Appeal details
Counselvise Citation
[2011] 140 COUNSELVISE.COM (IT) 49156 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 9 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-06-2011
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
L
Next Hearing Date
30-05-2011
Assessment Year
2010-2011
Appeal Filed On
07-09-2009
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH L, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI RAJENDRA SIN GH (A.M) ITA NO.5085/MUM/2009(A.Y. 2010-11) ITA NO.5087/MUM/2009(A.Y. 2009-10) ASSTT. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) 1(1), ROOM NO.117, 1 ST FLOOR, SCINDIA HOUSE BELLARD PIER, MUMBAI 38. (APPELLANT) VS. M/S. A C M SHIPPING INDIA LTD. MITTAL TOWER C-112, 11 TH FLOOR, 210, NARIMAN POINT, MUMBAI 400 021. PAN: AAFCA 8962M (RESPONDENT) APPELLANT BY : SMT. MALATHI SHRIDHARAN RESPONDENT BY : SHRI J.P.BAIRAGRA ORDER PER N.V.VASUDEVAN, J.M, THESE ARE APPEALS BY THE REVENUE AGAINST TWO ORDER S BOTH DATED 25/6/09 OF CIT(A) XXXI, MUMBAI RELATING TO ASSESSME NT YEAR 2010-11 AND 2009-10. 2. THE APPELLANT IS ACM SHIPPING INDIA LIMITED, A C OMPANY (HEREINAFTER REFERRED TO AS THE APPELLANT). IT IS ENGAGED I N THE BUSINESS OF SHIP BROKING AND ARRANGES FOR TRANSPORTATION OF CARGO FROM INDIA TO OTHER COUNTRIES. THE APPELLANT IS A SUBSIDIARY OF ACM SHIPPING LTD. (AC M UK) IS A FOREIGN COMPANY INCORPORATED IN UK, HAVING ITS OFFICE AT KI NNAIRD HOUSE, 1 PALL MALL, LONDON SWIY 5AU. ACM UK IS ENGAGED IN INTERNATIONA L BUSINESS OF SHIP BROKING SERVICES. ACCORDING TO THE APPELLANT ACM U K HAS AN EXTENSIVE WORLDWIDE NET WORK/CONNECTION WITH LARGE NUMBER OF INTERNATIONAL SHIP OWNERS AND HAS SUBSTANTIAL EXPERIENCE IN DEALING WI TH THEM. ACM UK IS A ITA NO.5085/MUM/2009(A.Y. 2010-11) ITA NO.5087/MUM/2009(A.Y. 2009-10) 2 TAX RESIDENT OF THE UNITED KINGDOM. A COPY OF THE TAX RESIDENCY CERTIFICATE WAS ALSO FILED BEFORE THE AO. 3. ACCORDING TO THE APPELLANT, IT NEEDS CONTACT IN FORMATION/DETAILS OF INTERNATIONAL SHIP OWNERS FOR ARRANGING INTERNATION AL SHIPMENTS. THE APPELLANT THEREFORE ENTERED INTO A SERVICE AGREEMEN T DATED APRIL, 1, 2008 WITH ACM UK. AS PER THE AGREEMENT, ACM UK WAS REQU IRED TO PROVIDE THE FOLLOWING SERVICES TO ACM INDIA OUTSIDE INDIA. - IDENTIFYING POTENTIAL INTERNATIONAL SHIP OWNERS OUTSIDE INDIA AND REFERRING THEM TO ACM INDIA. - FACILITATE INTERACTION OF ACM INDIA WITH THE INT ERNATIONAL SHIP OWNERS. - EXTEND HELP BY WAY OF ASSISTANCE WITH ESTABLISHI NG CONTACT WITH SHIP OWNERS REGARDING AVAILABILITY OF SHIPS ON REQUISITE DATES AND FREIGHT CHARGES. 4. THE APPELLANT APPROACHED THE AO FOR ISSUE OF A N IL DEDUCTION OF TAX AT SOURCE CERTIFICATE UNDER SECTION 195(2) OF THE INCO ME TAX ACT, 1961 FOR REMITTING PAYMENTS TO ACM, UK FOR THE FINANCIAL YEA R 1/4/2008 TO 31/3/2009. IT WAS SUBMITTED THAT THE AFORESAID CO MMISSION PAYABLE TO ACM UK CANNOT BE CHARACTERIZED AS FEES FOR TECHNICA L SERVICES (FTS) AS CONTEMPLATED IN ARTICLE 13(4) OF THE INDIA-UK TAX T REATY AS THE PAYMENT IS NOT IN THE NATURE OF TECHNICAL KNOWLEDGE, EXPERIENC E, SKILL, KNOW HOW OR PROCESSES, OR CONSIST OF THE DEVELOPMENT AND TRANSF ER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. THEREFORE, THE SAME WOULD NOT QU ALIFY AS FTS UNDER THE INDIA UK TAX TREATY. THE PAYMENTS TO BE RECEIVED BY ACM UK ARE IN THE NATURE OF BUSINESS INCOME IN THE HANDS OF ACM UK. IT WAS SUBMITTED BY THE APPELLANT THAT IN TERMS OF ARTICLE 7(1) OF THE DTAA BETWEEN INDIA AND UK, IN THE ABSENCE OF ANY OF PERMANENT ESTABLISHMENT(PE) OF ACM UK IN INDIA, ITS INCOME CANNOT BE SUBJECT TO TAX IN INDIA. IN VIEW OF THE ABOVE THE APPELLANT REQUESTED FOR A NIL WITHHOLDING TAX CERTIFICATE. ITA NO.5085/MUM/2009(A.Y. 2010-11) ITA NO.5087/MUM/2009(A.Y. 2009-10) 3 5. THE AO DID NOT AGREE WITH THE SUBMISSIONS OF THE APPELLANT. HE FOUND THAT ACM UK IS THE HOLDING MAJORITY OF THE SHARES O F THE APPELLANT. THE APPELLANT WAS ALSO PROCURING BUSINESS FOR ACM UK AN D THAT THE ACTIVITIES OF THE APPELLANT WERE CARRIED OUT WHOLLY FOR THE ACM U K AND THEREFORE, THE INDIAN COMPANY BECOMES AGENCY PE OF THE UK COMPANY AS PER ARTICLE 5 OF THE INDO-UK DTAA. HENCE THE PROFITS ATTRIBUTABLE T O INDIAN OPERATIONS ARE TAXABLE IN INDIA. ACCORDINGLY THE APPELLANT HEREIN WAS DIRECTED TO DEDUCT TAX AT SOURCE BEFORE MAKING PAYMENTS TO ACM UK. 6. ON APPEAL BY THE ASSESSE, THE CIT(A) HELD : A. THE COMMISSION EARNED BY THE NON-RESIDENT SELLI NG AGENT FOR SERVICES WHICH WERE RENDERED OUTSIDE INDIA CANNOT B E CONSIDERED AS DEEMED TO HAVE ACCRUED OR ARISEN IN INDIA AND HENC E NOT TAXABLE IN INDIA. IN THIS REGARD THE CIT(A) HELD THAT ACM, UK IS GETTING COMMISSION FOR SERVICES RENDERED BY THEM IN UK FOR ARRANGING THE CONTRACTS WITH SHIP OWNERS AND THE APPELLANT IS GET TING COMMISSION IN RESPECT OF ARRANGING CLIENTS IN INDIA FOR CARRYING THEIR CARGO. ACCORDING TO THE CIT(A) THE APPELLANT WAS PAYING 50% OF THE C OMMISSION IT EARNED TO ACM UK FOR THE SERVICES RENDERED FOR GET TING CONTRACT WITH THE SHIP OWNERS AND THE CUSTOMERS. ACCORDING TO TH E CIT(A) THE COMMISSION IS PAYABLE BY THE SHIP OWNERS TO ACM,UK DIRECTLY, BUT IS ROUTED THROUGH THE APPELLANT BECAUSE THE CUSTOMERS IS BASED IN INDIA. AS PER THE CONTRACT WITH THE SHIP OWNER AND THE CUS TOMER, THE CUSTOMER HAS TO DEDUCT THE COMMISSION PAYABLE OUT O F THE GROSS FREIGHT AND THE COMMISSION IS PAID TO THE APPELLANT WHICH IN TURN IS SHARED BETWEEN THE APPELLANT AND THE FOREIGN COMPAN Y. THE CIT(A) RELIED ON CIRCULAR NO.23 DATED 23/7/1969 WHEREIN IT HAS BEEN CLARIFIED THAT WHERE THERE ARE TRANSACTIONS WITH THE NON-RESI DENT ON A PRINCIPAL TO PRINCIPAL BASIS THERE WILL BE NO LIABILITY ON AC CRUAL BASIS TO THE NON- RESIDENT ON THE PROFITS MADE BY HIM. IT HAS FURTHE R BEEN CLARIFIED THAT THE REAL RELATIONSHIP BETWEEN THE PARTIES HAS TO BE LOOKED INTO ON THE BASIS OF THE AGREEMENT EXISTING BETWEEN THE RESIDEN T AND THE NON- RESIDENT. THUS THE CIT(A) HELD THAT THERE IS NO ACCRUAL OF INCOME TO THE NON-RESIDENT IN INDIA. B. ACM SHIPPING LTD., UK DOES NOT CARRY ON ANY BU SINESS IN INDIA. THEY DO NOT HAVE ANY PLACE OF BUSINESS IN INDIA. F URTHER, THE APPELLANT COMPANY , THOUGH IT IS A WHOLLY OWNED SUB SIDIARY OF ACM SHIPPING LTD., UK BUT IS INDEPENDENTLY AND COMPLETE LY MANAGED BY ITA NO.5085/MUM/2009(A.Y. 2010-11) ITA NO.5087/MUM/2009(A.Y. 2009-10) 4 DIFFERENT SET OF EMPLOYEES. ALL THE DECISIONS OF T HE APPELLANT COMPANY ARE INDEPENDENTLY TAKEN BY ITS EMPLOYEES. ALSO, TH E BOARD OF DIRECTORS ARE COMMON, OTHER THAN ONE DIRECTOR WHO IS APPOINTE D BY THE U.K COMPANY AND THE OTHER TWO DIRECTORS ARE NOT RELATED TO ACM SHIPPING LTD. UK AND HENCE, THE QUESTION OF APPELLANT COMPAN Y BECOMING AGENCY P.E OF ACM SHIPPING LTD. U.K AS PER ARTICLE 5 OF DTAA BETWEEN INDIA AND U.K. DOES NOT ARISE. ALSO, NONE OF THE EMPLOYEES OF THE APPELLANT COMPANY HAVE PREVIOUSLY WORKED OR HAVE BE EN SENT ON DEPUTATION BY ACM, UK. THE APPELLANT IS NOT A AGEN CY PE OF THE UK COMPANY AS THE AGREEMENT BETWEEN THE APPELLANT COMP ANY AND THE UK COMPANY IS AN AGREEMENT BETWEEN TWO PRINCIPALS A ND THE APPELLANT COMPANY IS NOT APPOINTED AS AN AGENT BY A CM UK FOR PROCURING ANY BUSINESS FOR THEM AS SALES AGENTS OR PURCHASE AGENTS. ON THE CONTRARY, THE APPELLANT COMPANY IS UTILIZING THE SERVICES OF ACM UK FOR WHICH COMMISSION IS REMITTED AND MERELY BECAUSE THE APPELLANT COMPANY IS A SUBSIDIARY OF ACM UK DOES NO T CREATE AGENCY PE AS PER ARTICLE 5 OF INDO- UK DTAA. C. NO SERVICES WERE RENDERED IN INDIA BY ACM UK. IN THIS REGARD THE CIT(A) ALSO REFERRED TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ISHIKAWAJMA HARIMA HEAVY INDUSTRIES LTD . V. DIT (288 ITR 408) AND THE DECISION OF THE HONBLE BOMBAY HIGH CO URT IN THE CASE CLIFFORD CHANCE V. DCIT (221 CTR 1). FOR ALL THE ABOVE REASONS THE CIT(A) HELD THAT THE PAYMENT OF COMMISSION BY THE APPELLANT TO ACM UK WAS NOT CHARGEABLE TO TAX A ND, THEREFORE, THERE WAS NO OBLIGATION ON THE PART OF THE APPELLANT TO DEDU CT TAX AT SOURCE. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS PREFERRE D THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. THE FACTS IN ITA NO.5085/M/09 ARE ALSO IDENTICAL EXCEPT FOR THE FINANCIAL YEAR WHICH IS 2009-10 RELEVANT TO ASSESSM ENT YEAR 2010-11. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE PRIM ARY RELIANCE BY THE LD. D.R. WAS ON THE FACT THAT THE CIT(A) IN HOLDING THA T THE COMMISSION EARNED BY ACM UK IS NOT CHARGEABLE TO TAX IN INDIA RELIED CIRCULAR NO.23 DATED 23/7/1969 AND THIS CIRCULAR HAS BEEN WITHDRAWN BY THE CBDT BY CIRCULAR NO.7 OF 2009 DATED 22/10/2009. IT WAS ALSO SUBMITT ED BY THE LD. D.R THAT ITA NO.5085/MUM/2009(A.Y. 2010-11) ITA NO.5087/MUM/2009(A.Y. 2009-10) 5 THE FINDING OF THE CIT(A) THAT ACM UK WAS BEING PAI D COMMISSION FOR SERVICES RENDERED ABROAD IS WITHOUT ANY BASIS. IT WAS HER SUBMISSION THAT THE INCOME EARNED BY ACM UK WAS BY VIRTUE OF A BUSI NESS CONNECTION IN INDIA, THEREFORE, INCOME IS DEEMED TO HAVE ACCRUED TO ACM UK IN INDIA UNDER SECTION 9 OF THE ACT. WITH REGARD TO THE FIN DING OF THE CIT(A) THAT THE APPELLANT WAS NOT PE OF ACM UK, THE LD. D.R SUBMITT ED THAT THE PROVISIONS OF ARTICLE 5(4)(C) AND ARTICLE 5 (5) OF THE DTAA WI LL BE APPLICABLE. IN THIS REGARD IT WAS POINTED OUT BY THE LD. D.R THAT THE A PPELLANT HABITUALLY SECURES ORDERS FOR ACM UK. IT WAS FURTHER SUBMITTED THAT T HE APPELLANT IS A SUBSIDIARY OF ACM UK. IN THIS REGARD LD. D.R ALSO POINTED OUT THAT THE APPELLANT CANNOT BE CONSIDERED AS A PERSON ACTING I NDEPENDENTLY. IT WAS FUTHER SUBMITTED THAT SINCE CIT(A) HAS NOT EXAMINED THE ISSUE FROM THIS PERSPECTIVE, THE CIT(A) SHOULD BE DIRECTED TO EXAMI NE THE SAME. 9. THE LD. COUNSEL FOR THE APPELLANT REITERATED THE STAND OF THE APPELLANT AS PUT FORTH BEFORE THE CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE AGREEMENT BETWEEN APPELLANT AND ACM UK IS AT PAGE 10 TO 13 OF THE APP ELLANTS PAPER BOOK. THE OTHER TERMS OF THE AGREEMENT HAVE ALREADY BEEN NARRATED IN THE EARLIER PART OF THIS ORDER AND THEY ARE NOT REPEATED. IT W ILL BE WORTHWHILE TO REFER TO THE CLAUSE OF THE AGREEMENT REGARDING REMUNERATION. THE SAME READS AS FOLLOWS: COMMISSION AND MODE OF PAYMENT: IT IS AGREED THAT ON OCCASIONS WHERE THE FIRST PART Y UTILIZES THE SECOND PARTYS SERVICES IN ESTABLISHING CONTACT WITH INTER NATIONAL SHIP OWNERS AND BENEFITS FROM IT FROM TIME TO TIME, THE SECOND PARTY SHALL BE ENTITLED TO 50% OF THE COMMISSION EARNED BY THE FIR ST PARTY FROM THE CHARTERER. IT IS ALSO A FACT THAT THE APPELLANT WHOLLY OR ALMO ST WHOLLY SECURES ORDERS ONLY FOR ACM UK. THE APPELLANT ARRANGES FOR TRANSP ORTATION OF CARGO FROM INDIA THROUGH A CARRIER OR SHIP OWNER OR CHARTERER. THE FREIGHT INVOICE ISSUED ITA NO.5085/MUM/2009(A.Y. 2010-11) ITA NO.5087/MUM/2009(A.Y. 2009-10) 6 BY THE CARRIER SHOWS THAT THE COMMISSION IS PAID BY THE INDIAN EXPORTER TO THE APPELLANT DIRECTLY ON BEHALF OF THE CARRIERS. THUS THE INCOME IS EARNED BY VIRTUE OF THE SERVICES RENDERED IN INDIA. IT IS THE PLEA OF THE APPELLANT THAT ACM UK GIVES INFORMATION ABOUT CARRIER AND THIS HEL PS THE APPELLANT TO ENGAGE THE SERVICES OF THE CARRIER ON BEHALF OF AN INDIAN EXPORTER AND, THEREFORE, PART OF THE COMMISSION IS SHARED BETWEEN THE APPELLANT AND ACM UK. THE APPELLANT HAS HOWEVER BEEN TAKING THE STAN D THAT ACM UK RENDERED SERVICES TO THE CARRIER OUTSIDE INDIA AND CARRIER INSTEAD OF PAYING COMMISSION TO ACM UK DIRECTLY PAYS COMMISSION TO TH E APPELLANT AND LATER THE COMMISSION IS SHARED BETWEEN THE APPELLANT AND ACM UK. THIS STAND OF THE APPELLANT IS SELF-SERVING AND THERE IS NO EVIDE NCE ON RECORD TO SHOW THAT THE COMMISSION IN QUESTION IS PAID FOR SERVICES REN DERED OUTSIDE INDIA. AS WE HAVE ALREADY SEEN THE COMMISSION IS PAID TO ACM UK BY THE APPELLANT ONLY IN RESPECT OF SERVICES RENDERED WHICH MIGHT UL TIMATELY RESULT IN BUSINESS TO THE APPELLANT IN INDIA. IN THE LIGHT O F THE ABOVE FACTUAL BACKGROUND, WE ARE OF THE VIEW THAT THE COMMISSION INCOME WHICH THE APPELLANT PAYS TO ACM UK ACCRUES TO ACM UK BY VIRTU E OF BUSINESS CONNECTION IN INDIA AND, THEREFORE, THE SAME IS TAX ABLE IN INDIA AS BUSINESS INCOME. THE RELIANCE PLACED ON CIRCULAR NO.23 DATE D 23/7/1969 IS NO LONGER RELEVANT BECAUSE THE SAME HAS BEEN WITHDRAWN BY CIRCULAR NO.7 OF 2009 DATED 22/10/2009. EVEN OTHERWISE IT IS DOUBTF UL AS TO WHETHER THE SAID CIRCULAR ISSUED IN THE CONTEXT OF SALE OF GOOD S CAN BE APPLIED TO A CASE OF RENDERING OF SERVICES. IN ANY EVENT THE PAYMENT TO THE NON-RESIDENT BY THE APPELLANT IS DEPENDENT UPON THE SERVICE CHARGES REA LIZED BY THE APPELLANT IN INDIA. THEREFORE CIRCULAR NO.23 WOULD NOT BE APPLI CABLE. THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SET SATELL ITE SINGAPORE PVT. LTD. VS. DCIT, 307 ITR 205(BOM) WOULD ALSO BE NOT RELEV ANT BECAUSE THE SAID DECISION IS BASED ON CIRCULAR NO.23 WHICH HAS ALREA DY BEEN WITHDRAWN BY THE CBDT. ITA NO.5085/MUM/2009(A.Y. 2010-11) ITA NO.5087/MUM/2009(A.Y. 2009-10) 7 11. AS FAR AS THE EXISTENCE OF PE IN INDIA IS CONCE RNED, THE CIT(A) HAS NOT EXAMINED THE APPLICABILITY OF ARTICLE 5(4)(C) AND 5 OF THE DTAA BETWEEN INDIA AND UK IN PROPER PERSPECTIVE. THE SAME IS AS FOLLOW S: ARTICLE 5: PERMANENT ESTABLISHMENT: 1. FOR THE PURPOSES OF THIS CONVENTION, THE TERM 'P ERMANENT ESTABLISHMENT' MEANS A FIXED PLACE OF BUSINESS THROUGH WHICH THE BUSINES S OF AN ENTERPRISE IS WHOLLY OR PARTLY CARRIED ON, 4. A PERSON ACTING IN A CONTRACTING STATE FOR OR ON BEHALF, OF AN ENTERPRISE OF THE OTHER CONTRACTING STATE OTHER THAN AN AGENT OF AN I NDEPENDENT STATUS TO WHOM PARAGRAPH 5 OF THIS ARTICLE APPLIES SHALL BE DEEMED TO BE A PERMANENT ESTABLISHMENT OF THAT ENTERPRISE IN THE FIRST MENTIONED STATE IF: (A) HE HAS, AND HABITUALLY EXERCISES IN THAT STATE, AN AUTHORITY TO NEGOTIATE AND ENTER INTO CONTRACTS FOR OR ON BEHALF OF THE ENTERP RISE, UNLESS 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 REGULARLY DELIVERS GOO DS 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 ENTERPR ISE AND OTHER ENTERPRISES CONTROLLING, CONTROLLED BY, OR SUBJECT TO THE SAME COMMON CONTROL, AS THAT ENTERPRISE. 5. AN ENTERPRISE OF A CONTRACTING STATE SHALL NOT B E DEEMED TO HAVE A PERMANENT ESTABLISHMENT IN THE OTHER CONTRACTING STATE MERELY BECAUSE IT CARRIES ON BUSINESS IN THAT OTHER STATE THROUGH A BROKER, GENERAL COMMI SSION AGENT OR ANY OTHER AGENT OF AN INDEPENDENT STATUS, WHERE SUCH PERSONS ARE AC TING IN THE ORDINARY COURSE OF THEIR BUSINESS. HOWEVER, IF THE ACTIVITIES OF SUCH AN AGENT ARE CARRIED OUT WHOLLY OR ALMOST WHOLLY FOR THE ENTERPRISE (OR FOR THE ENTERP RISE AND OTHER ENTERPRISES WHICH ARE CONTROLLED BY IT OR HAVE A CONTROLLING INTEREST IN IT OR ARE SUBJECT TO SAME COMMON CONTROL) HE SHALL NOT BE CONSIDERED TO BE AN AGENT OF AN INDEPENDENT STATUS FOR THE PURPOSES OF THIS PARAGRAPH. AS CAN BE SEEN FROM THE ORDER OF THE CIT(A), HE HAS NOT EXAMINED THE APPLICABILITY OF ARTICLE 5 (4)(C) AND ARTICLE 5(5) OF THE INDIA-UK DTAA. HE HAS EXAMINED ONLY APPLICABILITY OF ARTICLE 5(4)(A) OF T HE INDIA-UK DTAA. WE ARE OF THE VIEW THAT IT WOULD BE APPROPRIATE TO SET ASIDE THE ORDER OF CIT(A) AND REMAND THE ISSUE TO CIT(A) FOR FRESH CONSIDERATION REGARDING APPLICABILITY OF ARTICLE 5 (4)(C) AND ARTICLE 5(5) OF THE INDIA-UK D TAA. THE FACTS REGARDING APPLICABILITY OF ARTICLE 5(4)(C) AND ARTICLE 5(5) O F INDO-UK DTAA HAVE TO BE ITA NO.5085/MUM/2009(A.Y. 2010-11) ITA NO.5087/MUM/2009(A.Y. 2009-10) 8 PROPERLY EXAMINED. IN THIS REGARD THE FACT THAT TH E APPELLANT IS A WHOLLY OWNED SUBSIDIARY OF ACM UK AND THE FACT THAT THE AP PELLANT WORKS ONLY FOR ACM UK ARE FACTORS WHICH WILL HAVE A BEARING. THES E ASPECTS HAVE NOT BEEN EXAMINED BY THE CIT(A). THE CASE OF THE AO IS BASE D ON ARTICLE 5(4) AND ARTICLE 5(5) OF THE INDIA-UK DTAA. EVEN THOUGH THE AO HAS NOT EXAMINED THE CASE FROM ANY PARTICULAR SUB-CLAUSE OF ARTICLE 5(4) OF THE INDIA-UK DTAA, IT IS CLEAR FROM HIS ORDER THAT HE HAD APPLIED ARTI CLE 5(4)(C) OF THE INDIA-UK DTAA. THE CIT(A) WHILE REVERSING THE ORDER OF THE AO OUGHT TO HAVE DEALT WITH THAT ASPECT. THE LEARNED D.R. IN THIS REGARD ALSO RAISED AN ISSUE THAT THERE WAS NO JUSTIFICATION FOR THE APPELLANT TO PAY 50% OF THE COMMISSION THAT IT EARNS TO ACM UK. AT THIS STAGE, WE SHALL R ESTRICT OUR DISCUSSION ONLY TO CHARGEABILITY TO TAX OF THE RECEIPTS IN THE HAND S OF ACM UK IN INDIA. THE REVENUE IN AN ASSESSMENT IN THE CASE OF EITHER THE APPELLANT OR ACM UK, IF THEY ARE ULTIMATELY FOUND TO BE LIABLE TO TAX IN IN DIA, IS FREE TO EXAMINE THIS ASPECT. AS FAR AS THE PRESENT APPEAL IS CONCERNED, THE APPLICABILITY OF ARTICLE 5(4)(C) AND ARTICLE 5(5) OF INDO-UK DTAA, NEEDS TO BE EXAMINED AFRESH BY THE CIT(A). WE THEREFORE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE CIT(A) TO EXAMINE THE APPLICABILITY OF ARTICLE 5(4)(C) AND 5 OF THE DTAA BETWEEN INDIA AND UK IN PROPER PERSPECTIVE THE APPELLANT WILL BE GIVEN OPPORTUNITY OF BEING HEARD BY THE CIT(A) BEFORE DECIDING THE ISSUE . FOR STATISTICAL PURPOSES THE APPEALS OF THE REVENUE ARE TREATED AS ALLOWED. 12. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 10 TH DAY OF JUNE, 2011. SD/- SD/- (RAJENDRA SINGH ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 10 TH JUNE,2011 ITA NO.5085/MUM/2009(A.Y. 2010-11) ITA NO.5087/MUM/2009(A.Y. 2009-10) 9 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 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. ITA NO.5085/MUM/2009(A.Y. 2010-11) ITA NO.5087/MUM/2009(A.Y. 2009-10) 10 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 31/5/2011 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 1/6/2011 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPRO VED 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
