WSA SHIPPING (BOMBAY) P. LTD SWA 1994 PTE LTD. SINGAPORE, MUMBAI V. ADIT -IT CIR 2(2), MUMBAI

ITA 4907/MUM/2009

• Counselvise Citation: 490719914 RSA 2009
• Duration Of Justice: 2 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 14-11-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 26-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D P BAPAT
• Assessee Lawyers: JI TENDRA YADAV
• Keywords: Business income; Double taxation relief; Services rendered outside India; Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH L, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI B.RAMAKOTAIA H (A.M) ITA NO. ASSTT.YEAR APPELLANT RESPONDENT 4905/M/09 2002-03 WSA SHIPPING (BOMBAY) PVT. LTD. SEA ROAD TRNS. CORP.- KOREA B-101-105 SAGAR TECH PLAZA, ANDHERI (E), MUMBAI 72. ADIT(IT) CIR 2(2), ROOM NO.116, SCINDIA HOUSE, BALLARD ESTATE, MUMBAI -38 4906/M/09 2002-03 WSA SHIPPING (BOMBAY) PVT. LTD. MIRACLE CONTAINER LINE - SINGAPORE MUMBAI. ADIT(IT) CIR 2(2), MUMBAI 4907/M/09 2002-03 WSA SHIPPING (BOMBAY) PVT. LTD. WSA 1994 PTE.LTD. SINGAPORE MUMBAI. ADIT(IT) CIR 2(2), MUMBAI 4944/M/09 2002-03 WSA SHIPPING (BOMBAY) PVT. LTD. WILSON LOGISTICS- ROTTERDAM MUMBAI. ADIT(IT) CIR 2(2), MUMBAI 5038/M/09 2003-04 WSA SHIPPING (BOMAY) P. LTD. CAS AGENCIES -UK MUMBAI ADIT(IT) CIR 2(2), MUMBAI APPELLANT BY : SHRI D.P.BAPAT ASSESSEE BY : SHRI JITENDRA YADAV DATE OF HEARING : 14/11 /2011 DATE OF PRONOUNCEMENT : 18 /11/2011 WSA SHIPPING (BOMBAY) PVT. LTD. 2 ORDER PER N.V.VASUDEVAN, J.M THESE ARE FIVE APPEALS BY THE ASSESSEE AGAINS T ORDERS OF CIT(A) XXXI, MUMBAI, ALL DATED 29/06/2009. ITA NO.4905/M /2009 TO 4907/M/09 & ITA NO.4944/M/09 ARE IN RELATION TO A.Y . 2002-03, WHILE ITA 5038/M/09 IS FOR THE ASSESSMENT YEAR 2003-04. 2. FIRST WE SHALL TAKE FOR CONSIDERATION ITA NO.490 7/MUM/09. THE GROUND OF APPEAL RAISED BY THE ASSESSEE READS AS FO LLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING THAT AN AMOUNT EQUIVALENT TO 7.5% OF THE REMITTANCES MADE B Y THE APPELLANT TO WSA 1994 LTD. WAS ASSESSABLE AS INCOME CHARGEABL E TO TAX IN INDIA. 3. THE MATERIAL FACTS RELEVANT FOR DECISION IN THIS APPEAL ARE AS FOLLOWS: WSA SHIPPING (BOMBAY) PVT.LTD. IS ENGAGED IN THE BU SINESS OF CARGO CONSOLIDATION COMMONLY KNOWN IN THE BUSINESS AS NON VESSEL OWNERS CARGO CARRIERS (NVOCC). WSA SHIPPING (BOMBAY) PVT. LTD. IS REGISTERED AS A MULTIMODAL TRANSPORT OPERATOR (MTO) WITH THE MINIST RY OF SHIPPING; DIRECTORATE GENERAL OF SHIPPING, GOVT. OF INDIA. W SA SHIPPING (BOMBAY) PVT.LTD., RECEIVES CARGO FROM VARIOUS SHIPPERS / CO NSIGNORS AT MUMBAI PORT / CONTAINER FREIGHT STATION MUMBAI / JNPT FOR SHIPMEN TS TO VARIOUS DESTINATIONS WORLDWIDE. ONCE THE CARGO IS RECEIVED A DOCUMENT CALLED BILL OF LADING (B/L) IS ISSUED BY WSA SHIPPING (BOMBAY) PVT .LTD., TO THE SHIPPER. THE B/L SPECIFIES THE CONSIGNOR, THE CONSIGNEE, CAR GO DESCRIPTION, DESTINATION OF THE CARGO WHERE THE DELIVERY HAS TO BE MADE TO THE CONSIGNEE. BASED ON THE VOLUMES OF THE CARGO AND BUSINESS EXPE RIENCE WSA SHIPPING (BOMBAY) PVT.LTD. OBTAINS CONTAINERS FROM AGENTS OF SHIPPING LINES OR WSA SHIPPING (BOMBAY) PVT. LTD. 3 SHIPPING LINES. IN THE PROCESS OF CARGO CONSOLIDAT ION, THE CONTAINERS OBTAINED FROM THE AGENTS OF SHIPPING LINES OR SHIPP ING LINES CANNOT BE STUFFED FULLY FOR A PARTICULAR DESTINATION. AS THE DELIVERY SCHEDULE OF THE CARGO HAS TO BE STRICTLY ADHERED TO, WSA SHIPPING ( BOMBAY) PVT.LTD., STUFFS THE CARGO OF VARIOUS DESTINATIONS ON A PARTICULAR R OUTE IN ONE CONTAINER AND LOADS THE CONTAINER WITH THE SHIPPING LINE. THIS C ONCEPT CAN BE FULLY UNDERSTOOD WITH THE FOLLOWING EXAMPLES: 1. A SHIPPER HANDS OVER THE CARGO TO WSA SHIPPING (BO MBAY) PVT.LTD. FOR DELIVERY AT SYDNEY, AUSTRALIA. THE VOLUME OF THE A VAILABLE CARGO AS ON DATE FOR SYDNEY MAY NOT BE EQUIVALENT TO FULL CONTA INER LOAD. AS WSA SHIPPING (BOMBAY) PVT.LTD., IS UNDER AN OBLIGATION TO DELIVER THE CARGO WITHIN TIME IT STUFFS THIS CARGO IN A CONTAINER ALO NG WITH CARGOES FOR OTHER DESTINATIONS EN ROUTE TO SYDNEY AND DISPATCHE S THE CONTAINER TO SINGAPORE. SINGAPORE IS A HUB PORT WHEREIN THE CAR GOES COME FROM VARIOUS PORTS FOR REROUTING TO FINAL DESTINATIONS. 2. WSA SHIPPING (BOMBAY) PVT.LTD., HAS A BUSINESS ASSO CIATE IN SINGAPORE WHO TURNS AROUND THE CARGO AND ROUTES THE SAME TO SYDNEY WHERE THE CARGO IS ULTIMATELY DESTINED. FOR THIS S ERVICES RENDERED IN SINGAPORE THE SAID BUSINESS ASSOCIATE RAISES AN INV OICE FOR ON CARRIAGE FROM SINGAPORE TO SYDNEY. 3. AS WSA SHIPPING (BOMBAY) PVT.LTD., HAS COLLECTED TH E FREIGHT FROM MUMBAI TO SYDNEY, THE COST OF CARRIAGE I.E. SINGAPO RE TO SYDNEY IS REMITTED TO THE BUSINESS ASSOCIATE IN SINGAPORE. 4. THE AO NOTICED THAT WSA SHIPPING (BOMBAY) PVT.LT D., HAD MADE PAYMENT TO WSA 1994 PTE.LTD., SINGAPORE, (WHO IS TH E ASSESSEE IN THIS APPEAL) A NON-RESIDENT DURING THE RELEVANT ASSESSME NT YEAR UNDER CONSIDERATION, ON WHICH NO TAX WAS DEDUCTED AT SOU RCE AT THE TIME OF MAKING PAYMENT. THE AO, THEREFORE, ISSUED A SHOW CAUSE NOTICE TO WSA SHIPPING (BOMBAY) PVT.LTD. CALLING UPON IT TO SHOW CAUSE AS TO WHY IT SHOULD WSA SHIPPING (BOMBAY) PVT. LTD. 4 NOT BE TREATED AS AN AGENT OF THE NON-RESIDENT, VIZ ., THE ASSESSEE, TO WHOM IT MADE PAYMENTS, U/S. 163 OF THE INCOME TAX ACT, 1961 (THE ACT). 5. IN RESPONSE TO THE SAME, WSA SHIPPING (BOMBAY) P VT.LTD. SUBMITTED THAT THE NON-RESIDENT TO WHOM PAYMENT WAS MADE BY I T, VIZ., THE ASSESSEE WAS ITS BUSINESS ASSOCIATE BUT THERE WAS NO PRINCIP AL-AGENT RELATIONSHIP WITH THEM. WSA SHIPPING (BOMBAY) PVT.LTD., SUBMITT ED THAT ITS BUSINESS ASSOCIATES VIZ., THE ASSESSEE HAD RENDERED SERVICES AT THE RESPECTIVE PORT IN RESPECT OF CARGOES WHICH ARE TO BE SENT TO FURTHER ONWARD DESTINATIONS AND FOR WHICH ALL EXPENSES SUCH AS ONWARD FREIGHT, FREI GHT CHARGES, PORT CHARGES, DETENTION CHARGES ARE TO BE BORNE BY THEM. THE REM ITTANCES MADE BY WSA SHIPPING (BOMBAY) PVT.LTD. ARE IN RESPECT OF INVOIC ES RAISED BY THE BUSINESS ASSOCIATES FOR THESE CHARGES IN RESPECT OF SERVICES RENDERED OUTSIDE INDIAN TERRITORIAL WATERS. IT WAS ALSO CLAIMED THAT WSA SHIPPING (BOMBAY) PVT.LTD. WAS NOT BOUND TO SEND THE CARGO ONLY TO THE LISTED BUSINESS ASSOCIATES AND IT WAS FREE TO SEND THE CARGO FOR ONWARD MOVEMENT T O ANYONE WHO OFFER BETTER QUOTATION FOR ONWARD MOVEMENT. WSA SHIPPING (BOMBAY) PVT.LTD. SUBMITTED THAT THE BUSINESS ASSOCIATE, VIZ., THE AS SESSEE DID NOT HAVING PERMANENT ESTABLISHMENT (PE) IN INDIA. WSA SHIPPIN G (BOMBAY) PVT.LTD. SUBMITTED THAT THE RECIPIENTS OF PAYMENT FROM IT VI Z., THE ASSESSEE WAS A NON-RESIDENT, AND INCOME HAD NOT ACCRUED OR ARISEN OR DEEMED TO HAVE ACCRUED OR ARISEN TO THEM IN INDIA. WSA SHIPPING ( BOMBAY) PVT.LTD. THUS SUBMITTED THAT THE RECEIPTS FROM IT BY THE ASSESSEE WERE NOT CHARGEABLE TO TAX UNDER THE ACT IN THE HANDS OF THE NON-RESIDENTS . THEREFORE IT WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE IN RESPECT OF REMI TTANCES MADE TO THEM. 6. THE AO DID NOT ACCEPT THE EXPLANATION OF WSA SH IPPING (BOMBAY) PVT.LTD. AND HE HELD THAT TO TREAT A PERSON AS AN A GENT U/S. 163, WHAT IS REQUIRED IS TO PROVE THAT THE REPRESENTATIVE ASSESS EE HAS BUSINESS CONNECTION WITH THE NON-RESIDENT AND FROM WHOM OR T HROUGH WHOM THE NON- RESIDENT IS IN RECEIPT OF ANY INCOME, WHETHER DIREC TLY OR INDIRECTLY. BOTH WSA SHIPPING (BOMBAY) PVT. LTD. 5 THESE FACTS HAVE NOT BEEN DISPUTED BY M/S. WSA SHIP PING (BOMBAY) P LTD. IT HAS REMITTED THE FREIGHT COLLECTED FROM MUMBAI T O THE ULTIMATE DESTINATION WITHOUT ANY DEDUCTION OF TAX. IN THE CIRCUMSTANCE S, MS/ WSA SHIPPING (BOMBAY) P. LTD. WAS TREATED AS AN AGENT OF WSA 199 4 PTE LTD. SINGAPORE, VIZ., THE ASSESSSEE. 7. IT IS NOT IN DISPUTE BEFORE US THAT THIS ORDER OF THE AO WAS CONFIRMED BY THE TRIBUNAL IN THE APPEAL BY WSA SHIPPING (BOMBAY) PVT.LTD. THE TRIBUNAL WHILE CONFIRMING THE ORDER U/S.163 OF THE ACT, HAD HELD AS FOLLOWS: 21. WE HAVE ALREADY SEEN THE MANNER IN WHICH THE APPELLANT CARRIES ON ITS BUSINESS. THE SAME HAS BEEN EXPLAINED IN PA RA-4 OF THIS ORDER. THE CIT(A) HAS GIVEN A FINDING THAT THE APPELLANT C HARGES ITS CUSTOMERS FREIGHT PAYABLE INCLUSIVE OF THE FREIGHT FROM THE P ORT OF TRANSSHIPMENT TO THE ULTIMATE DESTINATION AND THIS IS DONE WITH T HE TACIT UNDERSTANDING WITH THE NON-RESIDENT WHO DOES TRANSS HIPMENT OUTSIDE INDIA. ACCORDING TO THE CIT(A), THE AFFAIRS OF THE APPELLANT AND THE NON-RESIDENT APPEAR TO BE IN A WAY THAT THE TARIFF CHARGED BY THE NON- RESIDENT BUSINESS ASSOCIATE FOR TRANSSHIPMENT DOES NOT INCLUDE THE TARIFF FROM THE INDIAN PORT TO THE TRANSSHIPMENT PO RT. IT HAS BEEN THE STAND OF THE APPELLANT THAT THE NON-RESIDENT IS NOT A PARTY TO THE TERMS OF CONTRACT BETWEEN THE APPELLANT AND THE EXPORTER. SIMILARLY THE EXPORTER IS NOT A PARTY TO THE TERMS OF THE CONTRAC T BETWEEN THE APPELLANT AND NON-RESIDENT FOR TRANSSHIPMENT OF THE CARGO. FROM THESE FACTS IT CANNOT BE SAID THAT THERE WAS ONLY A PRINCIPAL TO PRINCIPAL RELATIONSHIP AS BETWEEN THE APPELLANT AND THE NON-RESIDENT. THIS IS BECAUSE THE TERMS OF THE AGREEMENT BETWEEN THE APPELLANT AND THE NON-RESIDENT HAVE NOT BEEN BROUGHT ON RECORD. FURTHER WE ALSO DO NOT KNOW THE SHAREHOLDING PATTERN OF THE APPELLANT. THIS COULD BE MATERIAL FOR ASCERTAINING THE CONTROL THAT THE NON- RESIDENTS MIGHT EXERCISE ON THE APPELLANT. THOUGH THERE IS NO MATE RIAL ON RECORD TO SUGGEST THAT THE APPELLANTS WERE ACTING AS AGENTS W HEN THEY DEALT WITH THE INDIAN CUSTOMER SENDING CARGO, THERE IS EQUALLY NO MATERIAL TO SHOW THAT THE APPELLANTS WERE DEALING WITH THE NON- RESIDENTS ONLY ON A PRINCIPAL TO PRINCIPAL BASIS. IT CANNOT BE SAID WI TH CERTAINTY THAT THE EXPORTER IN INDIA HAS NO KNOWLEDGE ABOUT THE TRANSS HIPMENT AND THE APPELLANT UTILIZING THE SERVICES OF NON-RESIDENT FO R ONWARD MOVEMENT OF THE CARGO TO THE ULTIMATE DESTINATION. IN THE ABSE NCE OF THE TERMS OF THE AGREEMENT BETWEEN THE APPELLANT AND THE NON-RES IDENT IT CANNOT BE SAID THAT THE NON-RESIDENT HAD NO CONTROL OVER T HE FREIGHT CHARGES COLLECTED BY THE APPELLANTS OR THE TERMS OF CONTRAC T AS BETWEEN THE APPELLANT AND THE EXPORTER FROM INDIA. AS PER THE CONDITIONS OF WSA SHIPPING (BOMBAY) PVT. LTD. 6 TRANSSHIPMENT AS GIVEN BY M/S. WNS 1994 PTE LTD., S INGAPORE, ONE OF THE NON-RESIDENT, IT IS SEEN THAT THE NON-RESIDE NT CHARGES ARE EX- SINGAPORE. ANOTHER CONDITION IS THAT BECAUSE OF REG ULATIONS IMPOSED AT DIFFERENT PORTS, THE CLIENTS ARE REQUESTED TO CHECK WITH THE TRANSSHIPPER FOR ACCEPTANCE OF ANY HAZARDOUS CARGO BEFORE ACCEPTING ANY SHIPMENT. SIMILARLY THE NON-RESIDENT HAS IMPOS ED A CONDITION THAT ONLY CERTAIN CATEGORIES OF GOODS ARE ALLOWED F OR TRANSSHIPMENT AND THEREFORE ONE HAS TO CHECK WITH THEM AS TO WHETHER THE GOODS PROPOSED TO BE SENT FOR TRANSSHIPMENT ARE ACCEPTABL E FOR TRANSSHIPMENT. THESE TERMS HAVE BEEN RELIED UPON B Y THE CIT(A) TO GIVE A FINDING THAT THE NON-RESIDENTS CONSENT IS R EQUIRED FOR ACCEPTING CARGO BY THE APPELLANT. IT IS ALSO A FACT THAT THE APPELLANT HAVE NOT PLACED ON RECORD THE TERMS OF THE CONTRACT BETWEEN THE APPELLANT AND THE NON-RESIDENT. IN SUCH CIRCUMSTANCES IN OUR VIEW THE FINDING OF THE CIT(A) IN THIS REGARD CANNOT BE SAID TO BE BASELESS . IT CANNOT ALSO BE SAID THAT THE NON-RESIDENT HAS NO CONTROL OVER THE MANNER IN WHICH THE APPELLANT ACCEPTS THE CARGO AND THAT THE NON-RE SIDENT ONLY UNDERTAKES THE CARGO FROM THE PLACE OF TRANSSHIPMEN T TILL THE PORT OF DESTINATION AND CHARGES FEE FOR DOING SO. IT IS AL SO A FACT THAT THE APPELLANT HAS BEEN DEALING WITH THE NON-RESIDENT OV ER A PERIOD OF TIME AND IT WAS NOT A CASE OF SINGLE, ISOLATED OR SPORAD IC TRANSACTIONS. IN THE BACKGROUND OF THE ABOVE FACTS, LET US EXAMINE T HE QUESTION AS TO WHETHER THE APPELLANT HAD ANY BUSINESS CONNECTION W ITH THE NON- RESIDENT. .. 28. WE HAVE ALREADY SEEN THAT THE TERM 'BUSINESS C ONNECTION' IS SO BROAD IN SCOPE. EXPLANATION 2 INSERTED BELOW SEC. 9(1) BY THE FINANCE ACT, 2003 WITH EFFECT FROM 1-4-2004 EXPANDS THE SCO PE OF THE EXPRESSION. THOUGH THE EXPLANATION DOES NOT APPLY T O THE YEAR UNDER CONSIDERATION, EVEN APPLYING THE TESTS LAID DOWN IN DECIDED CASES, THE ISSUE HAS TO BE RESOLVED AGAINST THE ASSESSEE. THER E WAS AN ELEMENT OF CONTINUITY BETWEEN THE BUSINESS OF THE NON-RESIDENT AND THE ACTIVITY IN THE TAXABLE TERRITORY. A MERE RELATION BETWEEN THE BUSINESS OF THE NON- RESIDENT AND THE ACTIVITY IN INDIA WHICH FACILITATE S OR ASSISTS THE CARRYING ON OF THE BUSINESS OF THE NON-RESIDENT WOU LD RESULT IN A BUSINESS CONNECTION. WE ARE OF THE VIEW THAT APPLY ING THESE TESTS TO THE PRESENT CASE, IT MUST BE HELD THAT THERE WAS A BUSINESS CONNECTION. THE BUSINESS OF THE NON-RESIDENT WAS TR ANSHIPMENT OF CARGO AND THE APPELLANT ENGAGED THEIR SERVICES FOR SHIPMENT OF CARGO FROM INDIA TO A DESTINATION WHICH THE APPELLANT COU LD NOT REACH WITHOUT THE ASSISTANCE OF THE TRANSHIPMENT THROUGH THE NON-RESIDENT. THE APPELLANT CANNOT SEGREGATE THE BUSINESS ACTIVIT Y OF SHIPMENT OF CARGO AS ONE UPTO THE PORT OF TRANSHIPMENT AND THE OTHER FROM THE PORT OF TRANSHIPMENT TO THE PORT OF FINAL DESTINATION. BOTH THESE ACTIVITIES ARE INTEGRATED ACTIVITIES. THE ABSENCE OF PRIVITY OF CONTRACT BETWEEN WSA SHIPPING (BOMBAY) PVT. LTD. 7 THE CUSTOMER IN INDIA AND THE NON-RESIDENT WILL NOT BE A GROUND TO HOLD THAT THE NON-RESIDENT DID NOT HAVE BUSINESS CO NNECTION IN INDIA. THE TRANSACTION AS BETWEEN THE PERSON IN INDIA AND THE CUSTOMER IN INDIA, WOULD NOT BE COMPLETE UNLESS THE CARGO REACH ES THE FINAL PORT OF DESTINATION. ALL THESE FACTS IN OUR OPINION ARE SU FFICIENT TO JUSTIFY THE CONCLUSION THAT THERE WAS A BUSINESS CONNECTION WIT HIN THE MEANING OF SEC. 163(1)(B) AS WELL AS SEC.9(1)(I) OF THE ACT . WE UPHOLD THE CONCLUSION OF THE INCOME-TAX AUTHORITIES TO THIS EF FECT. 29. WE ARE ALSO OF THE VIEW THAT THE PARAMETERS LA ID DOWN IN SEC.163(1)(C) OF THE ACT ARE SATISFIED. UNDER THE ABOVE PROVISIONS AGENT INCLUDES A PERSON FROM OR THROUGH WHOM THE NO N-RESIDENT IS IN RECEIPT OF ANY INCOME, WHETHER DIRECTLY OR INDIRECT LY. THE APPELLANTS BASED ON THE DEBIT NOTES RAISED BY THE NON-RESIDENT MAKE PAYMENT FOR TRANSHIPMENT OF CARGO. THUS THE NON-RESIDENT IS IN RECEIPT OF INCOME FROM THE APPELLANT. IT IS NOT A CASE WHERE THE NON -RESIDENT IS IN RECEIPT OF INCOME THROUGH THE APPELLANT BUT FROM THE APPELLANT. WE ALSO DO NOT FIND ANY QUALIFICATION THAT INCOME SO R ECEIVED FROM THE NON-RESIDENT FROM THE RESIDENT IN INDIA SHOULD BE F OUND TO BE CHARGEABLE TO TAX AT THE TIME WHEN THE PERSON IN IN DIA IS TREATED AS AGENT OF THE NON-RESIDENT. WE SEE NO REASON AS TO WHY THIS CLAUSE SHOULD NOT APPLY TO THE CASE OF THE APPELLANT. FOR THE REASONS GIVEN ABOVE, WE UPHOLD THE ORDERS OF CIT(A) CONFIRMING TH E ORDER OF THE AO PASSED U/S.163 OF THE ACT. ALL THESE APPEALS BY TH E ASSESSEE ARE ACCORDINGLY DISMISSED. 8. THE TRIBUNAL WHILE UPHOLDING THE ORDER U/S.163 O F THE ACT FURTHER DEALT WITH THE ASSESSMENT ON WSA SHIPPING (BOMBAY) PVT.LTD., AS AGENT OF TWO NON-RESIDENT ASSESSEES VIZ., THE NON-RESIDENTS WSA SHIPPING (BOMBAY) P. LTD.RE-WSA LINES INTERNATIONAL LTD., HONG KONG, WSA SHIPPING (BOMBAY) P. LTD.RE-FORDABLE GROUP LTD.-HONG KONG, THE TRIBUN AL HELD THAT INCOME ACCRUED AND AROSE IN INDIA AND THEREFORE THE RECEIP TS BY THE TWO NON- RESIDENTS FROM WSA SHIPPING (BOMBAY) PVT.LTD. ARE C HARGEABLE TO TAX IN INDIA. THE TRIBUNAL FURTHER NOTICED THAT THERE WAS NO AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION BETWEEN INDIA AND HONG KONG AND CONSEQUENTLY HELD THAT THE SAME IS TAXABLE IN INDIA . THE TRIBUNAL HOWEVER ENTERED THE FOLLOWING CAVEAT IN THE PENULTIMATE PAR T OF PARA-33 OF ITS ORDER: WSA SHIPPING (BOMBAY) PVT. LTD. 8 . WE HAVE ALREADY HELD WHILE DECIDING THE APPEAL S ARISING OUT OF THE ORDER U/S.163 OF THE ACT THAT THE NON-RESIDENT HAD BUSINESS CONNECTION IN INDIA AND THEREFORE INCOME HAD ACCRUE D AND ARISEN IN INDIA TO THE NON-RESIDENT WHICH IS CHARGEABLE TO TA X. THE REVENUE AUTHORITIES HAVE HELD THAT THE INCOME SO CHARGED TO TAX IS BUSINESS INCOME. IN THE ABSENCE OF TREATY BETWEEN INDIA AND HONG KONG, WE HAVE TO PROCEED TO TAX INCOME THAT ACCRUES TO THE N ON-RESIDENT IN INDIA. HOWEVER IN THE CASE OF NON-RESIDENT WHO IS A RESIDENT OF THE OTHER STATE WHICH HAS A TREATY WITH INDIA, THE QUES TION WHETHER BUSINESS INCOME WILL BE TAXABLE BECAUSE OF EXISTENC E OF PERMANENT ESTABLISHMENT IN INDIA OR NOT HAS TO BE EXAMINED. BUT IN THE PRESENT TWO APPEALS, SUCH QUESTION WILL NOT ARISE BECAUSE O F THE ABSENCE OF TREATY BETWEEN INDIA AND HONG KONG. IN VIEW OF THE ABOVE, WE CONFIRM THE ORDERS OF THE CIT(A) AND DISMISS BOTH THESE APP EALS ALSO. 9. THE AO CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY ASSESSMENT OF THE RECEIPTS FROM WSA SHIPPING (BOMBAY) PVT.LTD. BY THE ASSESSEE IN AY 01-02 SHOULD NOT BE BROUGHT TO TAX. THE STAND OF T HE ASSESSEE WAS THAT IT HAD NO BUSINESS CONNECTION IN INDIA AND THEREFORE N O INCOME CAN BE CONSIDERED AS ACCRUED OR ARISEN TO IT IN INDIA. IT WAS SUBMITTED THAT EVEN ASSUMING THAT INCOME ACCRUED OR AROSE TO THE ASSESS EE IN INDIA, THE SAME HAS TO BE CONSTRUED AS BUSINESS INCOME. BUSINESS I NCOME THAT ARISES IN INDIA CANNOT BE BROUGHT TO TAX SINCE AS PER THE DTA A BETWEEN INDIA AND SINGAPORE (THE ASSESSEE IS A TAX RESIDENT OF SINGAP ORE) INCOME FROM BUSINESS IS CHARGEABLE TO TAX ONLY IF THE ASSESSEE HAS A PER MANENT ESTABLISHMENT (PE) IN INDIA. SINCE THE ASSESSEE DID NOT HAVE A PE IN INDIA INCOME THAT ACCRUES OR ARISES TO IT IN INDIA CANNOT BE BROUGHT TO TAX. ALTERNATIVELY IT WAS SUBMITTED THAT EVEN IF IT IS HELD THAT THE ASSESSEE HAD A PE IN INDIA, ONLY INCOME ATTRIBUTABLE TO THE PE IN INDIA CAN BE BROUG HT TO TAX. SINCE NONE OF THE ACTIVITIES WERE CARRIED ON BY THE ASSESSEE IN I NDIA, NO INCOME CAN BE ATTRIBUTED TO THE PE IN INDIA AND THEREFORE THE REC EIPTS IN QUESTION CANNOT BE BROUGHT TO TAX IN INDIA. 10. THE AO HOWEVER REJECTED THE CONTENTION ON BEHAL F OF THE ASSESSEE AND RELYING ON THE FINDINGS IN THE PROCEEDINGS U/S.163 OF THE ACT, HE HELD THAT WSA SHIPPING (BOMBAY) PVT. LTD. 9 THE ASSESSEE HAD BUSINESS CONNECTION IN INDIA AND T HEREFORE INCOME ACCRUED AND AROSE TO THE ASSESSEE IN INDIA. THE AO FURTHER HELD THAT THE ASSESSEE VIZ., WSA 1994 PTE. - SINGAPORE WAS IN THE BUSINESS OF SHIPPING, HOWEVER, IT IS NVOCC. IT DOES NOT OWN ANY SHIP AND HENCE IS NOT ENTITLED FOR ANY TREATY BENEFIT. IT WAS ALSO NOT GOVERNED BY THE PROVISIONS SECTION 44B OF THE I.T. ACT, 1961, AS IT WAS NOT ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS. THE AO HELD THAT THE ASSESSEE HAVING FILED THE RETURN O F INCOME THROUGH ITS AGENT IN THE PRESCRIBED FORM THE ASSESSEE DID NOT FURNISH THE RELEVANT DETAILS AND IN THE CIRCUMSTANCES, THE AO BEING LEFT WITH NO ALT ERNATIVE HAS TO COMPLETE THE ASSESSMENT ON THE BASIS OF THE MATERIAL AVAILAB LE ON RECORDS. HE FOUND FROM THE DETAILS OF OUTWARD REMITTANCE SUBMITTED BY WSA SHIPPING (BOMBAY) PVT.LTD., AN AMOUNT OF RS. 5,51,5521- HAS BEEN REMI TTED TO M/S. WSA 1994 PTE. SINGAPORE, THE ASSESSEE, DURING THE F.Y. REL EVANT TO A.Y. 2002-03. IN ABSENCE OF THE DETAILS OF EXPENSES, THE AO ESTIMATE D THE PROFITABILITY AT 10% OF THE FREIGHT INCOME EARNED DURING THE RELEVANT A. Y AMOUNTING TO RS. 5,51,552/- AND THE SAME WAS IS TREATED AS BUSINESS INCOME. ON APPEAL BY THE ASSESSEE THE CIT(A) CONFIRMED THE ORDER OF THE AO. HE ALSO HELD THAT THERE WAS A PE OF THE ASSESSEE IN INDIA WITHIN THE MEANING OF ARTICLE 5(8) TO (10) OF THE DTAA BETWEEN INDIA AND SINGPORE. AGGRI EVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL B EFORE THE TRIBUNAL. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE FIRST SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT THERE WAS NO ACCR UAL OF INCOME IN INDIA TO THE ASSESSEE WITHIN THE MEANING OF SECTION 9 OF THE ACT. IN THIS REGARD IT WAS SUBMITTED THAT THERE WAS NO INCOME ACCRUING OR ARIS ING TO THE ASSESSEE DIRECTLY OR INDIRECTLY FROM ANY BUSINESS CONNECTION IN INDIA. IN THIS REGARD WE HAVE ALREADY WHILE DECIDING THE APPEALS ARISING OUT OF THE ORDER UNDER SECTION 163 OF THE ACT, WHEREBY WSA SHIPPING( BOMBA Y) PVT. LTD. WAS APPOINTED AS AGENT OF THE ASSESSEE TAKEN THE VIEW T HAT THE ASSESSEE HAS A BUSINESS CONNECTION IN INDIA. THE RELEVANT DISCUSS ION IN THIS REGARD IS AT PARA 28 OF THE ORDER, WHICH READS AS UNDER:- WSA SHIPPING (BOMBAY) PVT. LTD. 10 28. WE HAVE ALREADY SEEN THAT THE TERM 'BUSINESS CONNECTION' IS SO BROAD IN SCOPE. EXPLANATION 2 INSERTED BELOW SEC. 9(1) BY THE FINANCE ACT, 2003 WITH EFFECT FROM 1-4-2004 EXPANDS THE SCO PE OF THE EXPRESSION. THOUGH THE EXPLANATION DOES NOT APPLY T O THE YEAR UNDER CONSIDERATION, EVEN APPLYING THE TESTS LAID DOWN IN DECIDED CASES, THE ISSUE HAS TO BE RESOLVED AGAINST THE ASSESSEE. THER E WAS AN ELEMENT OF CONTINUITY BETWEEN THE BUSINESS OF THE NON-RESIDENT AND THE ACTIVITY IN THE TAXABLE TERRITORY. A MERE RELATION BETWEEN THE BUSINESS OF THE NON- RESIDENT AND THE ACTIVITY IN INDIA WHICH FACILITATE S OR ASSISTS THE CARRYING ON OF THE BUSINESS OF THE NON-RESIDENT WOU LD RESULT IN A BUSINESS CONNECTION. WE ARE OF THE VIEW THAT APPLY ING THESE TESTS TO THE PRESENT CASE, IT MUST BE HELD THAT THERE WAS A BUSINESS CONNECTION. THE BUSINESS OF THE NON-RESIDENT WAS TR ANSHIPMENT OF CARGO AND THE APPELLANT ENGAGED THEIR SERVICES FOR SHIPMENT OF CARGO FROM INDIA TO A DESTINATION WHICH THE APPELLANT COU LD NOT REACH WITHOUT THE ASSISTANCE OF THE TRANSHIPMENT THROUGH THE NON-RESIDENT. THE APPELLANT CANNOT SEGREGATE THE BUSINESS ACTIVIT Y OF SHIPMENT OF CARGO AS ONE UPTO THE PORT OF TRANSHIPMENT AND THE OTHER FROM THE PORT OF TRANSHIPMENT TO THE PORT OF FINAL DESTINATION. BOTH THESE ACTIVITIES ARE INTEGRATED ACTIVITIES. THE ABSENCE OF PRIVITY OF CONTRACT BETWEEN THE CUSTOMER IN INDIA AND THE NON-RESIDENT WILL NOT BE A GROUND TO HOLD THAT THE NON-RESIDENT DID NOT HAVE BUSINESS CO NNECTION IN INDIA. THE TRANSACTION AS BETWEEN THE PERSON IN INDIA AND THE CUSTOMER IN INDIA, WOULD NOT BE COMPLETE UNLESS THE CARGO REACH ES THE FINAL PORT OF DESTINATION. ALL THESE FACTS IN OUR OPINION ARE SU FFICIENT TO JUSTIFY THE CONCLUSION THAT THERE WAS A BUSINESS CONNECTION WIT HIN THE MEANING OF SEC. 163(1)(B) AS WELL AS SEC.9(1)(I) OF THE ACT . WE UPHOLD THE CONCLUSION OF THE INCOME-TAX AUTHORITIES TO THIS EF FECT. WE, THEREFORE, HOLD THAT THERE WAS ACCRUAL OF INCOM E TO THE NON-RESIDENT IN INDIA WITHIN THE MEANING OF SECTION 9(1)(I) OF THE ACT. 12. THE NEXT ASPECT ON WHICH THE LD. COUNSEL, FOR T HE ASSESSEE MADE SUBMISSION WAS THAT THERE WAS NO PERMANENT ESTABLIS HMENT OF THE ASSESSEE IN INDIA AND, THEREFORE, EVEN ASSUMING THERE WAS AC CRUAL OF INCOME TO THE ASSESSEE IN INDIA THE SAME CANNOT BE BROUGHT TO TAX IN VIEW OF THE PROVISIONS OF ARTICLE 7 OF THE DTAA BETWEEN INDIA AND SINGAPOR E WHICH PROVIDES THAT BUSINESS PROFITS OF AN ENTERPRISE OF SINGAPORE SHAL L BE TAXABLE IN INDIA ONLY IF THAT ENTERPRISE CARRIES ON BUSINESS IN INDIA THROUG H A PE SITUATED THEREIN. WSA SHIPPING (BOMBAY) PVT. LTD. 11 THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HE REVENUE HAD MADE OUT A CASE OF EXISTENCE OF A PE UNDER ARTICLE 5(8) AND 5( 9) OF THE DTAA BETWEEN INDIA AND SINGAPORE. THE RELEVANT ARTICLES OF THE DTAA BETWEEN INDIA AND SINGAPORE DEALING WITH AGENCY PE ARE ARTICLE 5(8) T O (10), READS AS FOLLOWS: 8. NOTWITHSTANDING THE PROVISIONS OF PARAGRAPHS 1 AND 2, WHERE A PERSON OTHER THAN AN AGENT OF AN INDEPENDENT STAT US TO WHOM PARAGRAPH 9 APPLIES IS ACTING IN A CONTRACTING ST ATE FOR OR ON BEHALF, OF AN ENTERPRISE OF THE OTHER CONTRACTING STATE THA T ENTERPRISE SHALL BE DEEMED TO HAVE A PERMANENT ESTABLISHMENT IN THE FIR ST-MENTIONED STATE, IF: (A) HE HAS, AND HABITUALLY EXERCISES IN THAT STATE, AN AUTHORITY TO CONCLUDE CONTRACTS ON BEHALF OF THE ENTERPRISE, UNL ESS HIS ACTIVITIES ARE LIMITED TO THE PURCHASE OF GOODS OR MERCHANDISE FOR THE ENTERPRISE; OR (B) HE HABITUALLY MAINTAINS IN THE FIRST MENTIONED CONTRACTING STATE A STOCK OF GOODS OR MERCHANDISE FROM WHICH HE REGULAR LY DELIVERS GOODS OR MERCHANDISE FOR OR ON BEHALF OF THE ENTERPRISE; OR (C) HE HABITUALLY SECURES ORDERS IN THE FIRST-MENTI ONED STATE, WHOLLY OR ALMOST WHOLLY FOR THE ENTERPRISE ITSELF OR FOR THE ENTERPRISE AND OTHER ENTERPRISES CONTROLLING, CONTROLLED BY, OR SUBJECT TO THE SAME COMMON CONTROL, AS THAT ENTERPRISE. 9. AN ENTERPRISE OF A CONTRACTING STATE SHALL NOT B E DEEMED TO HAVE A PERMANENT ESTABLISHMENT IN THE OTHER CONTRACTING ST ATE MERELY BECAUSE IT CARRIES ON BUSINESS IN THAT OTHER STATE THROUGH A BROKER, GENERAL COMMISSION AGENT OR ANY OTHER AGENT OF AN I NDEPENDENT STATUS, PROVIDED THAT SUCH PERSONS ARE ACTING IN TH E ORDINARY COURSE OF THEIR BUSINESS. HOWEVER, WHEN THE ACTIVITIES OF SUC H AN AGENT ARE DEVOTED WHOLLY OR ALMOST WHOLLY FOR THE ENTERPRISE OR FOR THE ENTERPRISE AND OTHER ENTERPRISES CONTROLLING AND CONTROLLED BY OR SUBJECT TO SAME COMMON CONTROL, AS THAT ENTERPRISE, HE WILL NOT BE CONSIDERED TO BE AN AGENT OF AN INDEPENDENT STATUS WITHIN THE MEANING O F THIS PARAGRAPH. 10. THE FACT THAT A COMPANY WHICH IS A RESIDENT OF A CONTRACTING STATE CONTROLS OR IS CONTROLLED BY A COMPANY WHICH IS A R ESIDENT OF THE OTHER WSA SHIPPING (BOMBAY) PVT. LTD. 12 CONTRACTING STATE, OR WHICH CARRIES ON BUSINESS IN THAT OTHER STATE (WHETHER THROUGH A PERMANENT ESTABLISHMENT OR OTHER WISE), SHALL NOT OF ITSELF CONSTITUTE EITHER COMPANY A PERMANENT EST ABLISHMENT OF THE OTHER. 11. IT WAS THE SUBMISSION OF THE LD. COUNSEL FOR TH E ASSESSEE THAT AS FAR AS THE AO IS CONCERNED DESPITE A PLEA TAKEN BY THE ASS ESSEE THAT THERE WAS NO PE OF THE ASSESSEE IN INDIA, THE AO WITHOUT GIVING ANY FINDING ABOUT THE EXISTENCE OF THE PE OF THE ASSESSEE IN INDIA, PROCE EDED TO HOLD THAT THE ASSESSEE ACTED ON BEHALF OF THE NON-RESIDENTS. SIN CE THERE IS NO DISCUSSION IN THE ORDER OF THE AO ACCORDING TO THE LD. COUNSEL FOR THE ASSESSE, IT HAS TO BE HELD THAT THERE WAS NO FINDING BY THE AO IN THIS REGARD. IT WAS ALSO SUBMITTED THAT THE AO DID NOT CALL FOR ANY REQUIREM ENT FROM THE ASSESSEE TO DECIDE THE QUESTION REGARDING THE EXISTENCE OF A PE OF THE ASSESSEE IN INDIA. IT WAS FURTHER SUBMITTED BY HIM THAT THE CIT(A) HAS HELD THAT WSA SHIPPING (BOMBAY) PVT. LTD. WERE AGENTS ACTING ON BEHALF OF THE ASSESSEE WITHIN THE MEANING OF ARTICLE 5(9) OF THE DTAA. IN THIS REGAR D LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS NO EVIDENCE TO S HOW THAT WSA SHIPPING (BOMBAY) PVT. LTD. ACTED ON BEHALF OF THE ASSESSEE WHILE ACCEPTING CARGO FROM CUSTOMER IN INDIA FOR SHIPMENT. IT WAS HIS SUBMISS ION THAT THE RELATIONSHIP BETWEEN THE WSA SHIPPING (BOMBAY) PVT. LTD. AND THE ASSESSEE WAS PRINCIPAL TO PRINCIPAL RELATIONSHIP AND, THEREFORE, THE CONCLUSION OF THE CIT(A) IN THIS ARE BASELESS. 12. WITH REGARD TO THE EXISTENCE OF A PE WITHIN THE MEANING OF ARTICLE 5(8) OF THE DTAA THE LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THERE WAS NO MATERIAL WHATSOEVER BEFORE CIT(A) TO CONCLUDE THAT WSA SHIPPING (BOMBAY) PVT. LTD. HABITUALLY EXERCISED IN INDIA AN AUTHORIT Y TO CONCLUDE CONTRACTS ON BEHALF OF THE ASSESSEE OR HABITUALLY SECURED ORDERS IN INDIA WHOLLY OR ALMOST WHOLLY FOR THE ASSESSE OR FOR OTHER ENTERPRISES CONTROLLIN G, CONTROLLED BY OR SUBJECT TO THE SAME COMMON CONTROL OF THE ASSESSEE . IN THIS REGARD THE LD. WSA SHIPPING (BOMBAY) PVT. LTD. 13 COUNSEL FOR THE ASSESSEE ALSO POINTED OUT THAT THE ASSESSEE WAS A MULTIMODAL TRANSPORT OPERATOR REGISTERED UNDER THE MULTIMODAL TRANSPORTATION OF GOODS ACT, 1993. IT WAS HIS SUBMISSION THAT AS PE R DEFINITION TO MULTIMODAL TRANSPORT OPERATOR GIVEN IN THE SAID ACT, THE ASSES SEE SHOULD ACT ONLY AS PRINCIPAL AND NOT AS AN AGENT OF CONSIGNER OR CONSI GNEE OR THE CARRIERS PARTICIPATING IN THE MULTIMODAL TRANSPORTATION. IT WAS SUBMITTED THAT THE ASSESSEE WAS NOT ECONOMICALLY DEPENDENT ON WSA SHIP PING (BOMBAY) PVT. LTD.. IN THIS REGARD THE LD. COUNSEL FOR THE ASSES SEE RELIED ON THE DECISION OF THE HONBLE ITAT DELHI BENCH IN THE CASE OF WESTERN UNION FINANCIAL SERVICES INC. VS. ADIT, 104 ITD 34 (DEL), WHEREIN T HE HONBLE DELHI BENCH IN THE CONTEXT OF INDEPENDENT AGENCY OBSERVED AS FOLLO WS: 34. THE LEARNED CIT(DR) HAS DRAWN OUR ATTENTION TO PARAGRAPHS 36 TO 38.8 OF THE REVISED COMMENTARY ON THE OECD MODEL AN D HAS RELIED ON THE SAME IN SUPPORT OF HIS ARGUMENT THAT THE AGENTS IN THE PRESENT CASE ARE NOT INDEPENDENT AGENTS WITHIN THE MEANING OF ARTICLE 5.5 OF THE DTAA. THE COMMENTARY DISCUSSES WHAT IN GENERAL ARE THE TESTS TO BE APPLIED TO ASCERTAIN WHETHER THE AGENT IS AN IND EPENDENT AGENT OR NOT. THE EXTENT OF LEGAL DEPENDENCE OR CONTROL, THE UNDERTAKING OF RISKS, THE FACT WHETHER THE AGENT IS SUBJECT TO THE CONTROL OF THE PRINCIPAL FOR THE MANNER IN WHICH THE WORK IS TO BE CARRIED OUT ETC. HAVE BEEN DISCUSSED. MUCH OF THE DISCUSSION LOSES R ELEVANCE TO THE CONTROVERSY BEFORE US WHERE WE HAVE TO APPLY ARTICL E 5.5 WHICH REQUIRES THAT THE ACTIVITIES OF THE AGENT MUST BE W HOLLY OR ALMOST WHOLLY DEVOTED TO THE FOREIGN ENTERPRISE. THIS IS T HE TEST LAID DOWN IN THE ARTICLE. EVEN ON THIS ASPECT, PARAGRAPH 38.6 OF THE REVISED COMMENTARY HAS THIS TO SAY : ANOTHER FACTOR TO BE CONSIDERED IN DETERMINING IND EPENDENT STATUS IS THE NUMBER OF PRINCIPALS REPRESENTED BY T HE AGENT. INDEPENDENT STATUS IS LESS LIKELY IF THE ACTIVITIES OF THE AGENT ARE PERFORMED WHOLLY OR ALMOST WHOLLY ON BEHALF OF ONLY ONE ENTERPRISE OVER THE LIFETIME OF THE BUSINESS OR A L ONG PERIOD OF TIME. HOWEVER, THIS FACT IS NOT BY ITSELF DETERMINA TIVE. ALL THE FACTS AND CIRCUMSTANCES MUST BE TAKEN INTO ACCOUNT TO DETERMINE WHETHER THE AGENTS ACTIVITIES CONSTITUTE AN AUTONOMOUS BUSINESS CONDUCTED BY HIM IN WHICH HE BE ARS RISK AND RECEIVES REWARD THROUGH THE USE OF HIS ENTREPRE NEURIAL SKILLS AND KNOWLEDGE. WHERE AN AGENT ACTS FOR A NUMBER OF PRINCIPALS IN THE ORDINARY COURSE OF HIS BUSINESS AND NONE OF THESE IS PREDOMINANT IN TERMS OF THE BUSINESS CARRIED ON BY THE AGENT LEGAL DEPENDENCE MAY EXIST IF THE PRINCIPALS ACT IN CONCERT TO WSA SHIPPING (BOMBAY) PVT. LTD. 14 CONTROL THE ACTS OF THE AGENT IN THE COURSE OF HIS BUSINESS ON THEIR BEHALF. WHAT WE THUS UNDERSTAND FROM THE LANGUAGE USED IN A RTICLE 5.5 IS THAT THE AGENTS ACTIVITIES FOR THE FOREIGN ENTERPRISE M UST CONSTITUTE A LARGE CHUNK OF ALL HIS ACTIVITIES TAKEN TOGETHER SO THAT IT CAN BE SAID THAT HE IS ECONOMICALLY DEPENDENT LARGELY ON THE ACTIVITY. NOTHING HAS BEEN BROUGHT ON RECORD TO SUGGEST THIS. EVEN IF YOU TAKE THE RISK FACTOR, THE TO SEND SPECIMEN FORM WHICH WAS FILED BEFORE US I N THE COURSE OF THE HEARING WHILE EXPLAINING THE TRANSACTION MAKES IT C LEAR ON THE REVERSE THAT THE ASSESSEE WILL BE LIABLE TO REFUND THE PRIN CIPAL AMOUNT OF A MONEY TRANSFER (AT THE APPLICABLE RATE OF EXCHANGE AT THE TIME THE REFUND IS MADE) UPON THE WRITTEN REQUEST OF THE SEN DER IF PAYMENT TO THE RECIPIENT IS NOT MADE WITHIN 30 DAYS EXCLUDING SUNDAYS AND HOLIDAYS AND THAT THE SAME WILL BE THE CASE OF THE FEES CHARGED. IT GOES ON TO SAY THAT THE ASSESSEE OR HIS AGENT WILL IN NO CASE BE LIABLE FOR DAMAGES FOR THE DELAY, NON-PAYMENT OR UNDERPAYMENT OF THE MONEY TRANSFER. THE AGENT IS NOT THEREFORE LIABLE TO ANY RISK ON THIS ACCOUNT. 13. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT TH AT WSA SHIPPING (BOMBAY) PVT. LTD. ACTED ON BEHALF OF MANY NON-RESI DENTS IN THE SHIPPING BUSINESS IN THE ORDINARY COURSE OF ITS BUSINESS AND WAS NOT DEPENDENT ON THE ASSESSEE ALONE AND IN SUCH CIRCUMSTANCES IT CAN NOT BE SAID THAT THERE WAS ANY DEPENDENCE. 14. THE LD. D.R. ON THE OTHER HAND STRONGLY PLACED RELIANCE ON THE OBSERVATION OF THE TRIBUNAL IN THE APPEAL WHEREBY W SA SHIPPING (BOMBAY) PVT. LTD. WAS TREATED AS AN AGENT OF THE ASSESSEE. THE RELEVANT OBSERVATION ARE AS UNDER:- 21. WE HAVE ALREADY SEEN THE MANNER IN WHICH THE APPELLANT CARRIES ON ITS BUSINESS. THE SAME HAS BEEN EXPLAINED IN PA RA-4 OF THIS ORDER. THE CIT(A) HAS GIVEN A FINDING THAT THE APPELLANT C HARGES ITS CUSTOMERS FREIGHT PAYABLE INCLUSIVE OF THE FREIGHT FROM THE P ORT OF TRANSSHIPMENT TO THE ULTIMATE DESTINATION AND THIS IS DONE WITH T HE TACIT UNDERSTANDING WITH THE NON-RESIDENT WHO DOES TRANSS HIPMENT OUTSIDE INDIA. ACCORDING TO THE CIT(A), THE AFFAIRS OF THE APPELLANT AND THE NON-RESIDENT APPEAR TO BE IN A WAY THAT THE TARIFF CHARGED BY THE NON- RESIDENT BUSINESS ASSOCIATE FOR TRANSSHIPMENT DOES NOT INCLUDE THE TARIFF FROM THE INDIAN PORT TO THE TRANSSHIPMENT PO RT. IT HAS BEEN THE WSA SHIPPING (BOMBAY) PVT. LTD. 15 STAND OF THE APPELLANT THAT THE NON-RESIDENT IS NOT A PARTY TO THE TERMS OF CONTRACT BETWEEN THE APPELLANT AND THE EXPORTER. SIMILARLY THE EXPORTER IS NOT A PARTY TO THE TERMS OF THE CONTRAC T BETWEEN THE APPELLANT AND NON-RESIDENT FOR TRANSSHIPMENT OF THE CARGO. FROM THESE FACTS IT CANNOT BE SAID THAT THERE WAS ONLY A PRINCIPAL TO PRINCIPAL RELATIONSHIP AS BETWEEN THE APPELLANT AND THE NON-RESIDENT. THIS IS BECAUSE THE TERMS OF THE AGREEMENT BETWEEN THE APPELLANT AND THE NON-RESIDENT HAVE NOT BEEN BROUGHT ON RECORD. FURTHER WE ALSO DO NOT KNOW THE SHAREHOLDING PATTERN OF THE APPELLANT. THIS COULD BE MATERIAL FOR ASCERTAINING THE CONTROL THAT THE NON- RESIDENTS MIGHT EXERCISE ON THE APPELLANT. THOUGH THERE IS NO MATE RIAL ON RECORD TO SUGGEST THAT THE APPELLANTS WERE ACTING AS AGENTS W HEN THEY DEALT WITH THE INDIAN CUSTOMER SENDING CARGO, THERE IS EQUALLY NO MATERIAL TO SHOW THAT THE APPELLANTS WERE DEALING WITH THE NON- RESIDENTS ONLY ON A PRINCIPAL TO PRINCIPAL BASIS. IT CANNOT BE SAID WI TH CERTAINTY THAT THE EXPORTER IN INDIA HAS NO KNOWLEDGE ABOUT THE TRANSS HIPMENT AND THE APPELLANT UTILIZING THE SERVICES OF NON-RESIDENT FO R ONWARD MOVEMENT OF THE CARGO TO THE ULTIMATE DESTINATION. IN THE ABSE NCE OF THE TERMS OF THE AGREEMENT BETWEEN THE APPELLANT AND THE NON-RES IDENT IT CANNOT BE SAID THAT THE NON-RESIDENT HAD NO CONTROL OVER T HE FREIGHT CHARGES COLLECTED BY THE APPELLANTS OR THE TERMS OF CONTRAC T AS BETWEEN THE APPELLANT AND THE EXPORTER FROM INDIA. AS PER THE CONDITIONS OF TRANSSHIPMENT AS GIVEN BY M/S. WNS 1994 PTE LTD., S INGAPORE, ONE OF THE NON-RESIDENT, IT IS SEEN THAT THE NON-RESIDE NT CHARGES ARE EX- SINGAPORE. ANOTHER CONDITION IS THAT BECAUSE OF REG ULATIONS IMPOSED AT DIFFERENT PORTS, THE CLIENTS ARE REQUESTED TO CHECK WITH THE TRANSSHIPPER FOR ACCEPTANCE OF ANY HAZARDOUS CARGO BEFORE ACCEPTING ANY SHIPMENT. SIMILARLY THE NON-RESIDENT HAS IMPOS ED A CONDITION THAT ONLY CERTAIN CATEGORIES OF GOODS ARE ALLOWED F OR TRANSSHIPMENT AND THEREFORE ONE HAS TO CHECK WITH THEM AS TO WHETHER THE GOODS PROPOSED TO BE SENT FOR TRANSSHIPMENT ARE ACCEPTABL E FOR TRANSSHIPMENT. THESE TERMS HAVE BEEN RELIED UPON B Y THE CIT(A) TO GIVE A FINDING THAT THE NON-RESIDENTS CONSENT IS R EQUIRED FOR ACCEPTING CARGO BY THE APPELLANT. IT IS ALSO A FACT THAT THE APPELLANT HAVE NOT PLACED ON RECORD THE TERMS OF THE CONTRACT BETWEEN THE APPELLANT AND THE NON-RESIDENT. IN SUCH CIRCUMSTANCES IN OUR VIEW THE FINDING OF THE CIT(A) IN THIS REGARD CANNOT BE SAID TO BE BASELESS . IT CANNOT ALSO BE SAID THAT THE NON-RESIDENT HAS NO CONTROL OVER THE MANNER IN WHICH THE APPELLANT ACCEPTS THE CARGO AND THAT THE NON-RE SIDENT ONLY UNDERTAKES THE CARGO FROM THE PLACE OF TRANSSHIPMEN T TILL THE PORT OF DESTINATION AND CHARGES FEE FOR DOING SO. IT IS AL SO A FACT THAT THE APPELLANT HAS BEEN DEALING WITH THE NON-RESIDENT OV ER A PERIOD OF TIME AND IT WAS NOT A CASE OF SINGLE, ISOLATED OR SPORAD IC TRANSACTIONS. IN THE BACKGROUND OF THE ABOVE FACTS, LET US EXAMINE T HE QUESTION AS TO WHETHER THE APPELLANT HAD ANY BUSINESS CONNECTION W ITH THE NON- RESIDENT. WSA SHIPPING (BOMBAY) PVT. LTD. 16 15. THE LD. D.R PLACED STRONG RELIANCE ON THE FACT THAT THE ASSESSEE DID NOT FILE THE AGREEMENT WITH WSA SHIPPING (BOMBAY) PVT. LTD.. 16. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOIND ER SUBMITTED THAT THE ASSESSEE HAD CATEGORICALLY TAKEN A STAND BEFORE THE REVENUE AUTHORITIES IN THE PRESENT ASSESSMENT PROCEEDINGS THAT THERE WAS N O WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND WSA SHIPPING (BOMBAY) PVT. LTD.. IN THIS REGARD OUR ATTENTION WAS DRAWN TO THE SUBMISSION MADE BEFO RE THE CIT(A), WHEREIN SPECIFIC STAND WAS TAKEN BY THE ASSESSEE THAT THERE WAS NO FORMAL WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE NON-RESIDENT . THE ARRANGEMENT BETWEEN WSA SHIPPING (BOMBAY) PVT. LTD. AND THE ASS ESSEE WAS EXPLAINED BEFORE THE AO AND THAT ARRANGEMENT HAS NOT BEEN FOU ND TO BE FALSE. IT WAS, THEREFORE, SUBMITTED BY HIM THAT THE OBSERVATION OF THE TRIBUNAL IN THE PROCEEDINGS UNDER SECTION 163 OF THE ACT WOULD NOT BE RELEVANT FOR A DECISION IN THE PRESENT APPEAL. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT T HE OUTSET WE MAKE IT CLEAR THAT THE ACCRUAL OF INCOME TO THE ASSESSEE IN INDIA WILL GIVE A RIGHT TO THE TAX AUTHORITIES IN INDIA TO TAX THE INCOME OF T HE NON-RESIDENT BASED ON SOURCE RULE. THE ASSESSEE IS TAX RESIDENT OF SINGA PORE AND ON THE BASIS OF RESIDENCE, SINGAPORE AUTHORITIES HAVE RIGHT TO TAX THE ASSESSEE TO THE INCOME THAT ACCRUES IN INDIA. THIS IS BASED ON THE RESIDE NCE RULE. IT IS TO AVOID SUCH RIGHT TO TAX THE SAME INCOME BY TWO TAX JURISD ICTION BASED ON SOURCE RULE AND RESIDENCE RULE THAT TAX TREATIES ARE ENTER ED INTO BETWEEN TWO COUNTRIES. 18. INCOME THAT ACCRUES TO THE ASSESSEE IN INDIA IS TO BE CONSIDERED AS BUSINESS INCOME. ARTICLE 7 OF THE DTAA BETWEEN IND IA AND SINGAPORE PROVIDES THAT INCOME THAT ACCRUES TO A TAX RESIDENT OF SINGAPORE IN INDIA WSA SHIPPING (BOMBAY) PVT. LTD. 17 SHALL BE TAXABLE ONLY IN SINGAPORE UNLESS THE ENTER PRISE CARRIES BUSINESS IN INDIA THROUGH A PE. IN OTHER WORDS UNLESS THE ASSE SSEE HAS REAL AND SIGNIFICANT OR SUBSTANTIAL ECONOMIC NEXUS WITH INDI A IN WHICH THE PROFITS ACCRUED TO IT, THE SAID PROFITS CANNOT BE TAXED IN INDIA. SUCH REAL AND SIGNIFICANT AND SUBSTANTIAL NEXUS CAN EXIST ONLY IF THERE IS A PE OF THE ASSESSEE IN INDIA. THE REVENUE IN THE PRESENT CASE SEEKS TO RELY ON THE PROVISIONS OF ARTICLE 5(8) AND 5(9) TO HOLD THAT TH E ASSESSEE HAD PE IN INDIA IN THE FORM OF AN AGENT IN INDIA. AS FAR AS ARTICL E 5(8) IS CONCERNED, WE ARE OF THE VIEW THAT THERE IS NO EVIDENCE ON RECORD WHATSO EVER TO SHOW THAT WSA SHIPPING (BOMBAY) PVT. LTD. HABITUALLY EXERCISED IN INDIA AN AUTHORITY TO CONCLUDE AND CONTROL CONTRACTS ON BEHALF OF THE ENT ERPRISE OR HABITUALLY SECURED ORDERS WHOLLY OR ALMOST WHOLLY FOR THE ASSESSEE OR ITS RELATED ENTERPRISES. THE REVENUE SEEKS TO RELY ON THE OBSE RVATION MADE IN THE ORDER OF THE ITAT IN THE PROCEEDINGS UNDER SECTION163 OF THE ACT. WE ARE OF THE VIEW THAT THOSE OBSERVATIONS WERE RENDERED IN THE C ONTEXT OF TREATING WSA SHIPPING (BOMBAY) PVT.LTD. AS AGENT OF THE ASSESSEE U/S.163 OF THE ACT. IN THE PRESENT ASSESSMENT PROCEEDINGS, THE ASSESSEE HA D CATEGORICALLY DENIED ANY WRITTEN AGREEMENT WITH WSA SHIPPING (BOMBAY) PV T. LTD.. THE CONDITIONS OF TRANSSHIPMENT WHICH HAS BEEN REFERRED TO IN THE ORDER OF THE ITAT IN THE APPEAL RELATING TO PROCEEDINGS UNDER SE CTION 163 OF THE ACT ARE GENERAL CONDITIONS WHICH WOULD BE RELEVANT ONLY IN THE CONTEXT OF EXISTENCE OF THE BUSINESS CONNECTION OF THE ASSESSEE IN INDIA . FOR THE PURPOSE OF ASCERTAINING WHETHER THERE IS A PE OF THE ASSESSEE IN INDIA WITHIN THE MEANING OF ARTICLE 5(8) AND 5(9) OF THE DTAA THOSE OBSERVATIONS WOULD NOT BE SUFFICIENT. IN FACT THIS ASPECT HAS BEEN MADE CLEA R IN PARA 33 OF THE ORDER OF THE TRIBUNAL AND WE HAVE ALREADY MADE REFERENCE TO THOSE OBSERVATIONS IN PARAGRAPH 8 OF HIS ORDER. WSA SHIPPING (BOMBAY) PV T. LTD. WAS ACTING ON BEHALF OF SEVERAL NON-RESIDENTS AND, THEREFORE, ART ICLE 5(9) ALSO IS NOT ATTRACTED KEEPING IN MIND THE DECISION OF THE HONB LE DELHI ITAT IN THE CASE OF WESTERN UNION FINANCIAL SERVICES (SUPRA). WE AR E THUS OF THE VIEW THAT ON THE EVIDENCE AVAILABLE ON RECORD IT CANNOT BE SAID THAT THE ASSESSEE HAD PE WSA SHIPPING (BOMBAY) PVT. LTD. 18 IN INDIA AND, THEREFORE, INCOME WHICH ACCRUES OR AR ISE TO IT IN INDIA CANNOT BE TAXED IN INDIA. FOR THE REASONS GIVEN ABOVE WE HOLD THAT THE RECEIPTS BY THE ASSESSEE FROM INDIA THROUGH WSA SHIPPING (BOMBA Y) PVT. LTD. CANNOT BE BROUGHT TO TAX IN INDIA. IN VIEW OF THE ABOVE CONC LUSION THE QUESTION AS TO WHAT IS THE QUANTUM OF INCOME ATTRIBUTABLE TO THE P E OF THE ASSESSEE IN INDIA DOES NOT ARISE FOR CONSIDERATION. CONSEQUENT LY WE ALLOW THE APPEAL OF THE ASSESSEE. ITA NO.4944/M/09,4906/M/09,5038/M/09&4905/M/09: 19. IN ALL THE ABOVE APPEALS THE FACTS ARE IDENTICA L. THE ONLY DIFFERENCE IS THAT SOME OF THE NON RESIDENT ASSESSES IN THE ABOVE APPEALS ARE TAX RESIDENTS OF DIFFERENT COUNTRIES AS PER THE FOLLOWING DETAILS : ITA NO. NAME OF NON-RESIDENT COUNTRY AMOUNT REMITTED RS. 4905 SEA ROAD TRANS CORPORATION KOREA 20,78,648 4906 MIRACLE CONTAINER LINE SINGAPORE 3,42,705 5038 CAS AGENCIES UK 2,39,828 4944 WILSON LOGISTICS ROTTERDAM, NETHERLANDS 3,12,640 IT IS NOT IN DISPUTE BEFORE US THAT AS PER THE DTAA BETWEEN INDIA AND THE AFORESAID COUNTRIES THE EXISTENCE OF AN AGENCY PE H AS TO BE DECIDED ON THE SAME CRITERIA AS FOUND IN THE DTAA BETWEEN INDIA AN D SINGAPORE. THEREFORE, THE OBSERVATION MADE BY US WHILE DECIDING THE APPEA L OF WSA 1994 PTE LTD. WILL EQUALLY APPLY TO THESE APPEALS ALSO. FOR THE REASONS STATED WHILE WSA SHIPPING (BOMBAY) PVT. LTD. 19 DECIDING ITA NO.4907/M/09, WE HOLD THAT THE RECEIP TS BY THE ASSESSEES IN THESE APPEALS FROM WSA SHIPPING (BOMBAY) PVT. LTD. CANNOT BE BROUGHT TO TAX IN INDIA. THESE APPEALS ARE ACCORDINGLY ALLOWE D. 20. IN THE RESULT, ALL THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 18 TH DAY OF NOV. 2011. SD/- SD/- (B.RAMAKOTAIAH ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 18TH NOV. 2011 COPY TO: 1. THE APPELLANT 2. THE ASSESSEE 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RL BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. WSA SHIPPING (BOMBAY) PVT. LTD. 20 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 15/11/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 16 /11/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER