Shri Prashant Trivedi, Prop. of Kudos Shipping Corporation, Bhavnagar V. The Income Tax Officer, International Taxation, GANDHIDHAM

ITA 572/RJT/2012

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7889 (ITAT-RAJKOT)
• Duration Of Justice: 7 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 19-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Recovery proceedings; Double taxation relief; Opportunity of being heard
• Section: 271(1)(c); 5(2); 234B; 13; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: SHRI MAHAVIR PRASAD , JUDICIAL MEMBER AND S H RI AMARJIT SINGH , ACCOUNTANT MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] SHRI PRASHANT TRIVEDI, PROP. OF KUDOS SHIPPING CORPORATION, M.V.LUCKY ARROW - NAME OF VESSEL, NR. AMBAJI VAD TEMPLE, RAILWAYS STATION ROA D, BHAVNAGAR - 364001 PAN: ADIPT7909A (APPELLANT) VS THE ITO, INTERNATIONAL TAXATION, GANDHIDHAM (RESPONDENT) REVENUE BY : S H RI ANIL KUMAR DAS , D . R. ASSESSEE BY: S H RI KALPESH DOSHI , A.R. DATE OF HEARING : 0 7 - 01 - 2 020 DATE OF PRONOUNCEMENT : 20 - 01 - 2 020 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - BOTH THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE O R DER PASSED BY CIT(A), GANDINAGAR, ON 2 ND JULY 2012. SINCE THE COMMON ISSUE ON IDENTICAL FACTS ARE INVOLVED IN BOTH THE APPEALS, TH EREFORE, FOR THE SAKE OF CONVENIENCE, BOTH THE THESE APPEALS ARE ADJUDICATED TOGETHER BY TAKING THE I T A NO S . 572 & 573 / RJT /20 12 A SSESSMENT YEAR 2010 - 11 I.T.A NO S . 572 & 573 /RJT /20 12 A.Y. 2010 - 11 PAGE NO SHRI PRASHANT TRIVEDI VS. ITO 2 FACTS OF ITA NO . 572 /RJT/2012 AS LEAD CASE AND ITS FINDINGS WILL BE APPLICABLE TO ITA NO. 573 /RJT/2012. 572/RJT/2012 ASSESSMENT YEAR 2010 - 11 2. THE ASSESSE E HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE ID. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN HOLDING I THAT AS PER THE PROVISIONS OF S.172 OF THE ACT, THE ENTIRE TAX BURDEN AND PAYMENT OF TAX IS ON THE MASTER OF SHIP, AND THEREFORE, THE PERSON WITH WHOM ARRANGEMENT IS MADE BY THE MASTER OF SHIP TO FILE RETURN OF INCOME AND PAYMENT OF THE TAX, WILL BECOME AUTOMATICALLY AN ASSESSEE FOR THE PURPOSE OF MAKING AN ASSESSMENT ON FREIGHT INCOME EARNED BY THE NON - RESIDENT IN HIS HANDS. 2. THE ID. CIT(A) H AS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN NOT APPRECIATING THAT AS PER THE FIRST PROVISO TO SUB SECTION (3) OF SECTION 172 OF THE ACT, THE ARRANGEMENT M ADE BY THE MASTER OF SHIP WITH THE PERSON IS ONLY TO FILE RETURN OF INCOME AND PAY INCOME .TA X FOR THE MASTER OF SHIP ON BEHALF OF THE NON - RESIDENT, AND IN DOING SO, THE PERSON DO NOT BECOME AGENT OF THE NON - RESIDENT MECHANICALLY SO AS TO BE SADDLED WITH THE BURDEN OF INCOME - TAX ON FREIGHT INCOME EARNED BY THE NON - RESIDENT, EXCEPT TREATING HIM AS AN AGENT OF NON - RESIDENT AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD AS PER SECTION 163(2) OF THE ACT. 3. THE ID. CIT (A) HAS ACCORDINGLY ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO IN TREATING THE APPELLANT AS AN AG ENT OF THE SHIPPING COMPANY WITHOUT ACCORDING AN OPPORTUNITY OF BEING HEARD TO THE APPELLANT, AS TO HIS LIABILITY TO BE TREATED AS SUCH, AS PROVIDED UNDER SUB SECTION (2) OF S. 163 OF THE ACT. 4. LD. CIT (A) HAS FURTHER ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO IN HOLDING THAT THE CIT GROUP, INC. FROM JORDAN IS THE FREIGHT BENEFICIARY SO AS TO ATTRACT PROVISIONS OF S.L72 OF THE ACT, AND ACCORDINGLY IN THE ABSENCE OF DOUBLE TAXATION AVOIDANCE AGREEMENT WITH JORDAN, TH E SAID INCOME IS TAXABLE IN THE HANDS OF THE APPELLANT. 5. BOTH THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THAT THE CTI GROUP, INC. FROM JOR DAN HAS ENTERED INTO CONTRACT TO PURCHASE CEMENTS ON FREE ON BOARD BASIS WITH SAURASHTRA CEMENT LTD., AND C ONTRACT BEING IN THE NATURE OF FOB BASIS, QUESTION OF FREIGHT INCOME ACCRUING IN INDIA DOES NOT ARISE AT ALL, AND CONSEQUENTLY PROVISIONS OF S.I72 OF THE ACT ARE ALSO NOT APPLICABLE AT ALL. 6. LD. CIT(A) HAS ACCORDINGLY ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF ID. AO IN MAKING AN ADDITION OF RS.5,41,807/ - BEING 7.5% OF RS.72,24,100/ - IN THE HANDS OF THE APPELLANT. 7. BOTH THE LOWER AUTHORITIES HAVE FURTHER ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN NOT APPRECIATING THAT TH E INCOME EARNED BY THE NON - RESIDENT I.E FABER SHIPBROKER FROM DENMARK, IS NOT IN THE NATURE OF INCOME SO AS TO ATTRACT PROVISIONS OF S.172 OF THE ACT, AND THEREFORE, NO ADDITION ON ACCOUNT OF FREIGHT INCOME COULD HAVE BEEN ADDED IN THE HANDS OF THE APPELLA NT. 8. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE, EVEN IF IT IS HELD THAT INCOME EARNED BY FABER SHIPBROKER FROM DENMARK IS IN THE NATURE OF FREIGHT INCOME, THEN ALSO, AS PER THE DTAA AS ENTERED INTO BETWEEN INDIA AND DENMARK, SAID INCOME IS NOT TA XABLE IN INDIA AND CONSEQUENTLY, THE SAME COULD NOT HAVE BEEN ADDED IN THE HANDS OF THE APPELLANT. 9. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACT AND THAT THEY FURTHER ERRED IN GROSSLY IGNORING VARIO US SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF THE LOWER AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTIC E AND THEREFORE DESERVES TO BE QUASHED. 10. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF ID. AO IN CHARGING INTEREST U/S 234B/C/D OF THE ACT. 11. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF ID. A O IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 3. THE FAC T IN BRIEF IS THAT THE ASSESSEE ON BEHALF OF M/S. FABER SHIP BROKERS APS, DENMARK HAS FILED A PROVISIONAL AND FINAL RETURN OF INCOME ON I.T.A NO S . 572 & 573 /RJT /20 12 A.Y. 2010 - 11 PAGE NO SHRI PRASHANT TRIVEDI VS. ITO 3 13 TH MAY, 2009 WITHOUT PAYING FREIGHT TAX CLA IMING THE BENEFIT OF DOUBLE TAXATION AVOIDANCE AGREEMENT ENTERED INTO BETWEEN GOVERNMENT OF REPUBLIC OF INDIA AND THE KINGDOM OF DENMARK . UNDER THE PROVISION OF SECTION 172(3) , THE MOST OF THE SHIP SHALL BE REQUIRED TO PREPARE AND FURNISH THE RETURN BEFO RE THE DEPARTURE OF THE SHIP. M/ S KUDOS SHIP PING CORPORATION TOOK THE RESPONSIBILITY AND FILED BONDS ON STAMP PAPER. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE BRIEFLY ON THE FOLLOWING REASONS: - THERE IS NO RELIABLE PRO OF THAT FABER SHIP BROKERS APS HAS CHARTERED THE SHIP; NO CHARTER PARTY AGREEMENT HAS BEEN SUBMITTED. THERE IS NO EVIDENCE TO SHOW THAT FABER SHIP BROKERS APS WAS EARNING INCOME 'DERIVED' FROM OPERATION OF SHIP IN INTERNATIONAL TRAFFIC. THE FREI GHT .BENEFICIARY AND CHARTERER IS CTI GROUP INC., JORDAN. THERE IS NO DTA AGREEMENT BETWEEN INDIA AND JORDAN THE EFFECTIVE CONTROL AND MANAGEMENT OF FABER SHIP BROKERS APS HAS NOT BEEN PROVED TO BE IN DENMARK. THE AO ALSO DISBELIEVED THE DOCUMEN TS FILED IN SUPPORT OF THE CLAIM THEREFORE BENEFITS OF DTAA CLAIMED IN PROVISION AL AND FINAL RETURN U/S. 172(3) OF THE ACT WAS WITHDRAWN. 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A) . T HE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESS EE. THE RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER: - 7.3 I HAVE CONSIDERED THE FACTS OF THE CASE, THE EVIDENCES SUBMITTED, THE SUBMISSIONS OF THE APPELLANT AND THE ASSESSMENT ORDER. BEFORE PROCEEDING FURTHER, I WOULD LIKE TO DISCUSS THE SCHEME OF TAXATION U/S 172. THE SECTION 172 OF THE IT ACT IS A CODE IN ITSELF. THE SECTION STARTS AS FOLLOWS: 172. (1) THE PROVISIONS OF THIS SECTION SHALL, NOTWITHSTANDING ANYTHING CONTAINED IN THE OTHER PROVISIONS OF THIS ACT, APPLY FOR THE PURPOSE OF THE LEW A ND RECOVERY OF TAX IN THE CASE OF ANY SHIP, BELONGING TO OR CHARTERED BY A NON RESIDENT, WHICH CARRIES PASSENGERS, LIVESTOCK, MAIL OR GOODS SHIPPED AT A PORT IN INDIA. IT HAS TO BE NOTICED THAT THE LANGUAGE OF SECTION 172 IS VERY 'UNAMBIGUOUS'. THERE CAN B E NO DISPUTE THAT THE WHOLE SECTION IS A 'COMPLETE CODE IN ITSELF AND PROVIDES AS TO WHAT WOULD BE THE PROCEDURE FOR 'THE PROVISIONAL ASSESSMENT'. THE WHOLE SECTION STARTS FROM THE POINT OF WHO AND WHAT INCOME IS COVERED AND AFTER PROVIDING FOR THE DETERMI NATION OF FREIGHT INCOME AND TAX THEREON, THE PASSING OF THE ORDER IN THAT BEHALF AND ALSO ENSURES RECOVERY OF THE SAME. THUS, THE WHOLE ASSESSMENT PROCESS WOULD BE EXCLUSIVELY GOVERNED BY SECTION 172 ITSELF BECAUSE OF THE NON OBSTANTE CLAUSE IN THAT SECTI ON. I.T.A NO S . 572 & 573 /RJT /20 12 A.Y. 2010 - 11 PAGE NO SHRI PRASHANT TRIVEDI VS. ITO 4 ANOTHER ASPECT IS THAT THE MASTER OF THE SHIP IS RESPONSIBLE FOR ENTIRE TAXATION BURDEN AND PAYMENT OF THE TAX UNDER THE PROVISIONS OF SECTION 172. IT DOES NOT MATTER, WHETHER A OR B IS THE NONRESIDENT OWNER/CHARTERER OF THE SHIP, WHOSE FREI GHT INCOME FROM TRANSPORTATION OF GOODS IS TO BE BROUGHT UNDER TAXATION; AND THE MASTER OF THE SHIP IS SOLELY RESPONSIBLE. THE INCOME THAT IS TAXABLE U/S 172 IS DEFINED IN SECTION 172(2). THE INCOME IS TO BE TAKEN AT 7.5% OF THE AMOUNT PAID OR PAYABLE ON A CCOUNT OF SUCH CARRIAGE (CARRIAGE OF PASSENGER, LIVE STOCK, MAIL OR GOODS ETC. IN THE CASE OF THE SHIP) TO THE OWNER OR THE CHARTERER OR TO ANY PERSON ON HIS BEHALF, WHETHER THAT AMOUNT IS PAID OR PAYABLE IN OR OUT OF INDIA, SHALL BE DEEMED TO BE INCOME AC CRUING IN INDIA TO THE OWNER OR CHARTERER ON ACCOUNT OF SUCH CARRIAGE. IT IS THE RESPONSIBILITY OF THE MASTER OF THE SHIP TO FILE THE RETURN AND PAY TAXES ON THE ENTIRE INCOME IN RESPECT OF THE SHIP AS DISCUSSED ABOVE. IT IS THIS RESPONSIBILITY OF THE MAST ER OF THE SHIP WHICH THE AGENT M/S. KUDOS SHIPPING CORPORATION, PROP. SHRI PRASHANT Y. TRIVEDI HAS UNDERTAKEN UPON ITSELF AND FILED AN AFFIDAVIT/BOND TO THE REVENUE AUTHORITIES TO THIS EFFECT. THE SCHEME OF THE SECTION DOES NOT ALLOW ESCAPEMENT FROM THIS R ESPONSIBILITY, UNDERTAKEN BY THE PERSON ITSELF UNDER THE PROVISO TO SECTION 172J3). 7.3.I NOW WE HAVE TO DECIDE WHO IS THE OWNER /CHARTERER TO WHOM THE AMOUNT IS PAYABLE OR PAID ON ACCOUNT OF CARRIAGE OF GOODS ETC BY THE SHIP . THE FOLLOWING PERTINENT FACTS / OBSERVATIONS ARE MADE ON THE ISSUE: A) THOUGH THE APPELLANT IS CLAIMING THAT THE FREIGHT INCOME IS THAT OF FABER SHIP BROKERS APS, DENMARK, IT IS CLEAR FROM THE BILL OF LADING / LOADING AGREEMENT ITSELF THAT THE CHARTER ERS OF THE SHIP WERE FINALLY C TI GROUP INC., JORDAN. ADMITTEDLY, THE GOODS CARRIED ON THE SHIP BELONG TO SAURASHTRA CEMENT LTD. APPARENTLY, THE SHIP HAS BEEN HIRED / CHARTERED TO THE JORDAN COMPANY AND IT IS THE JORDAN COMPANY TO WHOM THE AMOUNT IS PAYABLE OR PAID ON ACCOUNT OF CARRIAG E OF GOODS ETC BY THE SHIP. IF THIS INCOME WHICH IS TAXABLE U/S 172 (2), AS DISCUSSED ABOVE. IF IT IS NOT PROVED EXEMPT THEN THE MASTER OF THE SHIP AND SUBSEQUENTLY, THE AGENT U/S 172(3) ARE LIABLE TO TAXATION. NO CLAIM HAS EVEN BEEN MADE TO SHOW THAT THE JORDAN COMPANY IS NOT TAXABLE IN INDIA. B) WITHOUT PREJUDICE TO THE ABOVE, EVEN AFTER SPECIFIC SHOW - CAUSE NOTICE (AS REPRODUCED IN PARA. 7.1, EARLIER) NO SATISFACTORY EVIDENCE HAS BEEN SUBMITTED TO PROVE ITS CLAIM THAT FABER SHIP BROKERS APS, DENMARK WAS I NDEED DISPONENT OWNER OF THE SHIP. ONLY COPY OF SELF - DECLARATION IN THIS REGARD HAS BEEN FILED WITHOUT FILING THE OWNERSHIP DOCUMENTS OR EVEN CHARTER PARTY AGREEMENT. EVEN WHEN IT WAS POINTED OUT TO THE APPELLANT (THROUGH SHOW CAUSE, REFERRED IN PARA.7.1) THAT THERE ARE REASONS TO DOUBT THE FACTS OF THE CASE AS C LAIMED BY THE APPELLANT, AS BOTH THE SHIPS ARE SHOWN UNDER THE HEAD 'OUR FLEET' AS CEMENT CARRIERS ON THE WEBSITE OF CTI GROUP AT WWW.SEKURSHIP.COM/INNER/ TRADER_ ARROW, HTM (COPY WAS ENCLOSED); NO SUBSTANTIAL EVIDENCE WAS FILED. IN THE LIGHT OF THE ABOVE, IT IS HELD THAT THE CTI GROUP, JORDAN WHO HAS CHARTERED THE SHIP AS PER THE DOCUMENTS FILED BY THE APPELLANT ITSELF; AND HAS TRANSPORTED GOODS OF SHIPPER M/S SAURASHTRA CEMENT LTD, AHMEDABAD HAS EA RNED FREIGHT BY TRANSPORTED CARGO NOT ON ITS OWN SHIPS OR SHIPS OPERATED BY IT. NEITHER THERE IS ANY DTAA BETWEEN INDIA & JORDAN NOR THE JORDAN COMPANY HAS EARNED INCOME FROM OPERATION OF SHIPS. THE INCOME FROM TRANSPORTATION OF GOODS ON THESE SHIPS WAS TA XABLE IN INDIA AND THE AO HAS CORRECTLY BROUGHT THE FREIGHT INCOME TO TAXATION UNDER THE PROVISIONS OF SECTION 172, WHICH IS THE COMPLETE CODE IN ITSELF. THE GROUNDS OF APPEAL ARE DISMISSED AND IT IS HELD THAT THE INCOME HAS BEEN CORRECTLY BROUGHT TO TAX U /S 172(4), AND THE BENEFIT OF DTAA IS NOT AVAILABLE FOR DIFFERENT REASONS, AS DISCUSSED ABOVE. 8. THE GROUND NO.7 IS AGAINST CHARGI NG OF INTEREST U/S 234B & 234C. THE GROUND DOES NOT ARISE FROM THE ORDER APPEALED AGAINST AS NO INTEREST HAS BE EN CHARGED. THE GROUND BEING INFRUCTUOUS IS DISMISSED. 9. NEXT GROUND OF APPEAL AGAINST INITIATION OF PENALTY U/S OF THE ACT BEING PREMATURE IS DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. I.T.A NO S . 572 & 573 /RJT /20 12 A.Y. 2010 - 11 PAGE NO SHRI PRASHANT TRIVEDI VS. ITO 5 5. DURING THE COURSE OF APPEL LATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS CONTENDED THAT M / S . FABER SHIP B ROKER S APS WAS THE SOLE PROPRIETOR AND ALSO RESIDENT OF DENMARK AND AS PER ARTICLE 9 OF THE TR EATY THE FREIGHT INCOME IS NOT TAXABLE IN INDIA. THE LD. COUNSEL HAS ALSO SUBMITT ED THAT AS PER PARA 14 IT CAN BE SEEN THAT FREIGHT IS PAYABLE BY CI T GROUP INC. JORDAN TO M/S. FABER SHIPBROKER, DENMARK. THE LD. COUNSEL HAS ALSO CONTENDED THAT IDENTICAL ISSUE ON SIMILAR FACTS HAS BEEN ADJUDICATED IN FAVOUR OF THE ASSESSEE BY THE ITAT R AJKOT IN THE CASE OF M/S. PEARL LOGISTICS & EX - IM CORPORATION (RAJKOT TRIB . ) ITA NO. 313/RJT/2013 & OTHERS. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF CIT(A). 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, M/S. KUDOS SHIPPING CORPORATION HAS FILED PROVISIONAL AND FINAL RETURN ON 13 TH MAY , 2009 FOR BEING FREIGHT BENEFICIARY OF M/S FABER SHIP B ROKER S APS DENMARK WITHOUT PAYING FREIGHT TAX. DURING THE COURSE OF ASSESSMENT, U/S. 172( 4) OF THE ACT, THE ASSESSING OFFICER HAS CALLED VARIOUS DETAILS AND DOCUMENT S AND THE ASSESSEE HAS FURNISHED THE DOCUMENT S AS ELABORATED AT PAGE NO. 3 & 4 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS DISBELIEVED THE DOCUMENTS/INFORMATION FURNISHED BY THE ASSESSEE AND REJECTED THE BENEFITS CLAIMED UNDER THE DTAA. WE HAVE GONE THROUGH THE DECISION OF C O - ORDINATE BENCH OF THE ITAT RAJKOT REFERRED BY THE LD. COUNSEL IN THE CASE OF PEARL (SUPRA) PERTAINING TO THE SIMILAR ISSUE ON IDENTICAL FACT WHEREIN THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER: - 11. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE IMPUGNED ORDER, IN THIS CASE SHIP M/S. FABER SHIPBROKERS, DENMARK IS THE DESPONENT OWNER A ND SHIP WAS CHARTERED BY CIT GROUP INC., JORDAN FOR SHIPMENT OF 10,160 M.T. OF CEMENT PURCHASED FROM M/S. SAURASHTRA CEMENT PVT. LTD. I.T.A NO S . 572 & 573 /RJT /20 12 A.Y. 2010 - 11 PAGE NO SHRI PRASHANT TRIVEDI VS. ITO 6 12. SHIP ARRIVED ON PORBANDAR PORT ON 16/01/2011 & 11/02/2011 AND RETURN U/S. 172(3) WAS FILED ON 02/02/2011 AND 17/02/201 1 FOR FREIGHT AMOUNT OF RS. 27,52,344/ - AND RS. 27,71,307/ - AND AMOUNT CHARGEABLE TO INCOME TAX U/S. 172(3) @ 7.5% IS RS.87,174/ - AND 87,774/ - TOTALING TO RS.1,74,948/ - . 13. FREIGHT WAS PAYABLE BY CTI GROUP INC., JORDAN TO FABER SHIPBROKERS, DENMARK (KINDL Y REFER CLAUSE NO. 13 AND 14 OF CHARTER PARTY AGREEMENT AT PAGE NO.36 OF PAPER BOOK.) 14. FABER IS OWNER AND CTI GROUP JORDAN IS CHARTERER (REFER PARA 3 & 4 OF CHARTER PARTY AGREEMENT). AS PER CHARTER PARTY AGREEMENT - CTI GROUP INC., JORDAN IS CHARTERER A ND FABER SHIPBROKER, DENMARK IS THE OWNER. (THIS CAN BE VERIFIED FROM THE SIGNATORIES TO CHARTER PARTY AGREEMENT). THEREFORE, THE AGREEMENT SOUGHT BY CIT(A) ABOUT AGREEMENT BETWEEN CTI GROUP INC., JORDAN AND FABER SHIPBROKERS, DENMARK IS CHARTER PARTY AGRE EMENT WAS SUBMITTED BEFORE AO AND CIT(A). 15. ACCORDING TO SECTION 172 OF THE ACT, INCOME OF OWNER OR CHARTER WHO RECEIVES FREIGHT IS CHARGEABLE TO TAX. IN THIS CASE, FREIGHT IS RECEIVED BY FABER SHIPBROKERS, DENMARK AND HAS EARNED THE FREIGHT, SO, THE INC OME OF FABER SHIPBROKER, DENMARK IS CHARGEABLE TO TAX IN INDIA. FABER SHIPBROKERS IS RESIDENT OF DENMARK AND TAX RESIDENCY CERTIFICATE OF WHICH IS AVAILABLE ON RECORD. (REFER PAGE NO.35 OF PAPER BOOK). SO AS PER DECISION OF HONORABLE SC IN CASE OF AZADI BA CHAO ANDOLAN 132 TAXMAN 373 (SC) THE BENEFIT OF DTAA BETWEEN INDIA AND DENMARK SHALL BE AVAILABLE TO THE DENMARK RESIDENT. 16. FURTHER, AS PER ARTICLE 9 OF INDO DENMARK DTAA, PROFITS DERIVED FROM THE OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC SHALL BE TAX ABLE ONLY IN THE STATE WHERE PLACE OF EFFECTIVE MANAGEMENT OF THE ENTERPRISE IS SITUATED. IN THIS EASE THE 'POEM' OF DENMARK ENTITY IS SITUATED IN DENMARK AS REGISTRATION CERTIFICATE RESIDENCE OF SHAREHOLDER PASSPORT OF OWNER ALL SHOWS THAT FAB ER SHIP BROKER IS RESIDENT OF DENMARK AND ITS 'POEM' IS IN DENMARK. THEREFORE 'HEAD AND BRAIN' OF FABER SHIP BROKER IS SITUATED IN DENMARK. RELIANCE PLACED ON - > RADHA RANI HOLDINGS PVT. LTD.( 110 TTJ 920) > SARASWATI HOLDING CORP. INT. VS. DDIT (16 SOT 5 35) (D) > DE BEERS CONS. MINES LTD. (1906 AC 455) (HL) ARABIAN EXPRESS LINE LTD. (212ITR 31) 17. IT IS NOTEWORTHY THAT IN THAT CASE OF SAME ASSESSEE AND ON IDENTICAL FACTS CIT(A) HAS ALLOWED THE BENEFIT OF DTAA TO THE ASSESSEE (PAGE NO.53 TO 84). HOWEVER R EVENUE HAS FILED APPEAL AGAINST THOSE ORDERS IN ITA NO. 499/RJT/2014 AND 517/RJT/2014. 18. LD. CIT (A) HAS RAISED CONTENTION THAT INCOME OF CTI GROUP INC. JORDAN IS CHARGEABLE TO TAX IS ERRONEOUS AS IT HAS NEITHER AN INCOME ACCRUED AND ARISED U/S.5(2) READ WITH SECTION 9(L)(I) OF THE INCOME TAX ACT. THEREFORE, NOTHING IS CHARGEABLE TO TAX IN THE HANDS OF JORDAN CO. IN FACT, FREIGHT IS RECEIVED BY FABER SHIPBROKERS DENMARK. SO IT IS FABER WHO IS RESPONSIBLE FOR PAYING TAX IN INDIA AS PER SECTION 5(2) OF THE INCOME TAX ACT. 19. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR CONSIDERED OPINION APPELLANT HAS PROVED THE PLACE OF EFFECTIVE CONTROL AND MANAGEMENT OF THE APPELLANT BY FURNISHING SEVERAL DOCUMENTS INCLUDING DECLARATION BY DIRECTOR OF C OMPANY THAT IT IS COMPLETELY 100% OWNED BY MR. JENS FABER ANDERSON, COPY OF PASSPORT OF DIRECTOR TO PROVE THAT THE NATIONALITY OF DIRECTOR AND COMPANY HAS BEEN OPERATING FROM DENMARK. IT CAN BE CONCLUDED THAT THE DIRECTOR MR. JENS FABER ANDERSON RESIDES IN DENMARK IS RESIDENT'OF DENMARK AND HAVE BEEN OPERATING BUSINESS WHOLLY FROM DENMARK, ALL THE IMPORTANT DECISIONS ARE TAKEN FROM DENMARK IN THE FORM OF MEETING AND THEREFORE, THE PLACE OF EFFECTIVE MANAGEMENT AND CONTROL IS DENMARK ONLY. THE PRINCIPAL COMP ANY IS ALSO ENGAGED IN INTERNATIONAL TRAFFIC AND RESIDENCE IS DENMARK. ARTICLE 9 OF THE TREATY BETWEEN INDIA AND DENMARK READ AS UNDER - PROFITS DERIVED FROM THE OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC SHALL BE TAXABLE ONLY IN THE CONTRACTING STATE IN WHICH THE PLACE OF EFFECTIVE MANAGEMENT OF THE ENTERPRISE IS SITUATED. I.T.A NO S . 572 & 573 /RJT /20 12 A.Y. 2010 - 11 PAGE NO SHRI PRASHANT TRIVEDI VS. ITO 7 THEREFORE, ON THE BASIS OF ARTICLE 9 OF THE DTAA BETWEEN INDIA AND DENMARK, THE INCOME ON ACCOUNT OF OPERATION OF SHIP IN INTERNATIONAL TRAFFIC SHALL BE TAXABLE IN THE STATE IN WHICH TH E PLACE OF EFFECTIVE MANAGEMENT IS SITUATED I.E. IN THIS CASE DENMARK. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION AND CONSIDERING ARTICLE - 9 OF THE TREATY BETWEEN INDIA AND DENMARK AND ALSO THE DECISION TAKEN BY THE DEPARTMENT IN EARLIER CASES OF THE ASSESS EE, WE HOLD THAT THE SHIPS OPERATED IN INTERNATIONAL TRAFFIC AND THEREFORE, THE INCOME FROM SHIP SHALL NOT BE TAXED IN INDIA AS PER ARTICLE 9 OF THE TREATY. THEREFORE, ON ACCOUNT OF FOREGOING OBSERVATION, APPEAL OF THE ASSESSEE/APPELLANT IS ALLOWED. WE C ONSIDER THAT IDENTICAL ISSUE ON SIMILAR FACTS HAS BEEN ADJUDICATED BY THE CO - ORDINATE BENCH OF THE ITAT AS SUPRA IN FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH ON SIMILAR FACT AND IDENTICAL ISSUE AS STATED ABOVE, T HE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 573/AHD/2012 7. SINCE THE ISSUES AND FACTS IN APPEAL ITA NO. 573 /RJT/2012 IS THE SAME AS IN APPEAL ITA 572/RJT/2012, SO, AFTER APPLYING THE FINDING OF APPEAL ITA 572/AHD/2012 IN APPEAL ITA 573/AHD/2012, TH IS APPEAL IS ALLOWED. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 20 - 01 - 20 20 SD/ - SD/ - (MAHAVIR PRASAD ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOU NTANT MEMBER AHMEDABAD : DATED 20 /01/2020 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. I.T.A NO S . 572 & 573 /RJT /20 12 A.Y. 2010 - 11 PAGE NO SHRI PRASHANT TRIVEDI VS. ITO 8 BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT