DCIT (IT) 2(3)(1), MUMBAI V. FORBES CONTIANER LINE PTE LTD, MUMBAI

ITA 6286/MUM/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 6014 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 25-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: GEETA RAMRAKHIANI
• Keywords: Business income; Residential status; Double taxation relief; Set aside
• Section: 143(3); 201; 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I , MUMBAI BEFORE SHRI MAHAVIR SINGH , JUDICIAL MEMBER AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. 6286 /M/20 16 ASSESSMENT YEAR: 2012 - 13 DY. COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) - 2(3) (1), 1702, 17 TH FLOOR, AIR INDIA BLDG., NARIMAN POINT, MUMBAI - 400021 VS. M/S. FORBES CONTAINER LINE PTE LTD., GROUND FLOOR, FORBES BUILDING, CHARANJIT RAI MARG, FORT, MUMBAI 400 001 PAN: AABCF 0967H (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : MS. GEETA RAMRAKHIANI , A.R. REVENUE BY : MS. POOJA SWAROOP , D.R. DATE OF HEARING : 15.11 .201 8 DATE OF PRONOUNCEMENT : 31 .12 .2018 O R D E R PER RAJESH KUMAR , ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 26.07.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012 - 13 . 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. 'WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF ESTABLISHMENT OF PE OF THE ASSESSEE IN INDIA WHEN THE ASSESSEE BEING THE PRINCIPAL AND ITS HOLDING COMPANY BEING THE AGENTS WHO WERE RELATED PARTIES AND WERE COVERED UNDER THE PROVISIONS OF PARA NO.8 OF ARTICLE 5 OF THE INDIA - SINGAPORE TREATY? 2. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OF FICER WHO HAD ADOPTED THE PROVISIONS OF SECTION 44B MERELY FOR THE SAKE OF ARRIVING/ESTIMATING ITA NO.6286/M/2016 M/S. FORBES CONTAINER LINE PTE LTD. 2 INCOME FROM THE BUSINESS OF THE ASSESSEE, SINCE THE ASSESSEE WAS INVOLVED IN THE CONTAINER BUSINESS WHICH IS AN ALLIED BUSINESS TO THE SHIPPING BUSINESS WHEREIN THE BUSINESS RECEIPTS ARE NOMENCLATURED AS FREIGHT RECEIPTS? 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. C1T(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS A NON RESIDENT COMPANY INCORPORATED IN SINGAPORE AND IS ENGAGED IN THE BUSINESS OF OPERATION AND MAINTENANCE OF SHIPS. DURING THE YEAR , THE D RAFT ASSESSMENT ORDER UNDER SECTION 143(3) READ WITH SECTION 144C (1) OF THE ACT WAS PASSED ON 27.02.2015. THEREAFTER, THE ASSESSEE DID NOT FILE ANY OBJECTION AGAINST THE DRAFT ORDER BEFORE THE DRP NOR INTIMATED THE AO ABOUT THE ACCEPTANCE OF DRAFT ASSESS MENT ORDER WITHIN THE PERIOD SPECIFIED IN SUB SECTION 2 OF SECTION 144C OF THE ACT. THEREFORE, INCOME WAS ASSESSED AS PROPOSED IN THE DRAFT ASSESSMENT ORDER AND BY FRAMING ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 144C SUB SECTION (3) VIDE ORDER D ATED 07.04.2015 ASSESSING THE INCOME AT RS.1,99,40,380/ - BEING 7.5% OF THE TOTAL RECEIPT OF RS.26,58,71,740/ - . 4. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE CHALLENGED THE ORDER PASSED UNDER SECTION 144C(3) READ WITH SECTION 143(3) OF THE ACT ON THE GROUND THAT THE AO HAS ERRED IN HOLDING THAT INCOME OF THE ASSESSEE FROM OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC IS ASSESSABLE UNDER SECTION 44B OF THE ACT WHEREAS AS A MATTER OF FACT THE PROVISIONS OF SECTION 44B WERE NOT APPLICABLE TO THE ASSESS EES CASE AND ACCORDINGLY INCOME IS NOT CHARGEABLE TO TAX IN INDIA. THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE ITA NO.6286/M/2016 M/S. FORBES CONTAINER LINE PTE LTD. 3 BY FOLLOWING THE ORDER OF MUMBAI TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2009 - 10 & 2011 - 12 AND THUS CAME TO THE CONCLUSION THAT ASSESSEE WAS NOT ENGAGED IN THE OPERATION OF SHIPS IN THE CURRENT YEAR. 5. AT THE OUTSET, THE LD. A.R. SUBMITTED THAT THE ISSUE RAISED BY THE REVENUE IN THE PRESENT APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.1607/M/2014 A.Y. 2009 - 10 AND ITA NO.972/M/2015 A.Y. 2011 - 12 WHEREIN IT HAS BEEN DECIDED THAT PROVISIONS OF SECTION 44B OF THE ACT A RE NOT APPLICABLE TO THE ASSESSEE. THE LD. A.R. THEREFORE PRAYED THAT THE APPEAL BY THE REVENUE IS DE SERVED TO BE DISMISSED IN VIEW OF THE ORDER OF ITAT IN THE EARLIER YEARS I.E. A.Y. 2009 - 10 AND 2011 - 12. 6. THE LD. D.R., ON THE OTHER HAND APPEARED TO BE FAIRLY AGREED TO THE CONTENTION OF THE LD. A.R. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH T HE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND FROM THE PERUSAL OF THE ORDER IN ASSESSEES OWN CASE IN ITA NO.972/M/2015 A.Y. 2011 - 12 THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE BY HOLDIN G THAT IN ABSENCE OF PE NO INCOME WAS TAXABLE IN INDIA AND PROVISIONS OF SECTION 44B WERE NOT APPLICABLE. THE OPERATIVE PORTION OF THE SAID DECISION IS REPRODUCED AS UNDER: 5.WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE COMPANY IS A RESIDENT OF SINGAPORE, THAT THE HOLDING COMPANY IS LOCATED IN INDIA, THAT IT HAD ENTERED INTO AN AGENCY AGREEMENT WITH VFSSL W.E.F. 1.1.2007, THAT THE AO AND THE FAA HAD HELD THAT THE ASSESSEE WAS HAVING BUSINESS CONNECTION I N INDIA AND THAT THE PARENT COMPANY WAS TAKING DECISION ON BEHALF OF ITA NO.6286/M/2016 M/S. FORBES CONTAINER LINE PTE LTD. 4 THE ASSESSEE, THAT THEY HAVE FURTHER HELD THAT THE ASSESSEE HAD SERVICE PE/AGENCY - PE IN INDIA AND THAT THE INCOME OF ASSESSEE WAS TAXABLE IN INDIA U/S.44B OF THE ACT. DURING THE ASSESS MENT PROCEEDINGS RELEVANT DETAILS ABOUT THE DIRECTOR HANDLING THE BUSINESS AT SINGAPORE WERE SUBMITTED BEFORE THE AO. IT HAD ALSO FILED DETAILS OF REMUNERATION PAID TO PADMAKUMAR UNNIKRISHNAN (PG - 56 OF THE PB). THE ASSESSEE HAD, VIDE ITS LETTER DT.20.12.20 11 (PG - 53 OF THE PB), SUBMITTED A COPY OF MINUTES OF MEETING HELD IN RELATION TO THE YEAR UNDER APPEAL AND HAD INFORMED THE AO THAT AS PER THE LAWS PREVALENT IN SINGAPORE, THE ASSESSEE WAS REQUIRED TO HOLD ONLY ONE BOARD MEETING. THOUGH THE AO AND THE FAA HAD MENTIONED THAT THE ASSESSEE WAS MAINTAINING BANK ACCOUNT IN INDIA. HOWEVER, THEY COULD NOT BRING ON RECORD ANY EVIDENCE TO SUPPORT THEIR CLAIM. ON THE OTHER HAND THE ASSESSEE HAD PROVED THAT ITS BOOKS OF ACCOUNTS WERE MAINTAINED IN SINGAPRORE. NOT ONLY THIS, IT WAS PROVED THAT IT WAS MAINTAINING A BANK ACCOUNT IN SINGAPORE AND ALL BANKING TRANSACTIONS WERE MADE FROM THAT ACCOUNT ONLY. IN OUR OPINION, BOTH THE AUTHORITIES WERE NOT ABLE TO ESTABLISH THAT EFFECTIVE MANAGEMENT AND CONTROL OF AFFAIRS OF THE COMPANY WAS IN INDIA. WE HAVE GONE THROUGH THE E - MAILS PLACED BY THE ASSESSEE AT PG NO.96 TO 127 OF THE PAPER BOOK WHICH CLEARLY PROVE THAT BUSINESS ACTIVITIES WERE CARRIED OUT BY THE SINGAPORE OFFICE. IN OUR OPINION, FACTORS LIKE STAYING OF ONE OF THE DIR ECTORS IN INDIA OR HOLDING OF ONLY ONE MEETING DURING THE YEAR UNDER CONSIDERATION OR THE LOCATION OF PARENT COMPANY IN INDIA IN THEMSELVES WOULD NOT DECIDE THE RESIDENTIAL STATUS OF THE ASSESSEE. THE ASSESSEE HAD RECEIVED SUBSTANTIAL PORTION OF ITS INCOME FROM THE OPERATION CARRIED OUT IN MIDDLE EAST AND OTHER COUNTRIES .IT WAS HANDLING ITS BUSINESS FROM SINGAPORE. WE HAVE GONE THR OUGH PG - 65 OF THE PAPER BOOK WHICH GIVES DETAILS OF INCOME OF PARENT COMPANY. A PERUSAL OF THE SAID PAGE MAKES IT CLEAR THAT TH E CLAIM , MADE BY THE ASSESSEE ABOUT EARNING SUBSTANTIAL INCOME FROM THE ENTITIES OTHER THAN THE HOLDING COMPANY, WAS FACTUALLY CORRECT. WE FIND THAT ASSESSEE HAD NOT CLAIMED EXEMPTION OF ARTICLE 8 OF T HE DTAA AS IT WAS NOT IN THE SHIPPING BUSINESS. THEREFORE, THE INCOME OF THE ASSESSEE HAD TO ASSESSED AS PER THE PROVISIONS OF TAX TREATY WHICH DEALS WITH BUSINESS INCOME. HERE, WE WOULD LIKE TO MENTION THAT FAA WAS NOT JUSTIFIED IN CONFIRMING THE ORDER OF THE AO HOLDING THAT PROVISIONS OF SEC.44B OF THE ACT WOULD BE APPLICABLE WITH REGARD TO THE DISPUTED AMOUNT. SECTION 44 B DEALS WITH THE SHIPPING BUSINESS AND THE AO HAD HIMSELF ADMITTED THAT THE ASSES SEE WAS NOT IN SHIPPING BUSINESS. THE ASSESSEE DID NOT OWN OR CHARTER OR TOOK ON LEASE ANY VESSEL OR SHIP FOR THE YEAR UNDER CONSIDERATION, IT WAS ONLY PROVIDING CONTAINER SERVICES TO ITS VARIOUS CLIENTS. THEREFORE, WE HAVE NO HESITATION TO HOLD THAT PROVI SIONS OF SECTION 44B WERE NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. CONSIDERING THE ABOVE DISCUSSION, WE HOLD THAT THE INCOME OF THE ASSESSEE WAS TO LIABLE TO BE TAXED AS BUSINESS INC OME AND THAT IN ABSENCE OF PE NO INCOME WAS TAXABLE IN INDIA, THAT THE PROVISIONS OF SECTION 44B WERE WRONGLY INVOKED BY THE AO. REVERSING THE ORDER OF THE FAA, WE DECIDE EFFECTIVE GROUND OF APPEAL IN F AVOUR OF THE ASSESSEE. ITA NO.6286/M/2016 M/S. FORBES CONTAINER LINE PTE LTD. 5 8. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL DISMISS THE APPEAL OF THE REVENUE BY UPHOLDING THE ORDER OF LD. CIT(A). ORDER PRONOUNCED IN THE OPEN COURT ON 31 .12 . 201 8 . SD/ - SD/ - ( MAHAVIR SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31 .12 . 201 8 . * KISHORE , SR. P.S. COPY TO: THE APPELLAN T THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.