DDIT(IT)-2(1), MUMBAI V. M/S SAFMARINE CONTAINER LINES NV, MUMBAI

ITA 3073/MUM/2010

• Counselvise Citation: 307319914 RSA 2010
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 22-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 19-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Retrospective amendment
• Section: 143(3)

Judgement Text

ITA NO. 3 073/MUM/10 ASSESSMENT YEAR: 2007- 08 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH, MUMBAI [CORAM: D K AGARWAL JM AND PRAMOD KUMAR AM] ITA NO. 3073/MUM/10 ASSESSMENT YEAR: 2007-08 DY. DIRECTOR OF INCOME TAX - INTERNATIONAL TAXATION 2(1), MUMBAI APPELLANT VS. SAFMARINE CONTAINER LINES NV ... RESPO NDENT C/O MAERSK INDIA PRIVATE LIMITED C G HOUSE, 11 TH FLOOR, DR ANNIE BEASANT ROAD MUMBAI 400 030 ( PAN AACCS0742A) APPEARANCES: SUMMET KUMAR, FOR THE APPELLANT O R D E R PER PRAMOD KUMAR : 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF CIT(A)S ORDER DATED 28 TH JANUARY 2010, IN THE MATTER OF ASSESSMENT UNDER SE CTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSM ENT YEAR 2007-08, ON THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN HOLDING THAT INCOME FROM INLAND HAULAGE CH ARGES IS INCIDENTAL AND CLEARLY CONNECTED WITH DIRECT OPERATIONS OF SHIPS, AND, THEREFORE, NOT LIABLE TO TAX IN INDIA IN TERMS OF ARTICLE 8 OF INDO BELGIUM DTAA IGNORING THE FACT THAT : I. THE ACTIVITY OF INLAND TRANSPORTATION CANNOT BE CON SIDERED AS INTERNATIONAL TRANSPORT AND BY THE VIRTUE OF THAT FACT, IT SHOULD BE TAXED IN THE SOURCE COUNTRY; AND II. THE INLAND HAULAGE CHARGES ARE TAXABLE IN INDIA AS BUSINESS PROFITS AS THE SAME ARE NOT COVERED BY SECTION 44B OF THE ACT. ITA NO. 3 073/MUM/10 ASSESSMENT YEAR: 2007- 08 PAGE 2 OF 7 2. GRIEVANCE OF THE ASSESSING OFFICER THUS IS THAT INCOME FROM INLAND HAULAGE, NOT BEING IN THE NATURE OF INCOME FROM OPERATIONS O F SHIPS IN INTERNATIONAL TRAFFIC, IS REQUIRED TO BE TAXED IN THE SOURCE COUNTRY, I.E. IN DIA, AND THE PROVISIONS OF ARTICLE 8 OF INDIA BELGIUM DTAA WILL NOT COME INTO PLAY TO AFFECT THE SAID TAXABILITY. IT IS ALSO CONTENDED THAT SINCE INLAND HAULAGE CHARGES ARE NOT COVERED BY THE SPECIFIC PROVISIONS OF SECTION 44B OF THE ACT, THE INCOME FR OM SUCH INLAND HAULAGE CHARGES IS REQUIRED TO BE TAXED AS A NORMAL BUSINESS PROFIT, O N NET BASIS, AT THE REGULAR TAX RATE. 3. BRIEFLY STATED, MATERIAL FACTS ARE LIKE THIS. TH E TAXPAYER BEFORE US, A TAX RESIDENT OF BELGIUM, IS ENGAGED IN THE BUSINESS OF OPERATIONS OF SHIPS IN INTERNATIONAL TRAFFIC. DURING THE COURSE OF SCRUTIN Y ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, INTER ALIA, NOTICED THAT THE ASS ESSEE IS COLLECTING INLAND HAULAGE CHARGES, FROM ITS CUSTOMERS, IN RESPECT OF GOODS BE ING TRANSPORTED FROM THE PLACES WHERE CONTAINERS ARE STUFFED, INLAND CONTAINER DEPO TS (ICD), TO THE PORT WHERE THESE GOODS ARE TO BE LOADED IN THE SHIPS FOR INTERNATION AL TRAFFIC. FOR EXAMPLE, IF THE SHIPPING COMPANY PICKS UP EXPORT CONSIGNMENTS, FROM SAY NEW DELHI FOR SHIPMENT TO MOMBASA, THE ASSESSEE BILLS THE EXPORTER OF SUCH GOODS INLAND HAULAGE CHARGES FROM NEW DELHI TO MUMBAI, AND ALSO BILLS THE EXPORT ER OCEAN FREIGHT FROM MUMBAI TO MOMBASA. THE ASSESSING OFFICER WAS OF THE VIEW T HAT IN SUCH A CASE, THE INCOME FROM INLAND HAULAGE CHARGES, I.E. TRANSPORTATION CO ST OF GOODS FROM NEW DELHI TO MUMBAI, SHOULD BE TAXED IN INDIA. IT WAS EXPLAINED BY THE ASSESSEE THAT THE FREIGHT BILL ISSUED BY THE CUSTOMER WAS FOR THE ENTIRE TRAN SPORTATION CHARGES, I.E. OCEAN FREIGHT, INLAND HAULAGE CHARGES, DETENTION CHARGES ETC, AND THE FREIGHT BILL WAS ISSUED FOR ENTIRE LEG OF TRANSPORTATION, INCLUDING INLAND TRANSPORTATION. IT WAS ALSO SUBMITTED THAT THE AMOUNT BILLED FOR INLAND HAULAGE CHARGES INCLUDED FOLLOWING SERVICES (I) PLACEMENT OF EMPTY CONTAINERS FROM E MPTY YARDS TO STUFFING POINT, (II) PROVIDING LABOUR FOR ALL LOADING, CARTING AND STUFF ING CARGO , (III) PROVIDING FORKLIFT AND OTHER EQUIPMENT FOR CARTING AND STUFFING CARGO, (IV) MOVEMENT OF LOADED CONTAINERS FROM CONTAINER FREIGHT STATION TO LOADIN G PORT, (V) PROVIDING CARGO INSPECTION TO SURVEYORS, AND (VI) TRANSPORTATION AN D MOVEMENT OF CONTAINERS FROM INLAND CONTAINER DEPOT (ICD) TO LOADING PORT (JNPT) IN MUMBAI. IT WAS THEN SUBMITTED THAT, IN VIEW TO RETROSPECTIVE AMENDMENT W.E.F. 1 ST APRIL 1976, BROUGHT ITA NO. 3 073/MUM/10 ASSESSMENT YEAR: 2007- 08 PAGE 3 OF 7 ABOUT BY FINANCE ACT 1997 IN SECTION 44B, THE SCOPE OF SECTION 44 B IS EXTENDED TO DEMURRAGE CHARGES, HANDLING CHARGES OR ANY OTHER A MOUNT OF SIMILAR NATURE, WHICH, ACCORDING TO THE ASSESSEE, INCLUDED INLAND HAULAGE CHARGES AS WELL. IT WAS CONTENDED THAT SINCE INLAND HAULAGE CHARGES WAS COVERED BY SE CTION 44B AND WAS REQUIRED TO BE TREATED AS FREIGHT INCOME , THE SAME IS NOT TA XABLE IN INDIA IN TERMS OF THE PROVISIONS OF ARTICLE 8 OF INDO BELGIUM TAX TREATY. RELIANCE WAS ALSO PLACED ON DECISIONS OF THE TRIBUNAL, IN ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 1988-89 AND 1993-94, AND OTHER LATER YEARS. RELIANCE WAS AL SO PLACED ON DECISION OF A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF A P MOLLER, MAERSK AGENCY INDIA PVT LTD VS DCIT (89 ITD 563) AND OF HONBLE CALCUTTA HI GH COURTS JUDGMENT IN THE CASE OF CIT VS NIPPON YUSEN KAISHA (233 ITR 158). REFERE NCES WERE ALSO MADE TO THE UN AND OECD MODEL CONVENTION COMMENTARIES, AS ALSO TO KLAUS VOGELS BOOK ON DOUBLE TAXATION CONVENTIONS. NONE OF THESE SUBMISSIONS, H OWEVER, IMPRESSED THE ASSESSING OFFICER. 4. THE ASSESSING OFFICER CONCLUDED THAT INLAND HAUL AGE CHARGES ARE NOT OF THE SAME NATURE AS HANDLING CHARGES INASMUCH AS WHILE F ORMER IS A CHARGE FOR DOMESTIC TRANSPORTATION OF GOODS, THE LATTER IS TOWARDS ACT IVITIES SUCH AS LOADING, UNLOADING, STACKING ETC. ACCORDINGLY, THE INLAND HAULAGE CHARG ES WERE UNAFFECTED BY THE EXPLANATION INSERTED TO SECTION 44 B, AND THE SAME COULD NOT BE SAID TO BE WITHIN PURVIEW OF SECTION 44B AS FREIGHT INCOME. HE FURTHE R POINTED OUT THAT TRANSPORTATION COULD BE (I) FROM PREMISES OF THE SH IPPER TO THE PORT OF LOADING, AND (II) FROM PORT OF LOADING TO THE PORT OF DESTINATIO N, AND THAT IT IS ONLY (II) WHICH CAN BE TREATED AS INTERNATIONAL TRANSPORTATION AND, ACC ORDINGLY, OUTSIDE THE AMBIT OF SOURCE TAXATION UNDER ARTICLE 8. HE WAS FURTHER OF THE VIEW THAT THE ACTIVITY OF INLAND HAULAGE IS A CLEARLY DISTINCT ACTIVITY, AND, MERELY BECAUSE IT WAS UNDERTAKEN BY A FOREIGN ENTITY, INCOME FROM THIS INLAND TRANSPORTAT ION ACTIVITY CAN NOT BE TAKEN OUT OF SOURCE TAXATION IN INDIA. THE ASSESSING OFFICER ALSO REJECTED ASSESSEES CONTENTION THAT THE INLAND HAULAGE IS DIRECTLY CONNECTED TO THE ACTIVITY OF INTERNATIONAL OPERATION OF SHIPS, AND A REFERENCE WAS MADE TO RES ERVATIONS EXPRESSED BY SOME DEVELOPING COUNTRIES, IN COMMENTARY ON UN MODEL CON VENTION, ON THE SCOPE OF ARTICLE 8. THE ASSESSING OFFICER WAS OF THE VIEW T HAT AS THE ASSESSEE CARRIED ON ITA NO. 3 073/MUM/10 ASSESSMENT YEAR: 2007- 08 PAGE 4 OF 7 BUSINESS IN INDIA THROUGH A DEPENDENT AGENT, THE DA PE EXISTED UNDER ARTICLE 5, AND THE PROFITS OF ASSESSEES BUSINESS, TO THE EXTENT O F INLAND HAULAGE CHARGES, WEE TAXABLE UNDER ARTICLE 7 ON THE NET BASIS. HE ALSO N OTED THAT THERE IS A DECISION OF THE TRIBUNAL, IN FAVOUR OF THE ASSESSEE, BUT ATTEMPTED TO REASON THAT THE DECISION OF THE COORDINATE BENCH IS INCORRECT AND INAPPROPRIATE TO THE ADMITTED FACTS OF THE CASE. HE THUS PROCEEDED TO BRING TO TAX INCOME, ON ESTIMA TE BASIS @ 7.5% OF GROSS INLAND HAULAGE CHARGES, AT RS 2,85,62,128. AGGRIEVED, ASS ESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO, FOLLOWING THE STAND T AKEN BY COORDINATE BENCHES OF THIS TRIBUNAL, REVERSED THE ACTION OF THE ASSESSING OFFICER. THE ASSESSING OFFICER IS AGGRIEVED OF THE STAND SO TAKEN BY THE CIT(A) AND I S IN APPEAL BEFORE US. 6. HAVING HEARD THE LEARNED DEPARTMENTAL REPRESENTA TIVE AND HAVING PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE ISSUES RAI SED IN THIS APPEAL ARE SQUARELY COVERED BY DECISION OF A COORDINATE BENCH, IN ASSES SEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02 (REPORTED AS DDIT VS SAFMAR INE CONTAINER LINES NV, 120 ITD 71), WHEREIN THE COORDINATE BENCH HAS, INTER AL IA, OBSERVED AS FOLLOWS: 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RELEVANT MATERIAL ON RECORD. FROM THE LANGUAGE OF ARTICLE 8 IT CLEARLY EMERGES T HAT THE INCOME DERIVED FROM THE OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC SHALL ALSO INCLUDE I NCOME FROM ANY OTHER ACTIVITY DIRECTLY CONNECTED WITH SUCH TRANSPORTATION. THIS EXPRESSIO N HAS NOT BEEN FURTHER ELABORATED IN THE DTAA INASMUCH AS SUCH OTHER ACTIVITIES HAVE NOT BEE N EXHAUSTIVELY SPELT OUT. UNDER THESE CIRCUMSTANCES, IT IS IMPERATIVE TO GO BY THE COMMEN TARIES FOR ASCERTAINING THE TRUE PURPORT OF THIS EXPRESSION. AT THIS STAGE, IT WOULD NOT BE OUT OF PLACE TO TAKE STOCK OF THE OVERALL ACTIVITY OF THE ASSESSEE-COMPANY. ITS BUSINESS IS TO COLLECT TH E CARGO FROM THE STATION OF THE EXPORTER THEN BRING IT TO MUMBAI PORT FROM WHERE ITS VESSELS CARRY IT TO THE DESTINATION STATION OUT OF INDIA. PAGE 7 OF THE PAPER BOOK IS A COPY OF BILL O F LADING FOR THE COMBINED TRANSPORT OF THE CYCLE PARTS FROM LUDHIANA TO NAIROBI. THE ASSESSEE IS CARRYING THE HERO CYCLES PARTS ETC., IN ITS CONTAINERS FROM LUDHIANA, BRINGING THE SAME TO MUMBAI AND THEN SHIPPING THEM TO NAIROBI. INSOFAR AS THE ASSESSEES INCOME FROM MUMBAI TO THE NAIROBI IS CONCERNED, THE ASSESSING OFFICER HAS ACCEPTED THE APPLICABILITY OF ARTICLE 8 ON IT AND HELD IT TO BE NOT TAXABLE IN INDIA. THE DISPUTE CENTRES AROUND THE TRANSPORTATION CHARG ES RECEIVED BY IT FOR CARRYING THE CARGO FROM LUDHIANA TO MUMBAI. NOW, WE HAVE TO DETERMINE AS TO WHETHER SUCH INLAND TRANSPORTATION CHARGES CAN BE BROUGHT WITHIN THE AM BIT OF AN ACTIVITY DIRECTLY CONNECTED WITH SUCH TRANSPORTATION. OECD COMMITTEE ON FISCAL AFFA IRS HAS DISCUSSED THIS ASPECT IN PARA 7 PAGE 134. ACCORDING TO IT, AN ENTERPRISE THAT TRANS PORTS PASSENGERS OR CARGO BY SHIPS OR AIRCRAFTS OPERATING IN INTERNATIONAL TRAFFIC WHICH UNDERTAKES TO HAVE THOSE PASSENGERS OR CARGO PICKED UP IN THE COUNTRY WHERE THE TRANSPORT ORIGIN ATES OR TRANSPORTED OR DELIVERED IN THE COUNTRY OF DESTINATION BY ANY MODE OF INLAND TRANSP ORTATION OPERATED BY OTHER ENTERPRISE SHALL BE CONSIDERED AS AN EXAMPLE OF THE ACTIVITIES, DIRE CTLY CONNECTED WITH THE OPERATION OF SHIPS OR AIRCRAFTS IN THE INTERNATIONAL TRAFFIC. KLAUS VOGEL ON DOUBLE TAXATION CONVENTIONS HAS REMARKED IN HIS COMMENTARY ON PAGE 480 THAT IF AN ENTERPRISE ENGAGED IN INTERNATIONAL TRANSPORT UNDERTAKES TO SEE TO IT THAT IN CONNECTIO N WITH SUCH TRANSPORT, GOODS ARE DELIVERED DIRECTLY TO THE CONSIGNEE IN THE OTHER CONTRACTING STATE, SUCH INLAND TRANSPORTATION IS ITA NO. 3 073/MUM/10 ASSESSMENT YEAR: 2007- 08 PAGE 5 OF 7 CONSIDERED TO FALL WITHIN THE SCOPE OF THE INTERNAT IONAL OPERATION OF SHIPS OR AIRCRAFT AND, THEREFORE, IS COVERED BY THE PROVISIONS OF THIS ART ICLE. IN PARA 8, CERTAIN ACTIVITIES HAVE BEEN LISTED TO ]WHICH THIS PROVISION WOULD APPLY. IT, IN TER ALIA INCLUDES TRANSPORTATION OF GOODS BY TRUCK CONNECTING A DEPOT WITH A PORT OR AIRPORT. O N PAGE 486 OF THE COMMENTARY, IT HAS BEEN MENTIONED THAT TRANSPORTATION OF THE CONTAINERS FR OM THE CONSIGNOR TO THE ULTIMATE CONSIGNEE FALLS WITHIN THE SCOPE OF OPERATING SHIPS OR AIRCRA FT IN INTERNATIONAL TRAFFIC. FROM THE ABOVE DISCUSSION, IT IS VIVID THAT ANY OTHER ACTIVITY DIR ECTLY CONNECTED WITH SUCH TRANSPORTATION INCLUDES ALL SUCH FUNCTIONS WHICH FACILITATE THE CA RRYING OF CARGO FROM THE PLACE OF ORIGIN TO THE PLACE OF DESTINATION IN UNISON. IT WOULD NOT ONLY I NCLUDE THE ACTUAL TRANSPORTATION BY SEA FROM MUMBAI PORT, IN THE PRESENT CASE TO NAIROBI BUT ALS O CARRYING THE GOODS FROM LUDHIANA TO MUMBAI PORT, AS WELL. IT IS ONE COMPOSITE ACTIVITY WHICH HAS BEEN BIFURCATED FOR CONVENIENCE INTO TWO PARTS. IT HAS BEEN INFORMED BY THE LEARNED AR THAT THE STUFFING OF THE CARGO INTO THE CONTAINERS IS DONE AT LUDHIANA AND THE GOODS ARE SE ALED BY THE CUSTOM AUTHORITIES AFTER VERIFICATION THERE ONLY. THIS SUBMISSION HAS NOT BE EN CONTROVERTED BY THE LEARNED DR. IT IS FURTHER NOTED THAT THE BILL OF LADING ISSUED BY THE ASSESSEE IS FOR COMBINED TRANSPORT FROM LUDHIANA TO NAIROBI. UNLESS THE GOODS ARE CARRIED U P TO THE MUMBAI PORT, THEY CANNOT BE SHIPPED TO NAIROBI. HENCE THE ACTIVITY OF BRINGING THE GOODS FROM LUDHIANA IS AN ACTIVITY WHICH IS DIRECTLY CONNECTED WITH THE TRANSPORTATION OF GO ODS FROM MUMBAI TO NAIROBI. IT IS WHOLLY UNREALISTIC TO SEGREGATE THIS COMPOSITE ACTIVITY IN TO TWO PARTS AND CONTEND THAT THE TRANSPORTATION UP TO MUMBAI PORT IS A DISTINCT ACTI VITY DE HORS THE FURTHER TRANSPORTATION BY SHIP FROM MUMBAI TO NAIROBI OR OTHER COUNTRIES. THE SITU ATION WOULD HAVE BEEN OTHERWISE IF THE ASSESSEE HAD ONLY COLLECTED CARGO FROM LUDHIANA AND DROPPED IT AT MUMBAI WITHOUT ANY FURTHER OBLIGATION OF SHIPPING IT FROM MUMBAI TO NA IROBI. IN SUCH AN EVENTUALITY, THE INLAND TRANSPORATION CHARGES WOULD OBVIOUSLY HAVE BEEN OUT SIDE THE PURVIEW OF ANY OTHER ACTIVITY DIRECTLY CONNECTED WITH SUCH TRANSPORTATION. SINCE THE ASSESSEE IN THE PRESENT CASE IS ITSELF TRANS-SHIPPING THE GOODS TO OTHER, DESTINATION COUN TRIES, THIS SMALL PORTION OF ITS TOTAL RECEIPTS, WHICH HARDLY ACCOUNTS FOR 5 PER CENT, CANNOT BE DET ACHED FROM THE MAIN ACTIVITY OF TRANSPORTATION BY THE OPERATION OF SHIPS IN THE INT ERNATIONAL TRAFFIC. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE EARNED FREIGHT FOR CARRYI NG THE GOODS OF OTHER PARTIES ALSO UP TO MUMBAI PORT FOR SHIPMENT BY SOME THIRD PARTY. IT, T HEREFORE, SHOWS THAT ALL THE INLAND TRANSPORTATION CHARGES RECEIVED BY THE ASSESSEE ARE IN CONNECTION WITH THE GOODS WHICH ARE FINALLY LOADED ON ITS OWN SHIPS AT MUMBAI FOR SHIPP ING TO THE OTHER COUNTRIES. THE LEARNED D.R. HAS EMPHA-SIZED ON THE WORDS CONNECTED WITH SUCH T RANSPORTATION FOR UNDERSTANDING TO MEAN ONLY THE LOADING AND UNLOADING OF THE CARGO AT THE PORT ITSELF. WE ARE NOT CONVINCED WITH THIS VIEW CANVASSED BY HER FOR THE REASON THAT THE PRECEDING WORDS ANY OTHER ACTIVITY DIRECTLY JOINED BY CONNECTED WITH SUCH TRANSPORTA TION, HAVE TO BE INTERPRETED IN A LOGICAL MANNER SO AS NOT TO RESTRICT ITSELF ONLY TO THE ACT IVITIES DONE AT PORT OR DURING THE VOYAGE ONLY. THIS EXPRESSION WOULD EXTEND TO OTHER ACTIVITIES BE YOND PORTS ALSO IF THEY ARE DIRECTLY RELATED TO THE MAIN ACTIVITY OF TRANSPORTATION BY SHIP. 16. MUCH STRESS HAS BEEN LAID BY THE LD. DR ON THE DEFINITION OF THE TERM INTERNATIONAL TRAFFIC IN ARTICLE 3(1)(I) FOR BOLSTERING HER SUBMISSION TH AT THE ACTIVITY OF SHIP OPERATING SOLELY IN ONE CONTRACTING STATE WAS NOT CONSIDERED AS THE INTERNA TIONAL TRAFFIC. WE FAIL TO APPRECIATE AS TO HOW THIS DEFINITION IS BRINGING THE CASE OF THE REV ENUE ANY FURTHER. THE SCOPE OF ARTICLE 8 IS NOT RESTRICTED ONLY TO THE INCOME DERIVED FROM THE OPERATION OF SHIPS IN THE INTERNATIONAL TRAFFIC AS UNDERSTOOD IN THE LITERAL SENSE. IT HAS ELABORAT ED THE AMBIT OF INCOME DERIVED FROM THE OPERATION OF SHIPS OR AIRCRAFTS IN THE INTERNATIONA L TRAFFIC BY ALSO, INTER ALIA INCLUDING INTEREST O N FUNDS DIRECTLY CONNECTED WITH THE OPERATION OF SHIP S OR AIRCRAFTS IN THE INTERNATIONAL TRAFFIC, SALE OF TICKETS FOR TRANSPORTATION ON BEHALF OF OTHER EN TERPRISES AND INCOME DERIVED FROM THE USE, MAINTAINING, RENTAL OF CONTAINERS, ETC. THIS DEMONS TRATES THE INTENTION OF THE CONTRACTING STATES IN GIVING A WIDER MEANING TO THE ABOVE EXPRE SSION. IF THE CONTENTION RAISED ON BEHALF OF THE DEPARTMENT IS ACCEPTED AND THE SCOPE OF THIS AR TICLE IS COMBINED ONLY TO THE INCOME DERIVED FROM THE OPERATION OF SHIPS IN THE INTERNAT IONAL TRAFFIC, THEN THE OTHER CLAUSES OF THIS ARTICLE WOULD BECOME REDUNDANT. UNDER THESE CIRCUMS TANCES WE ARE OF THE CONSIDERED OPINION THAT IN THIS TREATY, THE INLAND TRANSPORTATION IF C OUPLED WITH THE FURTHER SHIPPING OF CARGO ALSO BY ITA NO. 3 073/MUM/10 ASSESSMENT YEAR: 2007- 08 PAGE 6 OF 7 THE ASSESSEE FROM INDIAN PORT TO THE FOREIGN COUNTR Y, WOULD BE CONSTRUED AS THE ACTIVITY DIRECTLY CONNECTED WITH SUCH TRANSPORTATION. HENCE THE CASE WOULD SQUARELY FALL UNDER ARTICLE 8(2)(B)(II). WE APPRECIATE THAT IN SOME TREATIES TH E INCOME FROM JOURNEY BETWEEN STATES CONNECTED WITH THE CONTRACTING STATES HAS BEEN KEPT OUTSIDE THE PURVIEW OF INCOME FROM THE OPERATION OF SHIPS IN THE INTERNATIONAL TRAFFIC. FO R EXAMPLE, CLAUSE 2 OF ARTICLE 9 OF DTAA BETWEEN INDIA AND U.K. SPECIFICALLY PROVIDES THAT T HE PROVISIONS OF PARA 1 OF THIS ARTICLE SHALL NOT APPLY TO INCOME FROM JOURNEYS BETWEEN PLACES SI TUATED IN A CONTRACTING STATE. IN THE ABSENCE OF ANY SIMILAR CLAUSE IN THE DTAA BETWEEN I NDIA AND BELGIUM, WE ARE OF THE CONSIDERED OPINION THAT THE INLAND TRANSPORTATION W OULD BE COVERED WITHIN ARTICLE 8(2)(B)(II). 6. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. IN ANY EVENT, WE ARE IN CONSIDERED AND RESPECTFUL AGREEMENT WITH THE VIEWS OF THE COORDINATE BENCH. T HE CIT(A) HAS, IN THE IMPUGNED ORDER, MERELY FOLLOWED THE SAID ORDER OF THE COORDI NATE BENCH, AND THERE CANNOT BE ANY INFIRMITY IN THIS ACTION OF THE CIT(A). THE MER E FACT THAT THE ASSESSING OFFICER HAS CHALLENGED THE ORDER OF THE TRIBUNAL IN FURTHER APPEAL BEFORE HONBLE HIGH COURT DOES NOT DILUTE OR NEGATE THE BINDING NATURE OF THE COORDINATE BENCHS DECISION, AS LONG AS THE DECISION IS NOT REVERSED BY THE HIGHER APPELLATE AUTHORITY WHICH IS NOT THE CASE BEFORE US. AS REGARDS THE PLEA EMBEDDED IN THE GROUND OF APPEAL TO THE EFFECT THAT SINCE INLAND HAULAGE CHARGES EARNED BY THE ASSESSEE ARE NOT EARNED IN THE COURSE OF INTERNATIONAL TRAFFIC OF SHIPS, THE SE CHARGES SHOULD BE HELD TO BE TAXABLE IN THE SOURCE COUNTRY, WE SEE NO MERITS IN THIS PLEA EITHER. IT IS ONLY ELEMENTARY THAT TAX TREATIES DO RESTRICT THE SOURCE TAXATION RIGHT, TO THE EXTENT EXCLUSIVE RESIDENCE TAXATION IS CONTEMPLATED IN RES PECT OF INCOME SOURCED IN THE OTHER CONTRACTING STATE, AND, THEREFORE, AS LONG AS TREATIES PROVIDE FOR SUCH EXCLUSIVE RESIDENCE TAXATION OF ANY INCOME, WHETHER IT IS JUS TIFIED ON THE FIRST PRINCIPLES OR NOT, THE SOURCE TAXATION CANNOT BE INVOKED IN RESPE CT OF THE SAME. IT IS NOT FOR US TO QUESTION THE BASIS ON WHICH TAXATION RIGHTS ARE GIV EN UP BY SOURCE JURISDICTION, SINCE TO DO SO, WE WILL HAVE TO TRAVERSE MUCH BEYON D THE SCOPE AND CALL OF OUR DUTY WHICH IS CONFINED TO INTERPRETING THE PROVISIONS OF THE TREATY AS THEY EXIST. A COORDINATE BENCH OF THIS TRIBUNAL, AS DISCUSSED EAR LIER, HAS ALREADY HELD THAT AN INCOME COVERED BY ARTICLE 8 OF THE INDO BELGIUM TAX TREATY, WHICH IMPUGNED INCOME HAS BEEN HELD TO BE, IS SUBJECT TO EXCLUSIVE RESIDE NCE TAXATION, AND WE HAVE EXPRESSED OUR CONSIDERED AGREEMENT WITH THE VIEW SO TAKEN. THE ISSUE REGARDING TAXABILITY OF IMPUGNED INCOME UNDER THE PROVISIONS OF THE INCOME TAX ACT IS WHOLLY ACADEMIC INASMUCH AS ONCE WE HOLD THAT UNDER THE IN DO BELGIUM TAX TREATY, THE SOURCE TAXATION RIGHTS IN RESPECT OF THIS INCOME HA VE BEEN GIVEN UP BY THE ITA NO. 3 073/MUM/10 ASSESSMENT YEAR: 2007- 08 PAGE 7 OF 7 CONTRACTING STATES, IT IS NOT AT ALL RELEVANT WHETH ER OR NOT SUCH AN INCOME COULD AT ALL BE SUBJECTED TO SOURCE TAXATION UNDER THE DOMESTIC LAW. IN THIS VIEW OF THE MATTER, AND RESPECTFULLY FOLLOWING THE COORDINATE BENCHS D ECISION, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 7. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNC ED IN THE OPEN COURT TODAY ON 8 TH DAY OF APRIL, 2011. SD/- SD/- (D K AGARWAL ) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOU NTANT MEMBER MUMBAI; 8 TH DAY OF APRIL , 2011 . COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. DIT (INTERNATIONAL TAXATION) , MUMBAI 4. COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, G BENCH, MUMBAI 6. GUARD FILE TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI