THE DY. DIT (IT) 1(2), MUMBAI V. M/S. DELMAS FRANCE, MUMBAI

ITA 3879/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1003 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: L
• Assessment Year: 2003-2004
• Appeal Filed On: 17-05-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MAYANK PRIYADARSHI
• Keywords: Double taxation relief; Principle of natural justice; Additional evidence; Permanent establishment; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, L, MUMBAI BEFORE S/SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 3199/MUM/2007 (ASSESSMENT YEAR: 2003-04) DELMAS FRANCE, C/O. CMA CGM GLOBAL (INDIA) PVT.LTD., HAMILTON HOUSE, 8, J.N.HEREDIA MARG, BALLARD ESTATE, MUMBAI 400 038. PAN NO.AABCD 6672 P APPELLANT VS DEPUTY DIRECTOR OF INCOME-TAX, (INTERNATIONAL TAXATION)- OSD-RANGE-1, SCINDIA HOUSE, BALLARD ESTATE, MUMBAI 400 038 . RE SPONDENT ITA NO. 3879/MUM/2007 (ASSESSMENT YEAR: 2003-04) DEPUTY DIRECTOR OF INCOME-TAX, (INTERNATIONAL TAXATION)-1(2), MUMBAI APPELLANT V/S DELMAS FRANCE, ..RESPONDENT ASSESSEE BY : MR.FARROKH IRAN I REVENUE BY : MR.MAYANK PRIYA DARSHI ITA NO. 3199/MUM/2007 ITA NO. 3879/MUM/2007 (ASSESSMENT YEAR: 2003-04) 2 O R D E R PER BENCH THESE CROSS-APPEALS ARE DIRECTED AGAINST THE ORDER DATED 31.01.2007 OF CIT(A)--XXXI, MUMBAI FOR THE ASSESSMENT YEAR 2003-04. ITA NO. 3879/MUM/2007 (BY REVENUE) 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACT AN DIN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO RELIEF AS PER ART ICLE 9 OF THE DTAA. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE INLAND HAULAGE CHARGES IS PART OF THE PROF IT FROM THE OPERATION OF SHIPS AND IS ACCORDINGLY ENTITLED TO RELIEF UNDER ARTICLE 9 3. GROUND NO.1, REGARDING, ENTITLEMENT TO RELIEF UN DER ARTICLE 9 OF THE DTAA BETWEEN INDIA AND FRANCE. 4. WE HAVE HEARD THE LEARNED DR AS WELL AS THE LEAR NED AR OF THE ASSESSEE AND CONSIDERED THE RELEVANT RECO RD. WE NOTE THAT THIS ISSUE WAS DECIDED BY THE CIT(A) BY FOLLOWING THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2 001-02. WE FURTHER NOTE THAT THIS TRIBUNAL HAD ADJUDICATED UPON THE ISSUE IN THE APPEAL FOR THE ASSESSMENT YEAR 2001-2 IN ITA ITA NO. 3199/MUM/2007 ITA NO. 3879/MUM/2007 (ASSESSMENT YEAR: 2003-04) 3 NO.5824/MUM/2006 VIDE ORDER DATED 28.11.2008 IN PARAGRAPHS 11 TO 14 AS UNDER : 11. FOLLOWING THE AFORESAID DECISION, IT IS HELD (I) THAT THE EXPRESSION OPERATION OF SHIPS, IN TH E ABSENCE OF ANY DEFINITION IN THE ARTICLE 9 OF THE DTAA, WOULD INCLUDE NOT ONLY THE DIRECT ACTIVITY OF TRANSPORTATION OF CARGO BY SHIPS OWNED, LEASED OR CHARTERED BY THE ASSESSEE BUT ALSO TRANSPORTATION O F CARGO BY FEEDER VESSELS FROM INDIAN PORT TO THE MOTHER VESSEL IF SUCH TRANSPORTATION IS ANCILLARY O R INCIDENTAL TO THE MAIN ACTIVITY; (II) THAT BENEFIT OF ARTICLE 9 WOULD NOT BE AVAILABLE MERELY ON THE GROUND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHIPPING GLOBALLY; (III) THAT BENEFIT OF ARTICLE 9 WOULD BE AVAILABLE TO TRANSPORTATION OF THE CARGO B Y FEEDER VESSELS ONLY IF THE ASSESSEE IS ABLE TO ESTABLISH THE LINK BETWEEN THE TRANSPORTATION OF CARGO BY FEEDER VESSELS WITH TRANSPORTATION BY MOTHER VESSELS OWNED, LEASED OR CHARTERED BY THE ASSESSEE. 12. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT ON SIMILAR FACTS, THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE SIS TER CONCERN DELMAS SHIPPING SOUTH AFRICA (PTY.) LIMITED. IN THIS CONNECTION, IT IS MENTIONED THAT I N THAT CASE THERE WAS NO DISPUTE OF THE FACT THAT THE RE WAS SLOT CHARTER ARRANGEMENT WITH THE FEEDER VESSEL S BUT IN THE PRESENT CASE THIS FACT HAS BEEN DISPUTED AND THE SUBMISSION OF THE ASSESSEE IN THIS REGARD I S NOT SUBSTANTIATED BY ANY MATERIAL ON RECORD. FURTHE R, NO ARGUMENTS WERE ADVANCED REGARDING LINKAGE OF FEEDER VESSELS WITH MOTHER VESSELS. THEREFORE, THE SAID DECISION WOULD NOT COVER THE PRESENT CASE. 13. IN THE PRESENT CASE, THE ASSESSEE COULD NOT FURNISH THE RELEVANT DETAILS BEFORE THE ASSESSING OFFICER. HOWEVER, IT FILED ADDITIONAL EVIDENCES BEF ORE THE CIT(A) TO ESTABLISH THE LINKAGE BETWEEN THE FEEDER VESSEL AND THE MOTHER VESSEL ON SAMPLE BASIS. THAT SHOWS THAT THE ENTIRE EVIDENCE WAS NOT FURNISHED BEFORE THE CIT(A) IN THIS REGARD. IN OUR OPINION, THE RELIEF CANNOT BE ALLOWED ON THE BASIS OF SAMPLE EVIDENCE. IF RELIEF IS ALLOWED ON SAMPLE BASIS THEN IT WOULD GIVE THE ABSURD RESULTS AS BENE FIT COULD BE OBTAINED EVEN WHEN THE CARGO IS TRANSPORTED BY MOTHER VESSELS BELONGING TO OTHER ITA NO. 3199/MUM/2007 ITA NO. 3879/MUM/2007 (ASSESSMENT YEAR: 2003-04) 4 ENTERPRISES. HENCE, THE APPROACH OF THE CIT(A) FOR GRANTING RELIEF ON THE BASIS OF SAMPLE EVIDENCE HAS TO BE REJECTED. THE INTEREST OF JUSTICE WOULD BE ME T IF ONE MORE OPPORTUNITY IS PROVIDED TO THE ASSESSEE TO ESTABLISH SUCH LINKAGE. 14. IT MAY ALSO BE MENTIONED THAT THE CIT(A) HAS REFERRED TO CERTAIN SHIPS NAMELY, CAROLINE DELMAS, BLANDINE DELMAS, ADELINE DELMAS AND THERESE DELMAS WHICH ARE STATED TO BE OWNED BY THE ASSESSEE BUT THESE SHIPS DO NOT FIND PLACE IN THE L IST FURNISHED BEFORE THE ASSESSING OFFICER(PAGE 2 OF TH E ASSESSMENT ORDER) WHICH CARRIED THE CARGO. THEREFORE, THE OWNERSHIP OF SUCH SHIPS WOULD NOT BE RELEVANT IN ADJUDICATING THIS ISSUE. IT IS FURTHER NOTED THAT THE ASSESSEE HAD FURNISHED REGISTRATION CERTIFICATES IN RESPECT OF THREE MOTHER SHIPS, OUT OF WHICH THE SHIP NAMELY, SAINT ROCH, ALSO DOES NOT FIND PLACE IN THE LIST OF MOTHER SHIPS. IT IS ALSO NOT KNOWN WHETHER THE OTHER MOTHER SHIPS GIVEN IN THE ABOVE LIST ARE OWNED OR LEASED OR CHARTERED BY THE ASSESSEE OR NOT. ALL THESE ASPECTS NEED VERIFICATION. AS ALREADY STATED, THE ASSESSEE WOULD BE AT LIBERTY TO ESTABLISH THAT THE TRANSPORTATION OF CARGO WAS CARRIED OUT BY MOTHER VESSEL EITHER OWNED OR LEASED OR CHARTERED BY THE ASSESSEE. THE ORDER OF THE CIT(A) IS, THEREFORE MODIFIED AND THE MATTER IS RESTORED TO HIS FILE FOR FRESH ADJUDICATION IN THE LIGHT OF THE OBSERVATIONS MADE IN THE PRECEDING PARAGRAPHS. 5. SINCE THE ISSUE WAS REMANDED BACK TO THE RECORD OF THE CIT(A) FOR FRESH ADJUDICATION IN THE LIGHT OF THE O BSERVATIONS MADE IN THE SAID ORDER, THEREFORE, WE RESPECTFULLY FOLLOWING THE EARLIER OF THIS TRIBUNAL SET ASIDE THIS ISSUE T O THE RECORD OF THE CIT(A) FOR ADJUDICATION AFRESH IN TERMS OF THE ABOVE ORDER. 6. GROUND NO.1 TAKEN BY THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 3199/MUM/2007 ITA NO. 3879/MUM/2007 (ASSESSMENT YEAR: 2003-04) 5 7. THE SECOND GROUND IS REGARDING, INLAND HAULAGE CHARGES IS PART OF THE PROFIT FROM THE OPERATION OF SHIPS OR NOT. 8. WE HAVE HEARD THE LEARNED DR AS WELL AS THE LEAR NED AR OF THE ASSESSEE AND CONSIDERED THE RELEVANT RECO RD. WE NOTE THAT THIS ISSUE WAS ALSO DECIDED BY THE CIT( A) BY FOLLOWING THE EARLIER ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2001-02. WE FURTHER NOTE THAT THIS TRIBUNAL HAD ADJUDICATED UPON THE ISSUE BY THIS TRIBUNAL IN THE ORDER (SUPRA) FOR THE ASSESSMENT YEAR 2001-2 IN PARAGRAPH 15 AS UNDER : 15. THE ONLY ISSUE WHICH REMAINS TO BE ADJUDICATED RELATES TO THE TREATMENT OF INLAND HAULAGE CHARGES. THIS REPRESENTS LOCAL TRANSPORT FROM CUSTOMERS PLACE TO INDIAN PORT. THIS ISSUE STANDS COVERED BY OUR DECISION IN THE CASE OF SAFMARINE CONTAINER LINES N.V. 24 SOT 211(MUM.) WHEREIN IT HAS BEEN HELD THAT SUCH CHARGES WOULD FALL WITHIN THE SCOPE OF THE EXPRESSION PROFITS FR OM OPERATION OF SHIPS IF SUCH AMOUNT IS MINOR IN COMPARISON TO FREIGHT RELATING TO MAIN VOYAGE. ADMITTEDLY, THE AMOUNT OF HAULAGE CHARGES OF RS.11,65,400/- IS NEGLIGIBLE AND, THEREFORE, WOULD FALL UNDER ARTICLE 9(1) ITSELF. HOWEVER, SUCH TREATMENT WOULD DEPEND ON THE TREATMENT OF FREIGHT RELATING TO THE VOYAGE BY FEEDER VESSELS. IF THE CIT(A) FINDS THAT FREIGHT ATTRIBUTABLE TO FEEDER VE SSEL FALLS UNDER ARTICLE 9(1) THEN SUCH CHARGES WOULD AL SO FALL UNDER ARTICLE 9(1). OTHERWISE, SUCH CHARGES WOULD BE TREATED AS BUSINESS PROFITS FALLING UNDER ARTICLE 7 OF THE DTAA. ACCORDINGLY, THE CIT(A) WOULD PASS APPROPRIATE ORDER IN THIS REGARD. ITA NO. 3199/MUM/2007 ITA NO. 3879/MUM/2007 (ASSESSMENT YEAR: 2003-04) 6 9. RESPECTFULLY FOLLOWING THE ORDER OF THIS TRIBU NAL (SUPRA), WE REMIT THIS ISSUE TO THE RECORD OF THE C IT(A) FOR FRESH ORDER AS PER THE TERMS OF EARLIER ORDER OF TH IS TRIBUNAL. 10. THE LEARNED AR OF THE ASSESSEE HAS POINTED OUT THAT THE ASSESSEE ALTERNATIVELY CLAIMED BEFORE THE CIT( A) THAT IF THE EXEMPTION IS NOT ALLOWED UNDER ARTICLE 9 OF D TAA THEN SUCH BUSINESS PROFIT FALLING UNDER ARTICLE 5 WOULD NOT BE ASSESSABLE IN THE HANDS OF THE ASSESSEE BECAUSE TH E ASSESSEE HAS NO PERMANENT ESTABLISHMENT IN INDIA. WE NOTE THAT THIS TRIBUNAL WHILE DECIDING THE APPEAL FOR T HE ASSESSMENT YEAR 2001-02 HAS CONSIDERED THIS ALTERNA TIVE PLEA OF THE ASSESSEE IN PARAGRAPH 16 AS UNDER : 16. BEFORE PARTING WITH THIS ORDER, IT MAY BE MENTIONED THAT THE ASSESSEE HAD ALTERNATIVELY CLAIM ED BEFORE THE CIT(A) THAT IF THE EXEMPTION IS NOT ALLOWABLE UNDER ARTICLE 9, THEN SUCH BUSINESS PROFI TS FALLING UNDER ARTICLE 5 WOULD NOT BE ASSESSABLE IN THE HANDS OF THE ASSESSEE INASMUCH AS THE ASSESSEE HAS NO PERMANENT ESTABLISHMENT IN INDIA. IT HAS ALSO BEEN CONTENDED BEFORE THE CIT(A) THAT THE RATE OF T AX WOULD HAVE BEEN 35% INSTEAD OF 48%. IF THE CIT(A) FINDS THAT A PORTION OF THE PROFIT EARNED BY THE ASSESSEE IS NOT EXEMPT UNDER ARTICLE 9 , THEN HE WOULD ALSO ADJUDICATE THE ABOVE ISSUES AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE. THIS WOULD DISPOSE OF THE GROUNDS CONTAINED IN THE ASSESSEES APPEAL. 11. ACCORDINGLY, IN VIEW OF THE EARLIER ORDER OF TH IS TRIBUNAL, WE DIRECT THE CIT(A) THAT IN CASE THE POR TION OF ITA NO. 3199/MUM/2007 ITA NO. 3879/MUM/2007 (ASSESSMENT YEAR: 2003-04) 7 PROFIT EARNED BY THE ASSESSEE IS FOUND NOT EXEMPTE D UNDER ARTICLE 9 THEN THE ALTERNATIVE ISSUE RAISED BYS THE ASSESSEE SHALL BE ADJUDICATED UPON AFTER GIVING A PROPER AND REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEA RD. 12. THE GROUND NO.2 OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 3199/MUM/2007 (BY ASSESSEE) 13. IN THIS APPEAL, THE ASSESSEE HAS RAISED FOLLOWI NG GROUNDS : 1. THE CIT(A) ERRED IN HOLDING THAT GROUND NO.1 RAISED IN THE MEMORANDUM OF APPEAL FILED BEFORE HIM, IS GENERAL IN NATURE AND IS THEREFORE NOT SPECIFICALLY ADJUDICATED; 2. THE CIT(A) ERRED IN HOLDING THAT INLAND HAULAGE CHARGES ARE FREIGHT RECEIPTS IN CONNECTION WITH THE BUSINESS OF OPERATION OF SHIPS AND ARE COVERED BY THE DEFINITION OF RECEIPT AS GIVEN IN SECTION 44B(2) OF THE ACT.; 3. THE CIT(A) ERRED IN HOLDING THAT THE RATE OF INCOME TAX APPLICABLE IN CASE OF YOUR APPELLANTS I S 40%. 14. GROUND NO.1, REGARDING NON-ADJUDICATION OF GROU ND NO.1 RAISED BEFORE THE CIT(A).. ITA NO. 3199/MUM/2007 ITA NO. 3879/MUM/2007 (ASSESSMENT YEAR: 2003-04) 8 16. WE HAVE HEARD THE LEARNED AR AS WELL AS THE LEA RNED DR AND CONSIDERED THE RELEVANT RECORD. THE ASSESSE E HAS RAISED GROUND NO.1 BEFORE THE CIT(A) AS UNDER : 1. THE JOINT DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) OSD-RANGE-1 (HEREINAFTER REFERRED TO AS THE JDIT) ERRED IN PASSING THE IMPUGNED ORDER BY DETERMINING THE INCOME OF YOUR APPELLANTS AT 10% O F THE GROSS RECEIPTS INCLUSIVE OF ANCILLARY CHARGES YOUR APPELLANT SUBMITS THAT THE ORDER ISSUED BY TH E JDIT IS WITHOUT ANY BASIS AND IS IN VIOLATION OF TH E PRINCIPLES OF NATURAL JUSTICE YOUR APPELLANTS PRAY THAT THE JDITS ORDER BE EXPUNGED 17. WE NOTE THAT THE CIT(A) HAS ADJUDICATED UPON T HE GROUND NO.1 IN PARAGRAPH 2.1 AS UNDER : 2.1 THIS GROUND IS GENERAL AND IS COVERED BY SUBSEQUENT GROUNDS AND IS THEREFORE NOT SPECIFICALL Y ADJUDICATED 16. IT IS CLEAR FROM THE IMPUGNED ORDER OF THE LEAR NED CIT(A) THAT THE GROUND NO.1 RAISED BY THE ASSESSEE WAS NOT DECIDED BY THE CIT(A) IN VIEW OF HIS FINDING THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF ARTICLE 9 O F DTAA. SINCE, THE ISSUE REGARDING ENTITLEMENT OF RELIEF UN DER ARTICLE 9 OF DTAA HAS BEEN REMANDED BACK TO THE RECORD TO THE CIT(A), THEREFORE, THIS GROUND IS ALSO REQUIRED TO BE CONSIDERED AND ADJUDICATED UPON AFRESH BY THE CIT (A). ACCORDINGLY, WE REMIT THIS GROUND TO THE FILE OF TH E CIT(A) FOR FRESH ADJUDICATION. ITA NO. 3199/MUM/2007 ITA NO. 3879/MUM/2007 (ASSESSMENT YEAR: 2003-04) 9 19. GROUND NO.1 OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 20. GROUND NO.2, REGARDING INLAND HAULAGE CHARGES. 21. THIS ISSUE HAS ALREADY BEEN CONSIDERED AND REMI TTED BACK BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR TH E ASSESSMENT YEAR 2001-02 IN PARAGRAPH 15 OF THE SAI D ORDER AND THE SAME WAS FOLLOWED BY THIS TRIBUNAL IN THE APPEAL FOR THE ASSESSMENT YEAR 2005-06. ACCORDINGLY, IN VIEW OF THE ISSUE RAISED BY THE REVENUE ALREADY REMITTED TO TH E RECORD OF THE CIT(A), THIS ISSUE RAISED BY THE ASSESSEE IS A LSO REMITTED TO THE RECORD OF THE CIT(A) FOR ADJUDICAT ION AFRESH. 22. THE THIRD GROUND OF APPEAL IS REGARDING RATE OF INCOME TAX APPLICABLE IN THE CASE OF THE ASSESSEE. 23. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED T HE RELEVANT RECORD. WE FIND FROM THE RECORD THAT THIS ISSUE WAS CONSIDERED AND ADJUDICATED UPON BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-0 2 IN PARAGRAPH 16 OF ORDER (SUPRA) WHICH HAS BEEN REPROD UCED IN PARAGRAPH 10 OF THIS ORDER. ITA NO. 3199/MUM/2007 ITA NO. 3879/MUM/2007 (ASSESSMENT YEAR: 2003-04) 10 24. SO FAR AS THE ISSUE OF PE AND TAXABILITY OF IN COME IS CONCERNED, WHILE DECIDING THE APPEAL OF THE REVENUE , WE HAVE RESTORED THIS ISSUE TO THE FILE OF THE CIT(A) IN THE APPEAL OF THE REVENUE. ACCORDINGLY, THIS ISSUE HAS BEEN R EMITTED TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION AS T HE SAME IS DEPENDENT ON THE OUTCOME OF THE OTHER ISSUES. 25. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 23.07.2010 SD SD ( SHRI RAJENDRA SINGH ) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 23RD JULY 2010 SRL:19710 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A)XXXII 5. DR E BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI