M/s. FREIGHT CONNECTION (I) PVT. LTD., MUMBAI V. DCIT CIR. 2(1), MUMBAI

ITA 7680/MUM/2003

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4294 (ITAT-MUMBAI)
• Duration Of Justice: 16 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 1998-1999
• Appeal Filed On: 03-12-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVANEESH TIWARI
• Assessee Lawyers: ARPIT JAIN
• Keywords: Business income; Double taxation relief; Permanent establishment; Set aside
• Section: 143(3); 234B; 22; 147; 148

Judgement Text

ITA NO.7680/MUM/2003 & ITA NOS.2455, 2453 & 22980/MUM/2005 AYS.1998 - 99 & 2001 - 02 FREIGHT CONNECTION (INDIA) PVT. LTD. VS. DDIT, CIRCLE - 2(1) & FREIGHT CONNECTION INDIA PVT. LTD. VS. DDIT, (I.T) - 1(1) 1 IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 7680/MUM/2003 (ASSESSMENT YEAR: 1998 - 99 ) FREIGHT CONNECTION (INDIA) PVT. LTD. (AS AGENT OF ARC LINE ), CAMBATA BUILDING, M.K. ROAD, MUMBAI 400 020 VS. DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 2(1), MUMBAI . PAN AAACF2188H (APPELLANT) (RESPONDENT) ITA NO. 2455/MUM/2005 (ASSESSMENT YEAR: 2001 - 02 ) FREIGHT CONNECTION (INDIA) PVT. LTD. (AS AGENT OF ARC LINE ), CAMBATA BUILDING, M.K. ROAD, MUMBAI 400 020 VS. DEPUTY DIRECTOR OF INCOME - TAX, ( INTERNATIONAL TAXATION ) - 1(1), MUMBAI 4000 38 PAN AAACF2188H (APPELLANT) (RESPONDENT) ITA NO. 2453/MUM/2005 (ASSESSMENT YEAR: 2001 - 02 ) FREIGHT CONNECTION (INDIA) PVT. LTD. (AS AGENT OF BAY LINE), 4 TH FLOOR, CAMBATA BUILDING, M.K. ROAD, MUMBAI 400 020 VS. DEPUTY DIRECTOR OF INCOME - TAX, (INTERNATIONAL TAXATION) - 1 (1), MUMBAI. PAN AAACF2188H (APPELLANT) (RESPONDENT) ITA NO.7680/MUM/2003 & ITA NOS.2455, 2453 & 22980/MUM/2005 AYS.1998 - 99 & 2001 - 02 FREIGHT CONNECTION (INDIA) PVT. LTD. VS. DDIT, CIRCLE - 2(1) & FREIGHT CONNECTION INDIA PVT. LTD. VS. DDIT, (I.T) - 1(1) 2 ITA NO. 2280/MUM/2005 (ASSESSMENT YEAR: 2001 - 02 ) DDIT (IT) - 3(2) SCINDIA HOUSE, R. NO. 132, 1 ST FLOOR, N.M. ROAD, MUMBAI - 38 PAN AAACF2188H VS. M/S FREIGHT CONNECTION INDIA PVT. LTD. (AS AGENT OF BAY LINE) C/O FCI PVT. LTD. CAMBATTA BLDG., M.K. ROAD, MUMBAI - 20 . (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ARPIT JAIN RESPONDENT BY: SHRI AVANEESH TIWARI DATE OF HEARING: 22 .01 .2020 DATE OF PRONOUNCEMENT: 31 .01.2020 O R D E R PER RAVISH SOOD, JM THE PRESENT CROSS - APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS PASSED BY THE CIT(A) - XXXI, MUMBAI, AS UNDER: SR. NO. A.Y. PARTICULARS 1 1998 - 99 (ASSESSES APPEAL) FREIGHT CONNECTION (INDIA) PVT. LTD (AS AGENT OF ARC LINE) 2. 2001 - 02 (ASSESSES APPEAL) FREIGHT CONNECTION (INDIA) PVT. LTD. (AS AGENT OF ARC LINE) 3. 2001 - 02 (ASSESSES APPEAL) FREIGHT CONNECTION INDIA PVT. LTD. (AS AGENT OF BAY LINE) 4. 2001 - 02 (REVENUES APPEAL) FREIGHT CONNECTION INDIA PVT. LTD. (AS AGENT OF BAY LINE) AS THE ISSUE S INVOLVED IN THE CAPTIONED APPEALS ARE INEXTRICABLY INTERLINKED AND INTERWOVEN, THEREFORE, THE SAME ARE BEING TAKEN UP TOGETHER AND DISPOSED OFF BY WAY OF A CONSOLIDATED ORDER. WE SHALL FIRST ADVERT TO THE APPEAL OF THE ASSESSEE F OR A.Y. 1998 - 99 IN ITA NO. 7680/MUM/2003 . THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ['CIT(A)'] LEGALLY ERRED IN ASSESSING THE PRINCIPAL (AL) AND THE AGENT (THE APPELLANT COMPANY) SIMULTANEOUSLY. ITA NO.7680/MUM/2003 & ITA NOS.2455, 2453 & 22980/MUM/2005 AYS.1998 - 99 & 2001 - 02 FREIGHT CONNECTION (INDIA) PVT. LTD. VS. DDIT, CIRCLE - 2(1) & FREIGHT CONNECTION INDIA PVT. LTD. VS. DDIT, (I.T) - 1(1) 3 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) LEGALLY ERRED IN DENYING THE BENEFIT UNDER ARTICLE 8 OF THE DOUBLE TAXATION AVOIDA NCE AGREEMENT ('DTAA') TO AL AND BRINGING TO TAX IN THE HANDS OF THE APPELLANT COMPANY, THE AMOUNT OF FREIGHT COLLECTED ON BEHALF OF AL IN INDIA, ON THE PRETEXT THAT THE EFFECTIVE PLACE OF MANAGEMENT OF AL WAS NOT IN MAURITIUS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) LEGALLY ERRED IN HOLDING THAT AL HAD A PERMANENT ESTABLISHMENT ('PE') IN INDIA IN THE FORM OF THE APPELLANT COMPANY AND THEREBY ERRED IN CHARGING TO TAX THE BUSINESS PROFITS OF AL IN INDIA UNDER ARTICLE 7 OF TH E DTAA IN THE HANDS OF THE APPELLANT COMPANY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) LEGALLY ERRED IN HOLDING THAT THE APPELLANT COMPANY DOES NOT FALL WITHIN THE CATEGORY OF EXCLUSIONS AS REFERRED TO IN ARTICLE 5(5) OF T HE DTAA WITHOUT CONSIDERING THAT THE ACTIVITIES OF THE APPELLANT COMPANY WERE NOT EXCLUSIVELY OR ALMOST EXCLUSIVELY FOR AL. ACCORDINGLY, HE ERRED IN HOLDING THAT THEY ARE DEPENDENT AGENTS AND CONSTITUTE FE OF AL IN INDIA. 5. WITHOUT PREJUDICE TO THE ABOVE AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) LEGALLY ERRED IN BRINGING TO TAX THE ENTIRE FREIGHT COLLECTED ON BEHALF OF AL AND APPLYING THE PROVISIONS OF SECTION 44B OF THE INCOME - TAX ACT, 1961, INSTEAD OF TAXING THE PROFITS A TTRIBUTABLE TO THE ACTIVITIES PERFORMED IN THE INDIAN TERRITORIAL WATERS. 6. WITHOUT PREJUDICE TO THE FACT THAT AL DOES NOT HAVE A PE IN INDIA, THE LEARNED CIT(A) LEGALLY ERRED IN NOT APPLYING THE PROVISIONS OF ARTICLE 7(2) OF THE DTAA AND CIRCULAR NO. 23 , DATED JULY 23, 1969 ISSUED BY CENTRAL BOARD OF DIRECT TAXES IN ORDER TO DETERMINE AL'S PROFITS ATTRIBUTABLE TO INDIAN OPERATIONS. 7. WITHOUT PREJUDICE TO THE ABOVE AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT( A) LEGALLY ERRED IN CONFIRMING THE TAX LIABILITY OF THE APPELLANT ON THE ENTIRE AMOUNT OF FREIGHT COLLECTED BY IT ON BEHALF OF AL IN INDIA INSTEAD OF RESTRICTING THE SAME TO THE AMOUNT OF ASSETS BELONGING TO AL IN POSSESSION OF THE APPELLANT. THE APPELLAN T CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL HEREIN AND TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER AT OR BEFORE THE APPEAL HEARING. 2. BRIEFLY STATED, THE ASSESSEE IS AN AG ENT OF M/S ARC LINE, MAURITIUS, A COMPANY WHICH WAS INCORPORATED IN MAURITIUS AND WAS ENGAGED IN THE ACTIVITY OF SHIPPING IN INTERNATIONAL TRAFFIC. NOTICE WAS ISSUED TO THE ASSESSEE WHEREIN IT WAS CALLED UPON TO SHOW CAUSE AS TO WHY IT MAY NOT BE TREATED AS AN AGENT OF M/S ARC LINE , MAURITIUS UNDER SEC. 163 OF THE INCOME TAX ACT, 1961. AFTER CONSIDERING THE SUBMISSIONS OF M/S ARC LINE, MAURITIUS AN ORDER UNDER SEC. 163 DATED 19.03.2001 WAS PASSED AS PER WHICH THE ASSESSEE WAS TREATED AS AN AGENT OF THE AFOREMENTIONED COMPANY. N OTICE UNDER SEC.148 OF THE ACT, DATED 20.03.2001 WAS ISSUED TO THE ASSESSEE IN ORDER TO ASSESS THE INCOME OF M/S ARC LINE, MAURITIUS, IN ITS HANDS IN THE CAPACITY AS THAT OF A REPRESENTATIVE ASSESSEE. INITIALLY N O RETU RN OF INCOME WAS FILED BY THE ASSESSEE IN RESPONSE TO THE AFORESAID NOTICE. HOWEVER, SUBSEQUENTLY A RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 29.03.2001 , DECLARING ITS TOTAL INCOME AT RS. NIL . IT WAS THE CLAIM OF THE ASSESSEE THAT THE INCOME OF M/S ARC LINE, MAURITIUS WAS NOT TAXABLE IN INDIA AS PER ARTICLE 8 OF THE INDIA - ITA NO.7680/MUM/2003 & ITA NOS.2455, 2453 & 22980/MUM/2005 AYS.1998 - 99 & 2001 - 02 FREIGHT CONNECTION (INDIA) PVT. LTD. VS. DDIT, CIRCLE - 2(1) & FREIGHT CONNECTION INDIA PVT. LTD. VS. DDIT, (I.T) - 1(1) 4 MAURITIUS TAX TREATY. OBSERVING, THAT THE EFFECTIVE MANAGEMENT OF M/S ARC LINE WAS NOT IN MAURITIUS BUT WAS V ESTED WITH THE SHAREHOLDERS WHO EXERCISED DE FACTO CONTROL OVER THE COMPANY S AFFAIRS IN DUBAI, THE A.O WAS OF THE VIEW THAT THE ASSESSEE WAS NOT ELIGIBLE FOR THE BENEFIT OF ARTICLE 8 OF THE INDIA - MAURITIUS TAX TREATY. IN THE BACKDROP OF THE AFORESAID FACTS, THE A.O HOLDING A CONVICTION THAT THE ASSESSEE I.E FREIGHT CONNECTION (I NDIA) PVT. LTD. WAS THE EXCLUSIVE/DEPENDANT AGENT OF M/S ARC LINE, MAURITIUS, THEREFORE, TREATED IT AS ITS PERMANENT ESTABLISHMENT (FOR SHORT PE) IN INDIA. ON THE BASIS OF HIS AFORESAID OBSERVATIONS, THE A.O CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE INCOME OF M/S AR C LINE, MAURITIUS, MAY NOT BE FINALISED BY APPLYING ARTICLE 7 OF THE INDO - MAURITIUS DTAA AND BROUGHT TO TAX IN ITS HANDS IN THE STATUS AS THAT OF A REPRESENTATIVE ASSESSEE . ACCORDINGLY, THE A.O APPLYING THE PROVISIONS OF SEC. 44B A SSESS ED THE IN COME OF M/S ARC LINE, MAURITIUS FROM ITS COLLECTIONS FROM SHIPPING ACTIVITIES AMOUNTING TO RS.3,87,11,273/ - @ 7.5%, WHICH WORKED OUT TO AN AMOUNT OF RS.29,03,351/ - . AS SUCH, THE INCOME OF M/S ARC LINE, MAURITIUS AMOUNTING TO RS. 29,03,351/ - WAS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE COMPANY IN ITS CAPACITY AS THAT OF A REPRESENTATIVE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). HOWEVER, THE CI T(A) NOT FINDING FAVOUR WITH THE CONTENTION S ADVANCED BY THE ASSESSEE DISMISSED THE APPEAL. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE U S. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL WAS SQUARELY COVERED BY THE ORDER PASSED BY THE TRIBUNAL IN THE CASE OF M/S ARC LIN E, MAURITIUS FOR THE YEAR UNDER CONSIDERATION I.E A.Y. 1998 - 99. IT WAS SUBMITTED BY THE LD. A.R THAT THE TRIBUNAL WHILE DISPOSING OFF THE QUANTUM APPEAL OF M/S ARC LINE, MAURITIUS HAD CONCLUDED THAT THE ASSESSEE WAS AN AGENT OF INDEPENDENT STATUS AND HENCE COULD NOT BE CONSIDERED AS CONSTITUTING AN AGENCY PE OF THE ASSESSEE. AS SUCH, IT WAS THE CLAIM OF THE LD. A.R THAT THE TRIBUNAL WHILE DISPOSING OFF THE QUANTUM APPEAL IN THE CASE OF ARC LINE, MAURITIUS HAD CONCLUDED THAT THE ASSESSEE I.E M/S FREIGHT CONN ECTION INDIA PVT. LTD. DID NOT CONSTITUTE THE AGENCY PE OF THE ASSESSEE. IN ORDER TO DRIVE HOME HIS AFORESAID CONTENTION THE LD. A.R HAD PLACED ON RECORD THE CONSOLIDATED ORDER PASSED BY THE TRIBUNAL WHILE DISPOSING OFF THE APPEALS IN THE CASE OF M/S ARC L INE, MAURITIUS, DATED 07.03.2018. ON THE BASIS OF THE AFORESAID FACTS, IT ITA NO.7680/MUM/2003 & ITA NOS.2455, 2453 & 22980/MUM/2005 AYS.1998 - 99 & 2001 - 02 FREIGHT CONNECTION (INDIA) PVT. LTD. VS. DDIT, CIRCLE - 2(1) & FREIGHT CONNECTION INDIA PVT. LTD. VS. DDIT, (I.T) - 1(1) 5 WAS SUBMITTED BY THE LD. A.R THAT THE INCOME OF M/S ARC LINE, MAURITIUS FROM RENDERING OF SHIPPING SERVICES WAS BROUGHT TO TAX BY THE A.O IN THE HANDS OF THE ASSESSEE BY TREATING IT AS A REPRESENTATIVE ASSESSEE OF THE AFORESAID COMPANY. IT WAS AVERRED BY THE LD. A.R THAT THE TRIBUNAL WHILE DISPOSING OFF THE QUANTUM APPEAL OF M/S ARC LINE, MAURITIUS HAD CONCLUDED THAT THE ASSESSEE BEING AN AGENT OF INDEPENDENT STATUS COULD NOT BE CONSIDERED AS CONSTITUTING A PE AGENCY OF M/S ARC LINE, MAURITIUS. IT WAS SUBMITTED BY THE LD. A.R THAT THE TRIBUNAL WHILE DISPOSING OFF THE APPEAL OF M/S ARC LINE, MAURITIUS HAD OBSERVED THAT AS THE AFORESAID COMPANY DID NOT HAVE A PE IN INDIA, THEREFORE, ITS BUSINESS INCOME COULD NOT BE BROUGHT TO TAX IN INDIA. ON THE BASIS OF THE AFORESAID FACTS, IT WAS SUBMITTED BY THE LD. A.R THAT NOW WHEN THE ASSESSEE HA D BEEN HELD AS NOT BEING A N EXCLUSIVE/DEPENDANT AGENT OF M/S ARC LINE, MAURITIUS, THEREFORE, AS PER ARTICLE 7 OF THE INDIA - MAURITIUS TAX TREATY IN THE ABSENCE OF A PE IN INDIA ITS INCOME FROM SHIPPING ACTIVITIES COULD NOT HAVE BEEN SUBJECTED TO TAX IN INDIA. IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS THE CLAIM OF THE LD. A.R THAT NOW WHEN THE INCOME DERIVED BY M/S ARC LINE, MAURITIUS FROM THE SHIPPING ACTIVITIES WAS NOT LIABLE FOR BEING TAXED IN INDIA, THEREFORE, THE RE WAS NO OCCASION FOR ASSESS ING THE SAME IN THE HANDS OF THE ASSESSEE COMPANY (AS A REPRESENTATIVE ASSESSEE OF M/S ARC LINE) UNDER SEC. 44B OF THE ACT . 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. IN FACT, THE LD. D.R DID NOT CONTROVERT THE AFORESAID CONTENTIONS ADVANCED BY THE COUNSEL FOR THE ASSESSEE. 7. WE HAVE H EARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES , PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD, AS WELL AS THE JUDICIAL PRONOUNCEMENT S RELIED UPON BY THEM. AS OBSERVED BY US HEREINABOVE, THE A.O TREATING THE ASSE SSEE AS AN EXCLUSIVE/DEPENDANT AGENT OF M/S ARC LINE , A COMPANY INCORPORATED IN MAURITIUS AND ENGAGED IN THE ACTIVITY OF SHIPPING IN INTERNATIONAL TRAFFIC, HAD VIDE HIS ORDER PASSED UNDER SEC. 143(3)/147 R.W.S. 161 AND 163 OF THE ACT, DATED 30.03.2001 ASSESSED ITS INCOME FROM SHIPPING ACTIVITIES UNDER SEC. 44B IN THE HANDS OF THE ASSESSEE COMPANY . AS IS DISCERNIBLE FROM THE RECORDS, THE TRIBUNAL WHILE DISPOSING OFF THE QUANTUM APPEAL OF M/S ARC LINE, MAURITIUS FOR THE YEAR UNDER CONSIDERATION I.E A.Y. 1998 - 99 IN ITA NO. 5122/MUM/2003 HAD CONCLUDED VIZ. (I) THAT, THE ASSESSEE I.E M/S FREIGHT CONNECTION INDIA PVT. LTD. BEING AN AGENT OF AN INDEPENDENT STATUS COULD NOT BE CONSIDERED AS CONSTITUTING AN AGENCY PE OF THE ITA NO.7680/MUM/2003 & ITA NOS.2455, 2453 & 22980/MUM/2005 AYS.1998 - 99 & 2001 - 02 FREIGHT CONNECTION (INDIA) PVT. LTD. VS. DDIT, CIRCLE - 2(1) & FREIGHT CONNECTION INDIA PVT. LTD. VS. DDIT, (I.T) - 1(1) 6 ASS ESSEE; (II) THAT, M/S ARC LINE , MA URITIUS DID NOT HAVE ANY PE IN INDIA; AND (III) THAT, THE INCOME DERIVED BY M/S ARC LINE, MAURITIUS FROM ITS SHIPPING ACTIVITIES IN THE ABSENCE OF ANY PE IN INDIA COULD NOT BE BROUGHT TO TAX IN INDIA. ON THE BASIS OF THE AFORESAID FACTS, WE FIND OURSELVES TO BE IN AGREEMENT WITH THE CLAIM OF THE LD. A.R THAT NOW WHEN THE ASSESSEE HAS BEEN HELD AS AN AGENT OF INDEPENDENT STATUS, AND THE INCOME OF M/S ARC LINE, MAURITIUS IN THE ABSENCE OF ANY PE IN INDIA HAD BEEN HELD AS NOT TA XABLE IN INDIA, THEREFORE, THERE REMAINS NO BASIS FOR TAXING THE INCOME OF M/S ARC LINE, MAURITIUS FROM ITS SHIPPING ACTIVITIES UNDER SEC. 44B OF THE ACT IN THE HA NDS OF THE ASSESSEE BY TREATING IT AS A REPRESENTATIVE ASSESSEE OF THE AFORESAID COMPANY. WE THUS SET ASIDE THE ORDER OF TH E CIT(A) AND DELETE THE ADDITION OF RS.29,03, 351/ - MADE BY THE A.O IN THE HANDS OF THE ASSESSEE, VIDE HIS ORDER PASSED UNDER SEC. 143(3)/147 R.W.S 161 & 1 63 OF THE ACT, DATED 30.03.2001. 8. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO. 245 5 /MUM/2005 A.Y. 2001 - 02 9 . WE SHALL NOW ADVERT TO THE APPEAL OF THE CAPTIONED ASSESSEE VIZ. M/S FREIGHT CONNECTION INDIA PVT. LTD (AS AGENT OF ARC LINE) FOR A.Y 2001 - 02, THAT IS DIRECTED AGAINST THE ORDER OF THE CIT( A) - XXXI, MUMBAI, DATED 31.12.2004, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 147 R.W.S 163 OF THE ACT, DATED 26.03.2004. THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US : 1. ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ['CIT(A)'] HAS ERRED IN ASSESSING THE PRINCIPAL (ARC LINES) AND THE AGENT (THE APPELLANT COMPANY) SIMULTANEOUSLY. IT IS PRAYED THAT THE ORDER PASSED AGAINST THE APPEL LANT COMPANY UNDER SECTION 143(3) R.W.S. 163 OF THE INCOME TAX ACT, 1961 ('THE ACT') OUGHT TO BE QUASHED. 2. WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE PLACE OF EFFECTIVE MANAGEMENT OF ARC LINE ('A L') IS NEITHER IN MAURITIUS NOR IN INDIA BUT IN A THIRD COUNTRY. IT IS PRAYED THAT THE LEARNED AO BE DIRECTED TO HOLD THAT THE PLACE OF EFFECTIVE MANAG EMENT OF A L IS IN MAURITIUS. 3. WITHOUT PREJUDICE TO GROUND NO. 1 AND 2 ABOVE, AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE APPELLANT COMPANY IS A 'DEPENDENT AGENT' CONSTITUTING PER MANENT ESTABLISHMENT ('PE') OF A L WITHIN THE MEANING OF ARTICLE 5 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND MAURITIUS ('MAURITIUS TREATY'). ITA NO.7680/MUM/2003 & ITA NOS.2455, 2453 & 22980/MUM/2005 AYS.1998 - 99 & 2001 - 02 FREIGHT CONNECTION (INDIA) PVT. LTD. VS. DDIT, CIRCLE - 2(1) & FREIGHT CONNECTION INDIA PVT. LTD. VS. DDIT, (I.T) - 1(1) 7 IT IS PRAYED THAT THE LEARNED AO BE DIRECTED TO HOLD THAT THE APPELLANT COMPANY DOES NOT CONSTITUTE PE OF AL WITHIN THE MEANING OF ARTICLE 5 OF THE MAURITIUS TREATY. 4. WITHOUT PREJUDICE TO GROUND NO.1 TO 3 ABOVE, AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE PROFITS OF A L SHOULD BE COMPUTED UND ER SECTION 44B OF THE ACT. IT IS PRAYED THAT THE LEARNED AO BE DIRE CTED TO COMPUTE THE PROFITS OF A L AS ATTRIBUTABLE TO THE ACTIVITIES PERFORMED IN THE INDIAN TERRITORIAL WATERS. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL HEREIN AND TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER AT OR BEFORE THE APPEAL HEARING. 1 0 . BRIEFLY STATED, M/S ARC L INE, MAURITIUS HAD FILED ITS RETURN OF INCOME FOR A.Y. 2001 - 02 WHEREIN IT HAD REFLECTED ITS TOTAL COLLECTIONS FROM ITS SHIPPING OPERATION S IN INDIA AT RS.6,39,32,338.15 . IN THE RETURN OF INCOME, M/S ARC LINE, MAURITIUS HAD REPORTED THAT THE ASSESSEE COMPAN Y VIZ. M/S FREIGHT CONNECTION INDIA PVT. LTD WAS AN EXCLUSIVE/DEPENDANT AGENT FOR ITS SHIPPING BUSINESS IN INDIA. IN SUPPORT THEREOF, M/S ARC LINE, MAURITIUS HAD IN THE COURSE OF ITS ASSESSMENT PROCEEDINGS PLACED ON RECORD THE AGENCY AGREEMENT DATED 01.12. 1997 THAT WAS EXECUTED BY IT WITH THE ASSESSEE COMPANY. ON THE BASIS OF THE AFORESAID FACTS, THE A.O VIDE HIS ORDER PASSED UNDER SEC.163 OF THE ACT, DATED 03.02.2004 HELD THE ASSESSEE AS A REPRESENTATIVE ASSESSEE OF M/S ARC LINE, MAURITIUS IN RELATION TO ITS INCOME FOR THE YEAR UNDER CONSIDERATION VIZ. A.Y. 2001 - 02. NOTICE UNDER SEC. 148 OF THE ACT WAS ISSUED BY THE A.O TO THE ASSESSEE COMPANY CALLING UPON IT TO FILE ITS RETURN OF INCOME AS A REPRESENTATIVE ASSESSEE OF M/S ARC LINE, MAURITIUS . H OWEVER, THE ASSESSEE DID NOT FILE THE RETURN OF INCOME BY THE DUE DATE. SUBSEQUENTLY, THE RETURN OF INCOME IN RESPONSE TO NOTICE UNDER SEC. 148 WAS FILED BY THE ASS ESSEE ON 24.03.2004. IT WAS THE CLAIM OF THE ASSESSEE THAT AS THE ASSESSMENT OF M/S ARC LINE, MAURITIUS , WAS IN PROGRESS, THEREFORE, NO NOTICE UNDER SEC. 148 COULD HAVE BEEN ISSUED TO IT. HOWEVER, THE A.O NOT FINDING FAVOUR WITH THE AFORESAID CLAIM OF THE ASSESSEE APPLIED THE PROVISIONS OF SEC.44B AND ASSESSED THE INCOME OF M/S ARC LINE, MAURITIUS, FROM ITS COLLECTIONS FROM SHIPPING ACTIVITIES AMOUNTING TO RS.6,39,42,338.15 @ 7.5% IN THE HANDS OF THE ASSESSEE IN THE LATTERS STATUS AS THAT OF A REPRESENTATI VE ASSESSEE. AS SUCH, THE INCOME OF M/S ARC LINE, MAURITIUS AMOUNTING TO RS.47,95,688/ - WAS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE IN ITS CAPACITY AS THAT A REPRESENTATIVE ASSESSEE. 11. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). HOWEVER, THE CIT(A) NOT BEING PERSUADED TO SUBSCRIBE TO THE CONTENTION S ADVANCED BY THE ASSESSEE UPHELD THE VIEW TAKEN BY THE A.O VIZ. (I) THAT M/S ARC LINE, MAURITIUS WAS NOT ENTITLED FOR THE BENEFIT ITA NO.7680/MUM/2003 & ITA NOS.2455, 2453 & 22980/MUM/2005 AYS.1998 - 99 & 2001 - 02 FREIGHT CONNECTION (INDIA) PVT. LTD. VS. DDIT, CIRCLE - 2(1) & FREIGHT CONNECTION INDIA PVT. LTD. VS. DDIT, (I.T) - 1(1) 8 UNDER ARTICLE 8 OF THE INDIA - MAURI TIUS TAX TREA TY, AS ITS PLACE OF EFFECTIVE MANAGEMENT WAS IN A THIRD COUNTRY; AND (II) THAT, AS M/S ARC LINE, MAURITIUS HAD A PE IN INDIA, THEREFOR E, ITS BUSINESS INCOME WAS TAXABLE IN INDIA AS PER AR TICLE 7 OF THE INDIA - MAURITIUS T AX T REATY. ON THE BASIS OF HIS AFORESAID OBSERVATIONS, THE CIT(A) UPHELD THE VIEW TAKEN BY THE A.O THAT THE INCOME OF M/S ARC LINE, MAURITIUS FROM SHIPPING ACT IVITIES WAS LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE COMPANY IN IT STATUS AS THAT OF A REPRESE NTATIVE ASSESSEE. 12. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. WE FIND THAT AS THE FACTS AND THE ISSUE INVOLVED IN THE PRESENT APPEAL OF THE ASSESSEE REMAINS THE SAME AS WERE INVOLVED IN ITS APPEAL FOR A.Y.1998 - 99 IN ITA NO. 7680/MUM/2003, THEREFORE, OUR ORDER THEREIN PASSED SHALL APPLY MUTATIS MUTANDIS FOR THE DISPOSAL OF I TS PRESENT APPEAL FOR A.Y. 2001 - 02 . AS SUCH , IN TERMS OF OUR AFORESAID OBSERVATIONS RECORDED WHILE DISPOSING OFF THE APPEAL OF THE ASSESSEE FOR A .Y. 1998 - 99, WE HEREIN CONCLUDE THAT THE ASSESSEE WAS NOT AN EXCLUSIVE/DEPENDENT AGENT OF M/S ARC LINE, MAURITIUS. ACCORDINGLY, THE BUSINESS IN COME OF M/S ARC LINE, MAURITIUS IN THE ABSENCE OF ITS PE IN INDIA COULD NOT HAVE BEEN BROUGHT TO TAX IN INDIA AS PER ARTICLE 7 OF THE INDIA - MAURITIUS TAX TREATY. ON THE BASIS OF THE AFORESAID FACTS, WE HEREIN CONCLUDE THAT THE INCOME O F M/S ARC LINE, MAURITIUS AMOUNTING TO RS.47,95,688/ - THAT HAD BEEN ASSESSED BY THE A.O IN THE HANDS OF THE ASSESSEE COMPANY (AS A REPRESENTATIVE ASSESSEE ), WHICH THEREAFTER WAS UPHELD BY THE CIT(A) CANNOT BE SUSTAINED AND IS LIABLE TO BE VACATED. ACCORDINGLY, WE DELETE THE ADDITION OF RS.47,95,688/ - MADE I N THE HANDS OF THE ASSESSEE. 13. THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ITA NO. 245 3 /MUM/2005 A.Y. 2001 - 02 14 . WE SHALL NOW ADVERT TO THE APPEAL OF THE CAPTIONED ASSESSEE VIZ. M/S FREIGHT CONNECTION INDIA PVT. LTD (AS AGENT OF BAY LINES) FOR A.Y 2001 - 02, THAT IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - XXXI, MUMBAI, DATED 31.12.2004, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 147 R.W.S 163 OF THE ACT, DATED 26.03.2004. THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US : ITA NO.7680/MUM/2003 & ITA NOS.2455, 2453 & 22980/MUM/2005 AYS.1998 - 99 & 2001 - 02 FREIGHT CONNECTION (INDIA) PVT. LTD. VS. DDIT, CIRCLE - 2(1) & FREIGHT CONNECTION INDIA PVT. LTD. VS. DDIT, (I.T) - 1(1) 9 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ['CIT(A)'] HAS ERRED IN ASSESSING THE PRINCIPAL (BAY LINES) AND THE AGENT (THE APPELLANT COMPANY) SIMULTANEOUSLY. IT IS PRAYED THAT THE ORDER PASSED AGAINST THE APPELLANT COMPANY UNDER SECTION 143(3) R.W.S. 163 OF THE INCOME TAX A CT, 1961 ('THE ACT') OUGHT TO BE QUASHED. 2. WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE PLACE OF EFFECTIVE MANAGEMENT OF BAY LINE ('BL') IS NEITHER IN MA URITIUS NOR IN INDIA BUT IN A THIRD COUNTRY. IT IS PRAYED THAT THE LEARNED AO BE DIRECTED TO HOLD THAT THE PLACE OF EFFECTIVE MANAGEMENT OF BL IS IN MAURITIUS. 3. WITHOUT PREJUDICE TO GROUND NO. 1 AND 2 ABOVE, AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE APPELLANT COMPANY IS A 'DEPENDENT AGENT' CONSTITUTING PERMANENT ESTABLISHMENT ('PE') OF BL WITHIN THE MEANING OF ARTICLE 5 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND MAURITIUS ('M AURITIUS TREATY'). IT IS PRAYED THAT THE LEARNED AO BE DIRECTED TO HOLD THAT THE APPELLANT COMPANY DOES NOT CONSTITUTE PE OF AL WITHIN THE MEANING OF ARTICLE 5 OF THE MAURITIUS TREATY. 4. WITHOUT PREJUDICE TO GROUND NO.1 TO 3 ABOVE, AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE PROFITS OF BL SHOULD BE COMPUTED UNDER SECTION 44B OF THE ACT. IT IS PRAYED THAT THE LEARNED AO BE DIRECTE D TO COMPUTE THE PROFITS OF BL AS ATTRIBUTABLE TO THE ACTIVITIES PERFORMED IN THE INDIAN TERRITORIAL WATERS. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL HEREIN AND TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER AT OR BEFORE THE APPEAL HEARING. 15. BRIEFLY STATED, M/S BAY LINE S , MAURITIUS IS A COMPANY INCORPORATED IN MAURITIUS, AND IS ENGAGED IN THE BUSINESS OF SHIPPING. IT HAD FILED ITS RETURN OF INCOME FOR A.Y. 2001 - 02, WHEREIN ITS TOTAL COLLECTIONS FROM ITS SHIPPING OPERATIONS IN INDIA WERE SHOWN AT RS.15,26,97,100.71. IN ITS RETURN OF INCOME, M/S BAY LINE S , MAURITIUS HAD REPORTED THAT THE ASSESSEE COMPANY VI Z. M/S FREIGHT CONNECTION INDIA PVT. LTD. HAD ACTED AS ITS AGENT FOR ITS SHIPPING BUSINESS IN INDIA. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, M/S BAY LINE S , MAURITIUS HAD PLACED ON RECORD AN AGENCY AGREEMENT DATED 01.12.1997 THAT WAS EXECUTED BY IT WIT H THE ASSESSEE COMPANY. ON THE BASIS OF THE AFORESAID FACTS THE A.O CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY IT SHO U LD NOT BE CONSIDERED AS A REPRESENTATIVE ASSE SSEE OF M/S BAY LINES, MAURITIUS FOR THE YEAR UNDER CONSIDERATION UNDER SEC.163(2) OF T HE ACT. AS THE REPLY FILED BY THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O, THEREFORE, HE VIDE HIS ORDER PASSED UNDER SEC. 163, DATED 03.02.2004 TREATED THE ASSESSEE AS A REPRESENTATIVE ASSESSEE IN RELATION TO THE INCOME OF M/S BAY LINE, MAURITIUS FOR A .Y. 2001 - 02. NOTICE UNDER SEC. 148 WAS ISSUED TO THE ASSESSEE ON 04.02.2004, WHEREIN IT WAS CALLED UPON TO FILE A RETURN OF INCOME IN RELATION TO THE INCOME OF M/S BAY LINE S , ITA NO.7680/MUM/2003 & ITA NOS.2455, 2453 & 22980/MUM/2005 AYS.1998 - 99 & 2001 - 02 FREIGHT CONNECTION (INDIA) PVT. LTD. VS. DDIT, CIRCLE - 2(1) & FREIGHT CONNECTION INDIA PVT. LTD. VS. DDIT, (I.T) - 1(1) 10 MAURITIUS IN RESPECT OF WHICH IT WAS HELD TO BE A REPRESENTATIVE ASSESSEE. IN COM PLIANCE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 12.03.2004. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED BY THE ASSESSEE THAT AS THE ASSESSMENT OF M/S BAY LINE S , MAURITIUS, WAS IN PROGRESS, THEREFORE , NOTICE UNDER SEC. 148 COULD NOT HA VE BEEN VALIDLY ISSUED TO IT. HOWEVER, THE A.O NOT BEING PERSUADED TO ACCEPT THE CONTENTIONS ADVANCED BY THE ASSESSEE APPLIED THE PROVISIONS OF SEC.44B OF THE ACT AND ASSESSED THE INCOME OF M/S BAY LINE S , MAURITIUS FROM ITS COLLECTIONS FROM SHIPPING ACTIVITIES A MOUNTING TO RS.15,26,97,100.71 @ 7.5% , WHICH WORKED OUT TO AN AMOUNT OF RS.1,14,52,300/ - . ACCORDINGLY, THE INCOME OF M/S BAY LINE S , MAURITIUS AMOUNTING TO RS.1,44,52,300/ - WAS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE IN ITS CAPACITY AS TH AT OF A REPRESENTATIVE ASSESSEE . 16. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). OBSERVING, THAT AS THE EFFECTIVE MANAGEMENT OF M/S BAY LINE S , MAURITIUS WAS IN A THIRD COUNTRY, THEREFORE, THE CIT(A) FOLLOWING THE VIEW THAT WAS E ARLIER TAKEN BY HIM THEREIN CONCLUDED THAT THE ASSESSEE WOULD NOT BE ENTITLED FOR THE BENEFIT OF ARTICLE 8 OF THE INDIA - MAURITIUS TAX TREATY. ALSO, IT WAS OBSERVED BY THE CIT(A) THAT AS M/S BAY LINE S , MAURITIUS HAD A PE IN INDIA, THEREFORE, ITS BUSINESS IN COME WAS LIABLE TO BE TAXED IN INDIA AS PER ARTICLE 7 OF THE INDIA - MAURITIUS TAX TREATY. ON THE BASIS OF HIS AFORESAID OBSERVATIONS, THE CIT(A) WAS OF THE VIEW THAT SINCE THE INCOME OF M/S BAY LINE S , MAURITIUS FROM ITS SHIPPING ACTIVITIES WAS TAXABLE IN IN DIA, THEREFORE, NO INFIRMITY DID ARISE FROM THE ORDER OF THE A.O WHO HAD RIGHTLY ASSESSED THE SAID INCOME IN THE HANDS OF THE ASSESSEE IN ITS CAPACITY AS THAT OF A REPRESENTATIVE ASSESSEE. ACCORDINGLY, THE CIT(A) CONFIRMED THE ASSESSMENT FRAMED BY THE A.O IN THE HANDS OF THE ASSESSEE. 17. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. WE FIND THAT THE TRIBUNAL VIDE ITS ORDER PASSED IN THE CASE OF M/S BAY LINE S , MAURITIUS, FOR THE YEAR UNDER CONSIDERATION VIZ. A.Y.2001 - 02 IN BAY LINE S , MAURITIUS VS. ADIT(IT) - 3(2), MUMBAI, ITA NO. 2454/MUM/2005, HAD CONCLUDED THAT THE ASSESSEE VIZ. M/S FREIGHT CONNECTION INDIA PVT. LTD. WAS AN INDEPENDENT AGENT WHICH ACTED IN ITS ORDINARY COU RSE OF ITS BUSINESS AND WAS NOT DEVOTED EXCLUSIVELY OR ALMOST EXCLUSIVELY ON BEHALF OF M/S BAY LINE, MAURITIUS. ACCORDINGLY, IT WAS OBSERVED BY THE TRIBUNAL THAT M/S BAY LINE, MAURITIUS DID NOT HAVE AN AGENCY PE IN INDIA. ON THE BASIS OF THE AFORESAID FACT S, WE ARE OF THE CONSIDERED VIEW THAT NOW WHEN IT HA S BEEN HELD THAT M/S BAY LINE, MAURITIUS, DID NOT HAVE A PE IN INDIA, ITA NO.7680/MUM/2003 & ITA NOS.2455, 2453 & 22980/MUM/2005 AYS.1998 - 99 & 2001 - 02 FREIGHT CONNECTION (INDIA) PVT. LTD. VS. DDIT, CIRCLE - 2(1) & FREIGHT CONNECTION INDIA PVT. LTD. VS. DDIT, (I.T) - 1(1) 11 THEREFORE, ITS BUSINESS INCOME DERIVED FROM THE SHIPPING OPERATIONS COULD NOT HAVE BEEN BROUGHT TO TAX IN INDIA AS PER ARTICLE 7 OF TH E INDIA - MAURITIUS TAX TREATY. ACCORDINGLY, IN OUR CONSIDERED VIEW, IN THE ABSENCE OF ANY TAXABLE INCOME OF M/S BAY LINE S , MAURITIUS IN INDIA, THE ADDITION OF RS.1,14,52,300/ - IN THE HANDS OF THE ASSESSEE BY TREATING IT AS A REPRESENTATIVE ASSESSEE OF M/S B AY LINE S , MAURITIUS BY THE A.O , WHICH THEREAFTER HAD BEEN SUSTAINED BY THE CIT(A), CANNOT BE UPHELD AND IS LIABLE TO BE VACATED. AS SUCH, WE SET ASIDE THE ORDER OF THE CIT(A) IN TERMS OF OUR AFORESAID OBSERVATIONS AND DELETE THE ADDITION OF RS.1,14,52,300/ - MADE BY THE A.O. 18. THE APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ITA NO. 2280/MUM/2005 A.Y. 2001 - 02 19 . WE SHALL NOW ADVERT TO THE APPEAL OF THE REVENUE WHICH IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - XXXI, MUMBAI, DATED 31.12.2004 IN THE CASE OF M/S FREIGHT CONNECTION INDIA PVT. LTD (AS AGENT OF BAY LINES) FOR A.Y 2001 - 02, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 147 R.W.S 163 OF THE ACT, DATED 25.03.2004. THE REVENUE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US : ' 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT ASSESSEE IS NOT LIABLE TO PAY INTEREST U/S. 234B OF THE I.T. ACT AS IT COULD NOT VISUALISE THAT ITS INCOME WAS TAXABLE IN INDIA AS DIT RELIEF CERTIFICATE WAS ISSUED. THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT(A) ON THE ABOVE GROUNDS SET ASIDE AND THAT OF THE AO RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR LATER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 20 . AS WE HAVE CONCLUDED THAT THE INCOME OF M/S BAY LINES COULD NOT BE ASSESSED IN THE HANDS OF THE ASSESSEE, THEREFORE, THE ASSAILING OF THE ORDER OF THE CIT(A) BY THE REVENUE, FOR THE REASON, THAT HE HAD ERRED IN VACATING THE INTEREST LEVIED BY THE A.O UNDER SEC. 234B IS RENDERED AS INFRUCTUOUS. ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSE D AS HAVING BEEN RENDERED AS INFRUCTUOUS IN TERMS OF OUR FORESAID OBSERVATIONS. 21 . RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.7680/MUM/2003 & ITA NOS.2455, 2453 & 22980/MUM/2005 AYS.1998 - 99 & 2001 - 02 FREIGHT CONNECTION (INDIA) PVT. LTD. VS. DDIT, CIRCLE - 2(1) & FREIGHT CONNECTION INDIA PVT. LTD. VS. DDIT, (I.T) - 1(1) 12 22 . AS OBSERVED BY US HEREINABOVE, THE APPEALS OF THE ASSESSES VIZ. (1). FREIGHT CONNECTION INDIA PVT. LTD. (AS A GENT OF ARC LINES) FOR A.Y 1998 - 99, ITA NO. 7680/MUM/2003 AND FOR A.Y 2001 - 02, ITA NO. 2455/MUM/2005 AND (2). FREIGHT CONNECTION INDIA PVT. LTD. (AS AGENT OF BAY LINES) FOR A.Y 2001 - 02, ITA NO. 2453/MUM/2005 ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERV ATIONS. ON T H E OTHER HAND, THE APPEAL OF THE REVENUE IN THE CASE OF FREIGHT CONNECTION INDIA PVT. LTD. (AS AGENT OF BAY LINES) FOR A.Y 2001 - 02, ITA NO. 2280/MUM/2005 IS DISMISSED. ORDER PRO NOUNCED IN THE OPE N COURT ON 31 . 01.2020 SD/ - SD/ - ( N.K. PRADHAN ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 31 /01/2020 ROHIT, P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI