DCIT (IT) 4(2)(1), MUMBAI V. SAFMARINE CONTAINERS LINES,N.V., MUMBAI

ITA 5712/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3716 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Assessment Year: 2012-2013
• Appeal Filed On: 23-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Keywords: Business income; Double taxation relief; Question of law
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , A M AND SHRI RAVISH SOOD, JM I.T.A. NO. 5712/MUM/2016 ( ASSESSMENT YEAR: 2012 - 13) DY. CIT(IT) - 4(2)(1) ROOM NO. 1708, 17 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI - 4 00 021 VS. M/S. SAFMARINE CONTAINERS LINES N. V. C/O. EXPIRE INDUSTRIAL COMPLEX, 414, SENAPATI BAPART MARG, LOWER PAREL (W), MUMBAI - 400 013 PAN/GIR NO. AACCS 0742 A ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI V. VIDHYADHAR RESPONDENT BY : SHRI MANISH KANT DATE OF HEARING : 24.05.2018 DATE OF PRONOUNCEMENT : 13.08 .2018 O R D E R PER S HAMIM YAHYA, A. M.: THIS APPEAL BY THE R EVENUE IS DIRECTED AGAINST ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 58, MUMBAI DATED 29.06. 2016 AND PERTAINS TO ASSESSMENT YEAR 2012 - 13. 2. T HE GROUNDS OF APPEAL READ AS UNDER : 1) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT INCOME FROM INLAND TRANSPORT OF CARGO WITHIN INDIA WAS COVER ED UNDER ARTICLE 8(2)(B)(II) AND 8(2) (C) OF THE TAX TREATY BETWEEN INDIA AND BELGIUM AND THEREFORE NOT LIABLE FOR TAX IN INDIA.' 2) 'WHETHER ARTICLE 8(2)(B)(II) AND 8(2) (C) OF THE TAX TREATY BETWEEN INDIA AND BELGIUM INCLUDES WITHIN ITS AMBIT AND ACTIVI TY OF INLAND TRANSPORTATION OF CARGO FOR VARIOUS PLACES WITHIN INDIA.' 2 ITA NO. 5712/MUM/2016 M/S. SAFMARINE CONTAINERS LIN ES N. V. 3) 'THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) BE SET ASIDE ON THE ABOVE GROUND(S) AND OF THE ASSESSING OFFICER BE RESTORED.' 3. B RIEF FACTS OF THE CASE ARE AS UNDER : THE ASSESS EE IS A NON RESIDENT COMPANY BASED IN BELGIUM, ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC. THE ASSESSING OFFICER HAS PASSED AN ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT HOLDING THAT THE REVENUE EARNED BY THE ASSESSEE ON A CCOUNT OF RECEIPT OF INLAND HAULAGE CHARGES (IHC) IN INDIA IS TAXABLE IN INDIA AS BUSINESS PROFITS SINCE THE SAME IS NOT COVERED BY SECTION 44B OF THE ACT OR ARTICLE 8 OF THE DTAA BETWEEN INDIA AND BELGIUM AS DISCUSSED ABOVE. HE HAS NOT ACCEPTED THE CONTEN TION OF THE ASSESSEE THAT SUCH CHARGES FORM A PART OF THE FREIGHT CHARGED FROM THE CLIENT. UNDER THE TREATY, THE SAME WOULD BE TAXABLE UNDER ARTICLE 7 OF THE TREATY AS BUSINESS INCOME. SINCE THE ASSESSEE HAS AN EXCLUSIVE AGENT IN INDIA, THROUGH WHOM SUCH B USINESS IS CARRIED OUT, THE ASSESSEE HAS AGENCY P.E, AS PER ARTICLE 5 OF THE TREATY. 4. FOR ESTIMATING THE INCOME EARNED ON ABOVE RECEIPTS, THE ASSESSING OFFICER CALLED FOR DETAILS OF EXPENSES, IF ANY, INCURRED ON ACCOUNT OF INLAND TRANSPORTATION OF THE F REIGHT. THE ASSESSEE HAS SUBMITTED THAT THERE ARE VARIOUS EXPENSES INCURRED AND THAT COLLECTION OF INLAND HAULAGE CHARGES IS MAINLY TO RECOVER THE ACTUAL COST INCURRED. THE ASSESSEE HAS, HOWEVER, FAILED TO SUBSTANTIATE ITS STATEMENT BY FURNISHING ANY DOCUM ENTARY EVIDENCES OR VERIFIABLE DETAILS. IN ABSENCE OF DETAILS OF EXPENSES THE PROFITABILITY RATE OF 7.5% IS ADOPTED ON CONSERVATIVE BASIS. ACCORDINGLY, THE BUSINESS INCOME OF THE ASSESSEE FROM INLAND HAULAGE CHARGES WAS HELD TO BE RS.6,39,92,516/ - (7.5% OF RS.85,32,33,552/ - ). 3 ITA NO. 5712/MUM/2016 M/S. SAFMARINE CONTAINERS LIN ES N. V. 5. U PON ASSESSEE' S APPEAL, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF ITAT AND THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT I N ASSESSEE'S OWN CASE. 6. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER: 6. IT IS SEEN THAT THE GROUND RAISED BY THE APPELLANT ARE SIMILAR TO THE ISSUES RAISED BY THE SAME APPELLANT IN AY 2009 - 10 WHEREIN THE HON'BLE ITAT VIDE ORDER NO. ITA NO. 4995/MUM/20 12 DATED 19.9.2013 HAS CONSIDERED THE CLAIMS OF THE APPELLANT IN DETAIL AND HAS DECIDED THE ISSUE. THE DECISION OF THE HON'BLE ITAT IS REPRODUCED BELOW: 'WE HAVE HEARD BOTH PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE RAISE D IN THIS APPEAL IS REGARDING ASSESSMENT OF INCOME FROM INLAND HAULAGE CHARGES RECEIVED BY THE ASSESSEE COMPANY WHICH IS A NON RESIDENT COMPANY REGISTERED IN BELGIUM AND ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS. THE INCOME FROM OPERATION OF SHIPS IN I NTERNATIONAL TRAFFIC IS NOT TAXABLE IN INDIA UNDER ARTICLE 8 OF DTAA. ARTICLE 8(2)(B) (II) ALSO EXEMPTS ANY ACTIVITY DIRECTLY CONNECTED WITH SHIPPING. THE ASSESSEE HAD TAKEN THE INCOME FROM INLAND HAULAGE CHARGES AS DIRECTLY CONNECTED WITH SHIPPING INCOME AND ACCORDINGLY CLAIMED EXEMPT WHICH HAD NOT BEEN ACCEPTED BY THE AO. C I T(A) HAS, HOWEVER, ALLOWED THE CLAIM FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE IN 2001 - 02 WHICH HAS ALSO BEEN FOLLOWED IN SUBSEQUENT YEARS AND HAS BEEN UPHELD BY TH E HON 'BLE HIGH COURT OF MUMBAI BY JUDGEMENT DATED 17.1.2013 IN ITA NO, 952 OF 2011. FT HAS BEEN HELD BY THE TRIBUNAL THAT INLAND HAULAGE CHARGES ARE NOT ONLY INCIDENTAL BUT ALSO CLOSELY CONNECTED WITH DIRECT OPERATIONS OF SHIPS. FACTS IN THIS YEAR ARE IDEN TICAL. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE 'OWN CASE IN THE EARLIER YEARS (SUPRA), WE CONFIRM THE ORDER OF C IT( A) IN ALLOWING THE CLAIM. ' 7. IT IS SEEN THAT THE HON'BLE BOMBAY HIGH COURT HAS ALREADY CONSIDERED A LL THE ISSUES RAISED BY THE APPELLANT IN THIS GROUND AND HAS ARRIVED AT HIS DECISION AFTER CONSIDERING THE CURRENT POSITION OF LAW ON THE ISSUE. IN THIS VIEW OF THE MATTER, WE FIND THAT THE RELIANCE PLACED BY MR. POMS KAKA ON THE ORDER OF THIS COURT DATED 17 TH JANUARY, 2013 IN INCOME TAX APPEAL NO. 952 OF 2011 WITH INCOME TAX APPEAL NO. 147 OF IS FULLY JUSTIFIED AND SQUARELY COVERS THE ISSUE RAISED IN THE PRESENT APPEAL. WE THEREFORE FIND, THAT THIS APPEAL DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW AS PROJECTED BY THE L D. COUNSEL APPEARING ON BEHALF OF THE APPELLANT.WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE ITAT AND 4 ITA NO. 5712/MUM/2016 M/S. SAFMARINE CONTAINERS LIN ES N. V. IMPUGNED IN THIS APPEAL. THE APPEAL IS THEREFORE DISMISSED. NO ORDER AS TO COSTS.' 8. CONSIDERING THE JURISDICTIONAL ITAT AND HON'BLE BOMBAY HIGH COURTS ORDER IN THE APPELLANTS OWN CASE ON THE SIMILAR ISSUES, THE GROUND IS DELETED IN FAVOUR OF THE APPELLANT. 7. A GAINST THE ABOVE ORDER , THE R EVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECO RDS. THE L EARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY A SERIE S OF DECISIONS OF THE ITAT AND THE HON'BLE BOMBAY HIGH COURT IN ASSESSEE'S OWN CASE . 9. P ER CONTRA , THE LD. DEPARTMENTAL RE PRESENTATIVE D ID NOT DISPUTE THE PROPOSITION THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE. 10. UPON CAREFUL CONSIDERATION WE FIND THAT WE MAY GAINFULLY REFER TO THE LATEST ORDER OF THE HON'BLE JURISDICTIONAL HIGH COURT IN ITA NO.773 OF 2014 IN ASSESSEES OWN CASE VIDE ORDER 15.11.2016 HAS HELD AS UNDER : 1. THIS APPEAL UNDER SECTION 260 - A OF THE INCOME TAX ACT, 1951 (THE ACT) CHALLENGES THE ORDER DARED 19 :H SEPTEMBER, 2013 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL (THE TRIBUNAL). THE IMPUGNED O RDER - IS IN RESPECT OF ASSESSMENT YEAR 2009 - 10. 2. THE REVENUE URGES ONLY THE FOLLOWING QUESTION OF TAW FOR OUR CONSIDERATION. : - 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS CORRECT IN HOLDING THAT INCOME F ROM INLAND HAULAGE CHARGES IS INCIDENTAL AND CLOSELY CONNECTED WITH THE DIRECT O P ERATIONS OF SHIP AND HENCE NOT LIABLE TO TAX IN INDIA IN TERMS OF ARTICLE 8 OF THE INDO - BELGIUM DTAA? 5 ITA NO. 5712/MUM/2016 M/S. SAFMARINE CONTAINERS LIN ES N. V. 3. THE IMPUGNED ORDER OF THE TRIBUNAL DISMISSED THE REVENUES APPEAL BEFO RE IT HOLDING THAT THE ASSESSEE'S INCOME FROM INLAND HAULAGE CHARGES IS DIRECTLY CONNECTED TO THE SHIPPING INCOME AND, THEREFORE, NO: CHARGEABLE TO TAX UNDER ARTICLE 8 OF THE DOUBLE TAX AVOIDANCE 1 AGREEMENT (DTAA). THE IMPUGNED ORDER OF THE TRIBUNAL HAS FO LLOWED ITS DECISION IN THE RESPONDENT ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2001 - 02, WHICH HAS BEEN UPHELD BY THIS COURTS ORDER DATED 17 TH JANUARY, 2013 IN INCOME TAX APPEAL NO.952 OF 2011. 4. MR. TEJVEER SINGH, LEARNED COUNSEL FOR THE REVENUE VERY FAIRLY STATES THAT THE SAME ISSUE WAS ALSO THE SUBJECT MATTER FOR CONSIDERATION FOR T HE ASSESSMENT YEAR 2006 - 07 IN THE REVENUE'S APPEAL IN RESPECT OF THE SAME RESPONDENT ASSESSEE BEING INCOME TAX APPEAL NO.410 OF 2012 BEFORE THIS COURT. 3Y ORDER DATED 17 TH JULY, 2014, THIS COURT DISMISSED THE REVENUE'S ABOVE APPEAL ON IDENTICAL ISSUE. THEREFORE, FOR :HE REASONS SPELT OUT IN OUR ORDER DATED 17 ;N JULY, 2014 (INCOME TAX APPEAL NO.410 OF 2012), THE QUESTION AS FORMULATED DOES NOT GIVE RISE TO ANY SUBST ANTIAL QU ESTION OF LAW. 5. IN VIEW OF THE ADMITTED POSITION THAT ISSUE AS RAISED IS CONCLUDED BY THE DECISIONS OF THIS COURT, THE QUESTION AS FRAMED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS, NOT ENTERTAINED. 11. S INCE THE ISSUE INVOLVED STANDS C OVERED IN F AVOUR OF THE ASSESSEE BY THE DECISIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT AS WELL , WE DO NOT FIND ANY MERIT IN THIS APPEAL FILED BY THE R EVENUE. 12. ACCORDINGLY THE R EVENUE S APPEAL STANDS DISMISSED . 13. IN THE RESULT, TH IS APPEAL BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.08.2018 SD/ - SD/ - ( RAVISH SOOD ) (S HAMIM YAHYA) J UDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI ; DATE D : 13.08.2018 ROSHANI , SR. PS 6 ITA NO. 5712/MUM/2016 M/S. SAFMARINE CONTAINERS LIN ES N. V. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD F ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI