRANSPORTING BAUXITE ORE FROM INDIA TO SHA RJAH. AS MENTIONED ABOVE, GLENDIVE APPOINTED SHAAN AS ITS AG ENT FOR HANDLING THE LOADING OTHER OPERATIONS, FOR NECESSAR Y CLEARANCES FROM THE COURT, CUSTOMS, PHO, INCOME TAX, IMMIGRATI ON, ETC. IN INDIA AS DETAILED ON PAGE 17 OF THE PAPER BOOK FILE D BY THE ASSESSEE. THE BILL OF LADING IS PLACED ON PAGE 79 AND THE FREIGHT BILL IS ON PAGE 78 OF THE PAPER BOOK FILED BY THE A SSESSEE. THE BILL OF LADING GIVES THE DETAILS OF THE EXPORTER WHICH I S ASHAPURA MINCHEM LTD., THE ORE IS TO BE TRANSPORTED TO ARABI AN AND THE CARRIER IS GLENDIVE. GLENDIVE IS A COMPANY REGISTE RED IN CYPRUS AS DETAILED IN PAGE 20 AND ITS TAX RESIDENCE IS ALS O IN CYPRUS AS DETAILED IN PAGE 19 OF THE PAPER BOOK FILED BY THE ASSESSEE. SHAAN AS AN AGENT OF GLENDIVE FILED THE RETURN U/S 172 OF IT ACT AS PLACED ON PAGE 18 OF THE PAPER BOOK. IN THE SAI D RETURN, IT 8 DECLARED INCOME AT NIL BECAUSE AS PER ARTICLE 8 OF DTAA BETWEEN INDIA AND CYPRUS, IN THE SHIPPING BUSINESS, THE INCOME OF THE ENTITY IS TO BE TAXED IN THE COUNTRY WHEREIN THE ENTERPRISE IS REGISTERED AND IT IS HAVING ITS HEAD QUARTERS. ACCORDINGLY, AS GLENDIVE IS REGISTERED IN CYPRUS AND IT IS HAVING I TS HEAD QUARTERS IN CYPRUS, THE INCOME OF GLENDIVE IS NIL IN INDIA AS IT IS TAXABLE ONLY IN CYPRUS. ON THIS REASONING, SHAA N FILED THE RETURN OF GLENDIVE AS ITS AGENT U/S 172 DECLARING T HE INCOME OF NIL. 4.1 THE ASSESSING OFFICER ASSESSED SHAAN U/S 172 ON THE INCOME OF 40,63,125/- WHICH WAS CALCULATED AT 7.5% OF THE RECEIPTS OF GLENDIVE IN INDIA FROM THE SHIPPING BUS INESS. HE HELD THAT GLENDIVE IS ONE PERSON COMPANY HAVING NO STAFF , NO OFFICE, ETC. AND IT IS BEING INTERPOSED IN BETWEEN AS A CHA RTERER TO TAKE ADVANTAGE OF CYPRUS TREATY. ACCORDINGLY, THE EFFECT IVE MANAGEMENT OF GLENDIVE IS NOT IN CYPRUS. THUS, THE BENEFIT UNDER ARTICLE 8 OF TREATY COULD NOT BE GIVEN TO GLE NDIVE. THE ASSESSING OFFICER HELD THAT GLENDIVE IS TAXABLE U/S 172(4) ON ITS INCOME AND HE TAXED SHAAN AS AN AGENT OF GLENDIVE. AS STATED ABOVE, IN APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY OBSERVING THAT GLENDIVE IS NOT HAVING IT S EFFECTIVE MANAGEMENT IN CYPRUS. IT IS A ONE PERSON COMPANY. IT DOES NOT HAVE ANY OFFICE WHEREIN SOME STAFF IS WORKING. ACCO RDING TO HIM, AS PER THE OECD COMMENTARY, THE EFFECTIVE MANAGEMEN T IS TO BE DETERMINED ON THE FACTS OF THE CASE AND FOR THIS PU RPOSE, IT IS TO BE SEEN AS TO WHERE THE CONTROL, MANAGEMENT, STAFF, OFFICE, ETC. OF THE COMPANY ARE LOCATED. THE PLACE FROM WHICH THE A CTUAL SERVICES ARE RENDERED BY THE COMPANY IS TO BE SEEN. WHILE IN THIS CASE, GLENDIVE HAS NO BIG OFFICE ESTABLISHMENT, STA FF, ETC. IN CYPRUS AND HENCE, THE EFFECTIVE MANAGEMENT OF GLEND IVE IS NOT IN CYPRUS. ACCORDING TO HIM, THE ARTICLE 8 OF THE DTA A THEREFORE, DOES NOT APPLY IN ASSESSEE'S FAVOUR IN THIS CASE AN D THE INCOME OF 9 GLENDIVE IS TAXABLE IN INDIA U/S 172. THUS, HE CONF IRMED THE ORDER OF THE ASSESSING OFFICER ASSESSING THE INCOME IN THE HANDS OF SHAAN AS AN AGENT OF GLENDIVE U/S 172(4) OF THE ACT. 4.2 WE FIND IT UNDISPUTED THAT GLENDIVE IS A ONE PE RSON COMPANY REGISTERED IN CYPRUS AND IT HAS NO STAFF OR BIG OFFICE ESTABLISHMENT. IT HAS NO BRANCHES ANYWHERE IN THE WORLD AND AS EVIDENT FROM PAGE 19 & 20. AS STATED ABOVE, IT IS A RESIDENT IN CYPRUS FOR THE TAX PURPOSE AND IT IS INCORPORATED I N CYPRUS. ITS ONLY OFFICE ESTABLISHMENT IS IN CYPRUS. THE AUTHOR ITIES BELOW HAVE DOUBTED THE ROLE OF GLENDIVE AS A CHARTERER OF THE SHIP FOR TRANSPORTING THE ORE FROM INDIA TO SHARJAH. ACCORD ING TO THEM, THIS BEING ONE PERSON COMPANY HAVING NO OFFICE ESTA BLISHMENT AS SUCH, IT IS INTERPOSED IN BETWEEN ONLY FOR TAKING A DVANTAGE OF THE DTAA. WE FIND THAT ARABIAN HAS MADE A CONTRACT WITH GLENDIVE AS A CHARTERER OF THE SHIP. GLENDIVE HAS A CONTRAC T WITH AQUAVITA FOR CHARTERING THE SHIP. THE BILL OF LADING AS PLA CED ON PAGE 79 OF THE PAPER BOOK, RECOGNIZED GLENDIVE AS THE SHIP CHA RTERER IN THIS CASE. THE GLENDIVE HAS PLAYED DEFINITE ROLE IN TRA NSPORTING THE ORE BY SHIP FROM INDIA TO SHARJAH WHICH IS EVIDENT FROM THE FACT THAT ALL CONTRACTS AND THE BILL OF LADING HAVE BEEN MADE IN THE NAME OF GLENDIVE. GLENDIVE HAS GIVEN ITS ANNUAL RE PORT AS PLACED ON PAGE 21 ONWARDS AND IN THE P & L ACCOUNT AS PLAC ED ON PAGE 27 OF THE PAPER BOOK, WHEREIN IT HAS INCORPORATED A LL THE RECEIPTS IN THIS YEAR AND NOT JUST THE COMMISSION. ALL THES E DOCUMENTS AND THE CONTRACTS HAVE ACKNOWLEDGED THE ROLE OF GLE NDIVE AS A SHIP CHARTERER. IN SUCH A SCENARIO, THE AUTHORITIE S BELOW WERE NOT JUSTIFIED IN HOLDING THAT GLENDIVE HAS NOT PLAY ED ANY ROLE. IT IS JUST A PAPER COMPANY AND HAS NOT PLAYED ANY ROLE IN TRANSPORTING ORE FROM INDIA TO SHARJAH. THE AUTHOR ITIES BELOW HAVE TRIED TO REWRITE THESE CONTRACTS MENTIONED ABO VE, WHICH IS NOT PERMISSIBLE. 10 4.3 IT IS PERTINENT TO MENTION HERE THAT THE AUTHOR ITIES BELOW HAVE TAXED INCOME IN THE HANDS OF SHAAN AS AN AGENT OF GLENDIVE. IF IN THEIR OPINION GLENDIVE MAY BE BOGU S ENTITY INTERPOSED IN BETWEEN TO TAKE ADVANTAGE OF CYPRUS T REATY, THEN IT IS NOT THE INCOME OF GLENDIVE BUT THAT OF AQUAVITA. ON ONE SIDE, THEY ARE TAXING THE INCOME IN THE HANDS OF GLENDIVE AND ON THE OTHER HAND, THEY HOLD THAT GLENDIVE IS ONLY A PAPER COMPANY. IF IN THEIR OPINION IT IS THE INCOME OF GLENDIVE, IN T HAT EVENT, IT IS TO BE NOTED THAT GLENDIVE DOES NOT HAVE ANY ESTABLISHM ENT OUTSIDE CYPRUS. ACCORDINGLY, THE INCOME ARISES TO IT IN CY PRUS ONLY. IT IS NOT THE CASE OF THE AUTHORITIES BELOW THAT GLENDIVE HAS ANY ESTABLISHMENT OUTSIDE CYPRUS. ACCORDING TO AUTHORI TIES BELOW, GLENDIVE IS JUST A PAPER COMPANY AND HAS BEEN INTER POSED IN THE TRANSACTION AS A CHARTERER. IN THAT EVENT, THE INCO ME WOULD ACCRUE TO AQUAVITA AND NOT GLENDIVE. THIS APPROACH OF AUTHORITIES BELOW IS NOT JUSTIFIED. THE OTHER REAS ONING GIVEN BY AUTHORITIES BELOW IS THAT THE EFFECTIVE MANAGEMENT OF GLENDIVE CANNOT BE IN CYPRUS BECAUSE IT HAS NO STAFF, BIG OF FICE ESTABLISHMENT IN CYPRUS AND IT IS A ONE PERSON COMP ANY. HE HAS RELIED ON THE OECD COMMENTARY WHICH EXPLAINS THE WO RDS 'EFFECTIVE MANAGEMENT'. THE INDO CYPRUS TREATY DEF INES THE WORDS 'EFFECTIVE MANAGEMENT' IN ARTICLE 8 ITSELF. ARTICLE 8 ON PAGE 82 OF THE PAPER BOOK CLEARLY MENTIONED THAT IF THE ENTERPRISE IS REGISTERED AND IS HAVING THE HEAD QUARTERS IN A COU NTRY, IT IS THE EFFECTIVE MANAGEMENT. WHILE OTHER TREATIES LIKE TH E ONES WITH MAURITIUS, POLAND, NETHERLANDS DO NOT DEFINE THE WO RDS 'EFFECTIVE MANAGEMENT' IN THE ARTICLE 8 THEREOF. THUS, FOR INT ERPRETING, THESE TREATIES, RELIANCE MAY BE PLACED ON THE OECD COMMEN TARY BUT SO FAR AS THE CYPRUS TREATY IS CONCERNED, THERE IS NO REASON TO RELY UPON TO OECD COMMENTARY BECAUSE ARTICLE 8 ITSE LF HAS DEFINES THE TERM. HENCE, IN OUR CASE, WHEN ARTICLE 8 OF CYPRUS TREATY EXPLAINS CLEARLY THE WORD 'EFFECTIVE MANAGEM ENT', THERE IS NO NEED TO REFER TO OECD COMMENTARY OR OTHER SOURCE S FOR THE 11 MEANING OF THESE WORDS. IN VIEW OF THE ABOVE, THE CIT(A) ERRED IN HOLDING THAT THE INCOME OF GLENDIVE WAS TAXABLE U/S 172(4) IN THE HANDS OF SHAAN MARINE AS AN AGENT AND THE TREATY BE NEFITS WERE NOT AVAILABLE TO GLENDIVE. THE ASSESSING OFFICER I S DIRECTED ACCORDINGLY. 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 27 TH OF MAY, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 27 TH MAY, 2014 GCVSR COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT(A)-IT/TP, PUNE 4) THE CIT-IT/TP, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE